Yes, banks exchange currency, but the rate you get is not the mid-market rate

Most banks will exchange foreign currency for you, either in person at a branch or sometimes by mail or wire. The catch is that banks do not use the real exchange rate — the one you see on financial news sites. They use a markup, which is their profit on the transaction. That markup ranges widely depending on the bank, the currency, and how you exchange it.

The real exchange rate between two currencies (called the mid-market rate) changes constantly during trading hours. When you exchange $1,000 USD for euros at your bank, the bank buys those euros at the mid-market rate, then sells them to you at a worse rate. The difference is their fee, and it is usually between 1 and 3 percent, though some banks charge more.

Not all banks offer currency exchange to all customers. Some require you to have an account with them. Some only exchange major currencies like euros, British pounds, Canadian dollars, and Japanese yen. If you need a less common currency, you may have to special-order it, which takes several business days and costs more.

Key Takeaways

  • Banks exchange currency at a markup above the mid-market rate, typically 1 to 3 percent, which is how they profit on the transaction.
  • The rate you receive depends on the bank, the currency pair, and whether you exchange in person, by phone, or by mail.
  • Major currencies like euros and pounds are usually in stock; less common currencies must be ordered and take several business days to arrive.
  • You will pay less for currency exchange through a specialist money transfer service or by using a debit card abroad than through a traditional bank.

How the markup works and why it varies

When a bank quotes you an exchange rate, that rate already includes their profit. If the mid-market rate for USD to EUR is 0.92, a bank might quote you 0.89 or 0.90. The 0.02 to 0.03 difference per dollar is the markup.

The markup is not fixed. It depends on how much currency the bank has on hand, how much demand there is for that currency that day, and how much the bank wants to profit on your transaction. Banks that specialize in currency exchange (like those in major cities or near airports) sometimes offer tighter markups because they do higher volume. Small regional banks may charge more because they exchange less currency overall.

The method you use also matters. Exchanging currency in person at a branch usually costs less than ordering it by phone or mail, because the bank does not have to ship physical cash and the transaction is faster. Some banks charge a flat fee on top of the markup — anywhere from $5 to $25 — especially for orders placed by phone or mail.

What currencies banks keep in stock

Major banks in the United States typically keep euros, British pounds, Canadian dollars, Japanese yen, Swiss francs, and Australian dollars on hand. You can usually walk into a branch and exchange these currencies the same day, though you may need to call ahead to confirm they have enough of what you need.

If you need a currency the bank does not stock — Thai baht, Mexican pesos, South African rand, or dozens of others — the bank will order it for you. This takes 3 to 7 business days and costs more, because the bank has to source the currency from a wholesale supplier and then ship it to your branch. Some banks charge an additional fee for special orders, on top of the markup.

The currencies a bank stocks depend on where it operates. A bank in Miami may keep more Mexican pesos and Caribbean currencies in stock. A bank in a college town with many international students may stock more Asian currencies. Call your bank's foreign exchange desk to ask what they have available.

How to exchange currency at a bank

If you want to exchange currency in person, call your bank's main branch or foreign exchange desk first. Tell them which currency you need, how much, and when you want it. They will tell you the current rate, whether they have it in stock, and whether you need an account with them.

Bring your passport or government ID. Bring the cash you want to exchange, or a cashier's check. The bank will count it, confirm the amount, and give you the foreign currency at the quoted rate. The whole transaction usually takes 10 to 20 minutes if the currency is in stock.

If you are ordering a currency that is not in stock, the bank will place the order and tell you when it will arrive — usually 3 to 7 business days. You will return to the branch to pick it up and complete the exchange. Some banks will hold the currency for you; others will not reserve it until you confirm you still want it when it arrives.

When a bank is not the cheapest option

For small amounts of currency — under $500 — a bank is often not the best choice. Specialist money transfer services like Wise, OFX, and Remitly offer mid-market rates with a small flat fee instead of a percentage markup. For $500 USD to euros, you might pay $5 to $15 in fees with Wise instead of $15 to $30 with a bank.

If you are traveling and need cash, using an ATM abroad is usually cheaper than exchanging currency before you leave. Your bank's ATM network partner in that country will give you a better rate than a currency exchange desk, and you only withdraw what you need. The downside is that you pay an ATM fee — usually $2 to $5 per withdrawal — but the better exchange rate often makes up for it.

Credit and debit cards also give you a better rate than currency exchange. When you use a card abroad, the card network (Visa, Mastercard, American Express) converts the transaction at the mid-market rate, and your bank adds a small markup — usually 1 percent or less. This is better than the 2 to 3 percent markup you pay at a currency exchange desk.

Currency exchange for large amounts

If you need to exchange a large amount — $10,000 or more — call your bank's commercial or international services department, not the retail foreign exchange desk. Banks have different pricing for large transactions, and you may be able to negotiate a tighter markup.

For very large amounts, banks may require advance notice so they can source the currency. They may also require you to wire the funds to the bank first, then exchange them, rather than bringing cash. This protects the bank from theft and from the risk that the exchange rate will move between the time you arrive and the time the transaction settles.

If you are moving money internationally for a business purpose or a large personal transfer, a specialist money transfer service or a currency broker may offer better rates than a bank. These services are designed for larger transactions and can negotiate wholesale rates that beat what a retail bank offers.

What happens if the exchange rate moves before your transaction settles

If you order currency that is not in stock, the bank quotes you a rate at the time you place the order. That rate is usually good for 24 to 48 hours. If the mid-market rate moves significantly before your currency arrives, the bank will contact you and ask whether you want to proceed at the original rate or cancel the order.

If you cancel, you lose nothing — the bank does not charge a cancellation fee. If you proceed and the rate has moved against you, you pay the original rate you agreed to. If the rate has moved in your favor, you still pay the original rate. The bank locks in the rate to protect both of you from the risk of the market moving.

Frequently Asked Questions

Can I exchange currency at any bank branch, or only at the main branch?

Most banks can order currency for any branch, but not all branches keep foreign currency in stock. Call the branch you plan to visit first. Larger branches in city centers are more likely to have currency on hand. Smaller branches may need to order it from the main branch or a regional hub.

Do I need a bank account to exchange currency?

Many banks require you to have an account with them, but not all. Some banks exchange currency for non-customers, though they may charge a higher fee or require a larger minimum amount. Call your bank to ask their policy.

What is the difference between the mid-market rate and the rate a bank quotes me?

The mid-market rate is the real exchange rate between two currencies at any given moment. The rate a bank quotes you includes their markup — usually 1 to 3 percent — which is their profit. You always pay the bank's rate, not the mid-market rate.

Is it cheaper to exchange currency before I travel or when I arrive?

Using an ATM in the country you are visiting is usually cheapest. If you must exchange before you leave, use a specialist money transfer service rather than a bank. Using your debit or credit card abroad is also cheaper than exchanging cash at a bank or airport exchange desk.

How long does it take to exchange currency at a bank?

If the currency is in stock, the transaction takes 10 to 20 minutes. If you are ordering a currency the bank does not have, it takes 3 to 7 business days for the bank to receive it, plus the time for you to return to the branch to complete the exchange.