Foreign Exchange Fees Guide: How to Save Thousands on International Payments
Michael Ross
Compliance Officer • Dec 04, 2025
Last Updated: December 2025 | Reading Time: 10 minutes
Foreign exchange (FX) fees are one of the biggest hidden costs for businesses operating internationally. A seemingly small 3-4% markup can cost you thousands—or even millions—per year.
This comprehensive guide explains how FX fees work, where they hide, and most importantly, how to minimize them to save significant money on international payments.
What Are Foreign Exchange Fees?
Foreign exchange fees are charges applied when converting one currency to another. When you send $10,000 USD to a supplier in Europe, someone needs to convert those dollars to euros—and they charge a fee for that service.
The two components:
- Exchange rate markup: The difference between the real rate and the rate you get
- Transaction fees: Fixed or percentage-based fees on top of the markup
The Real Cost of FX Fees
Example: $100,000 International Payment
Let's say you're paying a European supplier €100,000 (approximately $108,000 USD at mid-market rate).
Traditional Bank:
- Mid-market rate: 1 EUR = 1.08 USD
- Bank's rate: 1 EUR = 1.12 USD (3.7% markup)
- You pay: $112,000
- Hidden cost: $4,000
Wise:
- Mid-market rate: 1 EUR = 1.08 USD
- Wise's rate: 1 EUR = 1.0844 USD (0.41% markup)
- You pay: $108,440
- Cost: $440
Savings: $3,560 per transaction
Annual savings (12 transactions): $42,720
Understanding the Mid-Market Rate
The mid-market rate (also called interbank rate or real exchange rate) is the midpoint between the buy and sell prices of two currencies on global markets.
Where to find it:
- Google "USD to EUR"
- XE.com
- Bloomberg Terminal
- Reuters
This is the "real" rate—the rate banks use when trading with each other. Consumers and businesses rarely get this rate.
Types of FX Fees
1. Exchange Rate Markup
What it is: The provider adds a percentage to the mid-market rate.
Example:
- Mid-market rate: 1 USD = 0.92 EUR
- Provider's rate: 1 USD = 0.89 EUR
- Markup: 3.3%
How to calculate:
Markup % = ((Mid-market rate - Provider rate) / Mid-market rate) × 100
Typical markups:
- Traditional banks: 3-5%
- PayPal: 3.5-4%
- Credit cards: 3-4%
- Wise: 0.41-0.69%
- Airwallex: 0.5-0.6%
2. Transaction Fees
What it is: A fixed or percentage-based fee charged per transaction.
Examples:
- Wire transfer fee: $25-$50 per transfer
- Percentage fee: 1-2% of transaction amount
- Receiving fee: $10-$15 to receive international payments
3. Foreign Transaction Fees (Cards)
What it is: Fee charged when using a card in a foreign currency.
Typical fees:
- Traditional credit cards: 3%
- Airwallex cards: 0%
- Wise cards: 0%
- Revolut cards: 0%
- Brex cards: 2.7%
4. Hidden Fees
What they are: Fees not clearly disclosed upfront.
Examples:
- Intermediary bank fees: $10-$30 per transfer
- Correspondent bank fees: $15-$25
- Receiving bank fees: $10-$20
- "Free" transfers with bad exchange rates
How Different Providers Charge
Traditional Banks
Fee structure:
- Exchange rate markup: 3-5%
- Wire transfer fee: $25-$50
- Receiving fee: $10-$15
- Intermediary fees: $10-$30
Example: $10,000 USD → EUR
- Markup cost: $300-$500
- Wire fee: $40
- Intermediary fees: $20
- Total cost: $360-$560 (3.6-5.6%)
Best for: Large corporations with negotiated rates
Worst for: Small businesses, frequent transfers
PayPal
Fee structure:
- Exchange rate markup: 3.5-4%
- Transaction fee: 2.9% + $0.30 (for receiving payments)
- No wire fees
Example: Receiving $10,000 USD payment (converting to EUR)
- Markup cost: $350-$400
- Transaction fee: $290
- Total cost: $640-$690 (6.4-6.9%)
Best for: Small, infrequent transactions
Worst for: Large transfers, frequent use
Wise (Formerly TransferWise)
Fee structure:
- Exchange rate: Mid-market rate (0% markup)
- Transaction fee: 0.41-0.69% depending on currency pair
- No hidden fees
Example: $10,000 USD → EUR
- Markup cost: $0
