Open any news app and you will see a single GBP/USD number. Try to actually exchange money and you will be offered something worse. Both are “the rate” — they just measure different things. Understanding the gap is the key to not overpaying.
What the mid-market rate is
The mid-market (or interbank) rate is the midpoint between the buy and sell prices in the wholesale market where banks trade with each other. It is the fairest single figure to quote, and it is what this site, news outlets and Google show. But it is a benchmark, not a price you can personally transact at — like the “recommended retail price” of a product rather than the till price.
How providers make money: spread and fees
Consumer providers earn their margin in two ways:
- The spread (exchange-rate markup). They give you a rate a little worse than mid-market and keep the difference. This is often invisible — there is no line item — which is why “0% commission” offers can still be expensive.
- Fixed fees. A flat charge per transfer or transaction, sometimes on top of the spread.
Typical gaps versus mid-market
As a rough guide for GBP/USD, a heavily-traded major pair:
- Specialist transfer services: often within ~0.3–1% of mid-market.
- High-street banks: frequently 2–4% once the spread is included.
- Airport / hotel bureaux de change: commonly 5–12%, sometimes more.
- Card payments abroad: network rate (near mid-market) is good, but watch for foreign transaction fees and “dynamic currency conversion” (see below).
How to estimate your real cost
Take the mid-market amount from our converter, then subtract the provider’s margin. On £1,000 at a 1.27 mid-market rate ($1,270), a 3% bank margin costs about $38; a 0.5% specialist costs about $6. The bigger the amount, the more the percentage matters — which is why people shop around hardest on large transfers.
The dynamic currency conversion trap
When paying by card or withdrawing cash abroad, you may be asked whether to be charged in your home currency or the local one. Always choose the local currency. Choosing your home currency triggers “dynamic currency conversion”, which lets the terminal set its own (poor) exchange rate on top of everything else.
For the practical steps, see sending money UK → USA, sending money USA → UK, and travel money tips.