Yes, banks convert foreign currency, but the process and cost depend on the type of account and the currency involved

When you deposit cash or a check in a foreign currency, your bank will convert it to US dollars before the money enters your account. The bank does not hold it in the original currency — the conversion happens automatically as part of processing the deposit. The same is true when you withdraw money: if you ask for cash in a foreign currency, the bank converts US dollars from your account and gives you the foreign bills.

The conversion itself is straightforward: the bank looks up the exchange rate for that day, multiplies your amount by that rate, and that is what appears in your account. The catch is that banks do not use the mid-market rate — the true rate you see on financial news sites. They add a markup, which is how they make money on currency conversion. That markup can range from 1% to 3% or more, depending on the bank and the currency.

Some banks offer better rates than others, and some accounts are designed specifically for people who move money across borders regularly. Understanding which option costs you less is worth the time, because the difference adds up quickly on large amounts.

Key Takeaways

  • Banks convert foreign currency automatically when you deposit it, using an exchange rate that includes the bank's markup — not the mid-market rate you see online.
  • The markup typically ranges from 1% to 3%, meaning you lose that percentage of the value compared to the true exchange rate.
  • International wire transfers and checks in foreign currency both trigger conversion, and each method has different fees and timing.
  • Some banks offer accounts designed for international customers that include better exchange rates or lower conversion fees.
  • Specialty money transfer services often charge less than traditional banks for currency conversion, though they work differently than a bank account.

How the conversion rate works and where the bank's profit comes from

The mid-market exchange rate is the real rate — the one banks use to trade currency with each other. You can see it on Google, XE.com, or OANDA. If the mid-market rate is 1 USD = 0.92 EUR (euros), that is what the rate truly is at that moment.

When you convert money, your bank does not give you that rate. Instead, it quotes you a rate that is slightly worse — maybe 1 USD = 0.90 EUR. The difference between 0.92 and 0.90 is the bank's markup. On a $1,000 conversion, that 2% difference means you receive roughly $20 less than you would at the true rate. The bank keeps that $20.

This is not hidden or illegal — it is how banks operate. The markup is their fee for handling the conversion. Different banks set different markups. Some large banks with many international customers charge 2% to 3%. Some smaller banks or online banks charge 1% or less. A few specialty banks designed for international customers charge even less, sometimes 0.5% or close to the mid-market rate.

Depositing foreign currency cash or checks

If you have cash in a foreign currency, you can take it to your bank and deposit it. The teller will count it, note the currency, and send it to the bank's processing center. The bank converts it at their quoted rate and deposits the US dollar amount into your account. This usually takes 1 to 3 business days.

Depositing a check written in a foreign currency works the same way, but takes longer — typically 5 to 10 business days — because the check has to be sent to a correspondent bank in the country where it was issued, cleared there, and then converted. You will see the deposit as pending for several days before the final amount appears.

Some banks charge a fee for processing foreign currency deposits on top of the conversion markup. This fee might be $10 to $25. Ask your bank whether they charge a deposit fee before you bring in the cash or check.

Withdrawing foreign currency from your US bank account

If you need cash in a foreign currency, you can order it from your bank. You tell the teller which currency and how much, and the bank converts US dollars from your account at their quoted rate. The bank then orders the physical bills from a currency supplier and gives them to you when they arrive — usually within a few business days.

This is useful if you are traveling and want to have cash before you leave, or if you are sending money to someone abroad and they prefer cash. However, the conversion markup applies here too. You are paying the bank's rate, not the mid-market rate.

Some banks charge an ordering fee ($15 to $30) on top of the conversion markup. If you are withdrawing a small amount, the fee might cost more than the conversion markup itself, so it is worth asking the cost before you order.

International wire transfers and the conversion that happens

When you send money to someone in another country, your bank converts your US dollars to the currency of the receiving country. The conversion happens at the bank's quoted rate, and you pay both the conversion markup and a wire fee (usually $15 to $50).

The receiving bank may also charge a fee on their end, which comes out of the amount the recipient receives. So if you send $1,000, the receiving person might get less because of fees at both banks plus the conversion markup.

Wire transfers are fast — usually 1 to 3 business days — but they are expensive for currency conversion. If you are sending money regularly or in large amounts, a specialty money transfer service like Wise, OFX, or Remitly often charges less than a traditional bank wire.

When specialty accounts or services offer better rates

Some banks offer accounts designed for people who live in the US but move money internationally. These accounts may include a debit card that converts at a better rate, or they may offer wire transfers with lower markups. Examples include Wise (formerly TransferWise), which is not a traditional bank but offers currency conversion and transfers at rates much closer to mid-market, and some online banks that cater to international customers.

If you convert currency regularly, comparing the total cost — conversion markup plus fees — across a few providers is worth doing. A 1% difference in the conversion rate on a $5,000 transfer is $50. Over a year, if you move money several times, that difference becomes significant.

Traditional banks are not always the cheapest option for currency conversion. Specialty services are often faster and cheaper, though they work differently than a bank account — you may need to set up a separate account with them, and the money moves through their system rather than your regular bank.

What happens if you receive money from abroad

When someone sends you money from another country, it arrives as a wire transfer in a foreign currency. Your bank receives it, converts it to US dollars at their quoted rate, and deposits the US dollar amount into your account. The conversion markup applies here too — you receive less than the mid-market rate would give you.

The sender's bank also charged them a fee, and your bank may charge you a receiving fee (usually $10 to $20). These fees come out of the amount you receive. If someone sends you $1,000 from abroad, you might receive $950 or less after all conversions and fees.

If you receive money regularly from the same country, asking the sender to use a specialty service like Wise instead of their bank can save both of you money. Wise charges a flat fee plus a conversion rate closer to mid-market, which often costs less than two banks' markups and fees combined.

Frequently Asked Questions

Can I ask my bank to use a specific exchange rate?

No. Your bank sets the rate they offer, and you either accept it or decline the conversion. You cannot negotiate the rate for a single transaction. However, you can choose a different bank or service if you do not like their rates — that is the only leverage you have.

Why do banks charge a markup if they are already making money on fees?

The markup is the main way banks profit on currency conversion. The fee covers the cost of processing the transaction. The markup is the profit. Together, they are how the bank makes money on international transactions.

Is the conversion rate the same if I use an ATM abroad versus withdrawing at my bank?

No. ATMs abroad usually charge a higher markup than your bank's in-person rate, plus an ATM fee. Withdrawing cash at your bank before you travel, or using a specialty debit card designed for travel, usually costs less than using foreign ATMs.

What if I need to convert a large amount of money?

For amounts over $10,000, some banks will negotiate a slightly better rate, though this varies. Specialty money transfer services often have better rates for large amounts. It is worth calling your bank and asking, or getting quotes from two or three other providers before you convert.

Do I have to convert currency, or can I keep money in a foreign currency account?

Most US banks do not offer accounts in foreign currencies. Some international banks or specialty providers do, but they are not common. For most people with a regular US bank account, conversion is automatic and unavoidable.