Banks are convenient for international transfers, but they rarely offer competitive exchange rates. Most banks build a margin of 2–4% into the rate and add fees on top, which reduces the amount received. For large transfers, this hidden cost can run into thousands. Use our exchange rate comparison tool to see exactly how much you’re paying above the market rate, or check the live mid-market rate on our currency converter.
How Banks Make Money on Exchange Rates
Banks apply their own rate rather than the real market (mid-market) rate. For example, if the market rate is GBP/EUR 1.1700 and your bank offers 1.1450, the difference of 0.0250 is their margin. This margin is often called the FX spread, exchange rate markup, or conversion margin. Most banks apply 2%–4%. For a full explanation of the cost structure, see our guide on what international transfers actually cost.
How Much This Costs on Large Transfers
| Transfer | Market rate | Bank rate | Euros lost |
|---|---|---|---|
| £50,000 | 1.1700 → €58,500 | 1.1450 → €57,250 | €1,250 |
| £150,000 | 1.1700 → €175,500 | 1.1450 → €171,750 | €3,750 |
| £500,000 | 1.1700 → €585,000 | 1.1450 → €572,500 | €12,500 |
This is why exchange rate margin matters far more than any transfer fee. This is especially impactful on overseas property purchases, expat transfers, and business supplier payments.
Additional Fees Banks Often Charge
On top of the exchange rate margin, banks may charge international transfer fees (£15–£40), receiving bank fees, intermediary (correspondent) bank fees, and currency conversion fees. These can add another £10–£50+ per transfer. See our guide on bank wire transfer fees explained for the full breakdown.
Why Banks Offer Worse Exchange Rates
- FX is not their core business — banks focus on lending and deposits
- Retail pricing model — they price for convenience, not competitiveness
- Limited market access — often use internal pricing rather than live interbank markets
- No rate competition — most customers don’t compare before transferring
Bank vs Currency Specialist: Real Example
On a £200,000 transfer at GBP/EUR: Bank rate 1.1450 → €229,000. Specialist rate 1.1685 → €233,700. Difference: €4,700. Same transfer. Same day. Different provider. Check our rate comparison tool for your transfer amount, and see our guide on who gives the best exchange rates for large transfers.
How to Reduce Exchange Rate Costs
- Compare rates before transferring — use our rate comparison tool
- Use a forward contract to lock in a good rate for a future transfer
- Set a rate alert to notify you when your target rate is reached
- Use a limit order to auto-execute at your target rate
- Check our guide on whether now is a good time to exchange money
FAQ: Bank Exchange Rates
How much worse are bank exchange rates?
Typically 2–4% above the mid-market rate. Check the mid-market rate on our currency converter and compare against your bank’s quote.
Are currency specialists cheaper than banks?
Yes, especially for large transfers. Specialist margins are typically 0.3–0.8% vs 2–4% at banks. See our guide on the best way to transfer large amounts internationally.
Should I avoid banks for large transfers?
Comparing alternatives can significantly reduce costs. Use our rate comparison tool to see what you’re currently paying.
If you’re sending a large international payment, comparing exchange rates before transferring can make a significant difference. Request a free quote to see how we compare. We work exclusively with FCA-authorised payment partners — your funds are always safeguarded.
