GuidesFX5 min read
How to read an FX quote before you approve it
Three numbers decide what a foreign payment costs. Most bank quotes show you one of them.
By the Kelvern payments desk ·
A currency quote has three parts: the mid-market rate, the margin, and the fee. Every provider charges some mix of the last two. The question is only whether they show you.
The mid-market rate
This is the midpoint between the prices at which large banks buy and sell a currency from each other. It moves all day and is the fairest reference there is. You can find it on any financial news site. Write it down before you ask for a quote.
The margin
The margin is how far your rate is from mid-market. If mid-market is 1.1850 euros to the pound and your quote is 1.1809, the margin is 0.35%. If your quote is 1.1506, the margin is 2.9%, and on a €50,000 invoice that difference is about £1,100.
Banks rarely print the margin. They print “our rate”, which already includes it. Work it out yourself:
margin = 1 − (your rate ÷ mid-market rate)
The fee
The fee is the fixed charge per payment. It looks like the whole cost because it is the only number labelled as one. A £25 fee on a SWIFT payment with a 2.9% margin is the smaller of the two charges by a long way once the invoice is above about £900.
Two more things to check
- The arrival date. A cheaper quote that lands two days after your supplier’s deadline is not cheaper if they hold the goods.
- Who pays the correspondent. On SWIFT, “OUR” means you pay all fees and the supplier receives the full amount. “SHA” means the fees are shared, and your supplier may receive less than the invoice.
The short version
Look for the three numbers. If a quote only shows one, ask for the other two. You can try it with our FX quote calculator, which uses example rates and shows all three.
