February 7, 2026
You look at the exchange rate. You look at the fee line. Neither tells you the full story. Here is where money actually disappears when you do a cross-currency transaction.
The mid-market rate is the midpoint between the buy and sell price for a currency pair. It is what you see on Google or Bloomberg. It is not what anyone will give you for a transaction. The actual rate you get is always worse than mid-market because banks and payment processors take a spread — they buy from you at below mid-market and sell to others above it.
A typical bank spread on a EUR/USD transaction for a small business is 1.5 to 3%. That means on a EUR 10,000 transfer, you are losing EUR 150 to EUR 300 before any stated fees.
Many payment processors add an explicit markup to the spread. A processor might take a 1.8% spread plus an additional 0.5% "cross-border fee." These are sometimes disclosed separately, sometimes bundled into a single "exchange rate" that is just significantly worse than mid-market. Always ask: what is your markup over mid-market rate? Not just what is your fee.
In a traditional wire transfer, correspondent banks in the chain are each entitled to deduct a service fee from the transaction. These fees are not paid by the sender — they come out of the amount received. A EUR 5,000 payment might arrive as EUR 4,932 because three intermediary banks each took EUR 20 to EUR 25. This is separate from any fees your bank charged you.
You can ask your bank to send via SHA (shared fees) or OUR (sender pays all fees) arrangements. OUR costs more upfront but ensures the recipient receives the full amount.
If you accept card payments and your processor supports it, some card networks offer dynamic currency conversion — converting the transaction into the cardholder's home currency at the point of sale. The conversion rate is set by the payment processor, not by market rates, and typically includes a markup of 3 to 7%. This is the most expensive FX mechanism available. Merchants should understand whether DCC is being applied on their transactions and whether they can opt out.
Take the mid-market rate on the day of a transaction. Compare it to the rate you actually received. The difference, expressed as a percentage, is your total FX cost — inclusive of spread, markup, and any other conversion charges. Do this across ten transactions and you have your actual FX cost. Most merchants who do this exercise find their real FX cost is 1.5 to 2 times higher than what they thought they were paying.