Exchange rate markups, explained

The exchange rate you see quoted online — on the news, in a converter, in a search result — is a reference rate: the wholesale rate banks trade at among themselves. It's not the rate you'll actually get. Card issuers, currency exchanges and banks add their own margin on top, called a markup.

Reference rate vs retail rate

The reference rate (sometimes called the mid-market or interbank rate) is the midpoint between what currency traders are willing to buy and sell a currency pair for, at wholesale volumes most people never transact at. It's a useful benchmark, but no retail provider — your card, a currency exchange counter, a money transfer service — gives it to you directly.

Instead, they apply a markup: a small percentage added to (or subtracted from, depending on direction) the reference rate, which becomes their margin on the conversion. The rate that ends up on your card statement already has this markup baked in — it isn't shown as a separate line item the way a foreign transaction fee is.

Why the margin exists

Converting currency isn't free for the provider either — they're managing their own exposure to rate movements, covering operational costs, and in most cases, making a profit on the service. The markup is how that's funded. It's a normal part of how retail currency conversion works everywhere, not something unique to any one bank or card.

Why there is no universal markup

Markup depends on the provider, currency pair, transaction type and time. The ACCC recommends comparing the total price, including the exchange rate and fees, rather than assuming that a service described as “fee free” is cheapest. A card network's indicative rate is also not necessarily the final rate billed by your issuer; Mastercard explains that timing and issuer fees can change the amount.

Markup vs foreign transaction fee

It's worth being clear about the difference, because both show up as "the overseas transaction cost more than I expected":

• The markup is hidden inside the exchange rate itself — you won't see it as a separate charge, only as a rate that's slightly worse than the reference rate.
• The foreign transaction fee is an explicit percentage charged on top, after conversion, and is usually itemised separately or at least clearly disclosed as a fee.

A card can carry one, both, or neither. Knowing which applies to your card is the only way to estimate the real cost of a purchase ahead of time.

How to spot your own markup

For a past transaction, divide the AUD amount billed by the original foreign-currency amount to find the effective AUD cost per foreign unit. Compare that with a reference rate for the same pair and transaction time, then account for any separate card fee. A rate checked today cannot reliably reveal the markup on a purchase processed earlier.

Sources and method

Reviewed 31 October 2026. The advice to compare the complete price follows the ACCC's consumer guidance. The notes about card conversion timing follow Mastercard's converter explanation. Our calculation method is documented on How we calculate rates.