Yes, banks exchange foreign currency, but the rate you get is not the market rate
Most banks will exchange foreign currency for you, but they do not do it at the rate you see online. Banks buy and sell currency at wholesale rates among themselves, then mark up the rate they offer you—sometimes by 2 to 5 percent or more. That markup is how they profit on the transaction. You pay the difference between what they charge you and what they actually paid for the currency.
The process is straightforward: you bring cash or request a wire in a foreign currency, the bank converts it at their rate, and you receive the amount in the currency you need. But the timing, the fees, and the final amount you receive all depend on which bank you use and which currency you need.
Key Takeaways
- Banks mark up their exchange rates by 2 to 5 percent or more above the wholesale rate, and this markup is their profit on the transaction.
- Physical currency exchange at a bank branch is slower and often more expensive than ordering currency in advance or using a wire transfer.
- Some banks charge a flat fee for currency exchange in addition to the markup on the rate itself.
- Specialty currency exchange services and some online banks offer better rates than traditional banks, though they may have minimum order amounts.
- The actual rate you receive depends on the bank, the currency, the amount, and whether you are exchanging cash or moving money electronically.
How the markup works and what it costs you
When you exchange currency at a bank, you are paying two costs: the markup on the exchange rate and sometimes a separate fee. The markup is invisible—it is built into the rate the bank quotes you. If the mid-market rate (the rate banks use with each other) is 1 USD = 85 Indian Rupees, your bank might quote you 1 USD = 82 Rupees. You lose 3 rupees on every dollar you exchange.
On top of the markup, many banks charge a flat fee—typically $5 to $15 for a currency exchange transaction, or sometimes a percentage of the amount you are exchanging. A few banks waive the fee if you are a premium customer or if you exchange a large amount. The fee and the markup together can reduce the amount you receive by 3 to 8 percent or more, depending on the bank and the currency.
The markup varies by currency. Major currencies like euros, British pounds, and Canadian dollars have tighter markups because banks trade them constantly and the wholesale market is liquid. Less common currencies—like Indian rupees, Philippine pesos, or Thai baht—have wider markups because fewer banks trade them and the wholesale market is thinner.
Exchanging physical cash at a branch versus ordering in advance
If you walk into a bank branch with foreign cash and ask to exchange it, the bank will usually do it the same day, but the rate will be worse than if you order currency in advance. Walk-in exchanges are expensive because the bank has to source the currency quickly, and that cost gets passed to you through a wider markup.
Ordering currency in advance—usually 5 to 10 business days before you need it—gives the bank time to source it at a better wholesale rate, and you may get a slightly better rate in return. Some banks offer this service for free or at a lower fee than a walk-in exchange. You pick up the cash at a branch or have it mailed to you.
If you are exchanging a large amount of cash—$5,000 or more—call the bank's foreign exchange desk directly rather than going to a branch. The desk can sometimes negotiate a better rate for large orders, and they can tell you exactly what you will receive before you commit.
Wire transfers and electronic currency exchange
If you are sending money to another country, a wire transfer through your bank is one option, but it is not always the cheapest. Your bank will convert the money at their marked-up rate and charge a wire fee (typically $15 to $50). The receiving bank may also charge a fee. The total cost can be 4 to 8 percent of the amount you send.
Some banks offer better rates on large wire transfers or for frequent customers. If you are sending money regularly to the same country, ask your bank whether they have a preferred rate or a lower fee for repeat transfers. A few banks waive the wire fee if you maintain a high balance or have a premium account.
The exchange rate on a wire is locked in at the moment the bank processes the transfer, not when you request it. If the rate moves against you between the time you request the wire and the time it is processed, you receive less in the foreign currency. This usually happens within hours, but it is worth knowing if the market is volatile.
Alternatives to bank currency exchange
Specialty currency exchange companies—like OFX, Wise, Remitly, and others—often offer better rates than banks because they operate with lower overhead and trade currency in higher volume. These services are designed for people sending money internationally or exchanging larger amounts. Many of them are faster than banks and charge lower fees.
Online banks and fintech companies sometimes offer better exchange rates than traditional banks, though they may have minimum order amounts or may not offer all currencies. If you are exchanging a common currency in a large amount, an online service may save you 1 to 3 percent compared to a traditional bank.
Credit unions sometimes offer better rates than banks for their members, especially if you are exchanging a large amount or if the credit union has partnerships with banks in the country you are sending money to. Call your credit union's foreign exchange desk to ask about rates before you go to a bank.
What information you need to exchange currency
To exchange currency at a bank, you will need a valid photo ID (passport, driver's license, or national ID card). If you are exchanging a large amount—usually $3,000 or more in a single transaction—the bank will ask for additional information under anti-money-laundering rules. They may ask where the money is coming from and what you plan to use it for. This is standard and does not mean anything is wrong.
If you are ordering currency in advance, the bank will ask how much you need, which currency, and when you need it. Some banks require you to place the order online or by phone at least 5 business days in advance. If you are sending a wire transfer, you will need the recipient's bank account number, the bank's routing or SWIFT code, and the recipient's full name and address.
Timing: how long currency exchange takes
A walk-in currency exchange at a bank branch usually takes 15 to 30 minutes if the bank has the currency in stock. If they do not have it, they may order it and have you pick it up in a few days, or they may charge you extra to source it quickly.
An advance order typically takes 5 to 10 business days. You place the order, the bank sources the currency, and you pick it up or have it mailed to you. Mailing adds another 2 to 5 business days depending on where you live.
A wire transfer usually clears in 1 to 3 business days in the receiving country, though the conversion happens when ready when your bank processes the transfer. International wires can take longer if the receiving bank is in a country with slower banking infrastructure or if there are time zone differences.
Frequently Asked Questions
Do all banks charge the same exchange rate?
No. Exchange rates vary by bank, and the markup can differ by 1 to 3 percent or more. Call two or three banks and ask for their rate on the specific currency and amount you need before you exchange. The difference can be significant on large amounts.
Can I get a better rate if I exchange a large amount?
Sometimes. Banks may offer a tighter markup or waive the fee for amounts over $5,000 or $10,000. Call the bank's foreign exchange desk and ask what rate they can offer for your specific amount. Do not assume the published rate applies to you.
What is the difference between the mid-market rate and the rate my bank quoted me?
The mid-market rate is what banks pay each other for currency. Your bank's rate includes their markup and profit. The difference is usually 2 to 5 percent, but it can be wider for less common currencies or small amounts.
Is it cheaper to exchange currency before I travel or after I arrive?
It is usually cheaper to exchange before you travel, because you can order in advance and get a better rate. Exchanging at an airport or in a foreign country typically costs more because those locations have higher overhead and less competition.
Can I exchange currency online without going to a bank branch?
Some banks and most specialty currency services allow you to order and pay for currency online, then pick it up at a branch or have it mailed to you. A few online banks and fintech services can convert money electronically for wire transfers without a physical branch visit. Check your bank's website or call to see what options they offer.