- Transaction fee: $41-$69
- Total cost: $41-$69 (0.41-0.69%)
Best for: Cost-conscious businesses, frequent transfers
Worst for: Very small transactions (<$100)
Airwallex
Fee structure:
- Exchange rate markup: 0.5-0.6%
- No transaction fees for account-to-account
- Card spending: 0% foreign transaction fee
Example: $10,000 USD → EUR
- Markup cost: $50-$60
- Transaction fee: $0
- Total cost: $50-$60 (0.5-0.6%)
Best for: Businesses with high card usage, international operations
Worst for: Very small businesses
Revolut Business
Fee structure:
- Exchange rate markup: 0.5-1%
- Free transfers up to certain limits
- Weekend markup: +0.5-1%
Example: $10,000 USD → EUR (weekday)
- Markup cost: $50-$100
- Transaction fee: $0
- Total cost: $50-$100 (0.5-1%)
Best for: European businesses, frequent small transfers
Worst for: Weekend transfers
Real-World Cost Comparison
Scenario 1: Freelancer ($5,000/month)
Annual volume: $60,000
| Provider | Annual Cost | Savings vs Bank |
|---|---|---|
| Traditional Bank | $2,160-$3,360 | - |
| PayPal | $3,840-$4,140 | -$1,680 to -$780 |
| Wise | $246-$414 | $1,914-$2,946 |
| Airwallex | $300-$360 | $1,800-$3,000 |
| Revolut | $300-$600 | $1,560-$3,060 |
Best choice: Wise (saves $2,000-$3,000/year)
Scenario 2: Small Agency ($50,000/month)
Annual volume: $600,000
| Provider | Annual Cost | Savings vs Bank |
|---|---|---|
| Traditional Bank | $21,600-$33,600 | - |
| PayPal | $38,400-$41,400 | -$16,800 to -$7,800 |
| Wise | $2,460-$4,140 | $17,460-$31,140 |
| Airwallex | $3,000-$3,600 | $18,000-$30,600 |
| Revolut | $3,000-$6,000 | $15,600-$30,600 |
Best choice: Wise (saves $17,000-$31,000/year)
Scenario 3: E-commerce Business ($500,000/month)
Annual volume: $6,000,000
| Provider | Annual Cost | Savings vs Bank |
|---|---|---|
| Traditional Bank | $216,000-$336,000 | - |
| PayPal | $384,000-$414,000 | -$168,000 to -$78,000 |
| Wise | $24,600-$41,400 | $174,600-$311,400 |
| Airwallex | $30,000-$36,000 | $180,000-$306,000 |
| Revolut | $30,000-$60,000 | $156,000-$306,000 |
Best choice: Wise or Airwallex (saves $175,000-$310,000/year)
How to Minimize FX Fees
Strategy 1: Use Mid-Market Rate Providers
Action: Switch from traditional banks to Wise, Airwallex, or Revolut.
Savings: 2.5-4.5% per transaction
Implementation:
- Open account with low-fee provider
- Transfer funds from bank to new account
- Make international payments from new account
Time: 1-2 weeks to set up
Strategy 2: Hold Multi-Currency Balances
Action: Keep balances in currencies you frequently use.
Savings: Avoid conversion fees when receiving payments
Example: US company with European clients
- Receive EUR payments → Hold in EUR account
- Pay European suppliers → Use EUR balance (no conversion)
- Only convert to USD when needed
Providers: Wise, Airwallex, Revolut
Strategy 3: Time Your Conversions
Action: Convert when exchange rates are favorable.
Savings: 1-5% depending on volatility
Tools:
- Set rate alerts on Wise or XE.com
- Use forward contracts to lock in rates
- Monitor economic calendars for major announcements
Example: EUR/USD typically volatile around:
- Federal Reserve announcements
- European Central Bank decisions
- Major economic data releases
Strategy 4: Batch Payments
Action: Combine multiple small payments into one large payment.
Savings: Reduce fixed fees
Example: Instead of 10 × $1,000 payments ($25 fee each = $250), make 1 × $10,000 payment ($25 fee = $25).
Savings: $225
Strategy 5: Use Local Payment Methods
Action: Pay suppliers in their local currency using local payment rails.
Savings: Avoid international wire fees
Example: Pay UK supplier via UK Faster Payments instead of international wire.
Providers: Wise, Airwallex (offer local payment methods in 50+ countries)
Strategy 6: Negotiate with High-Volume Providers
Action: For large volumes ($100,000+/month), negotiate lower rates.
Savings: 0.1-0.3% reduction in markup
Providers willing to negotiate:
- Airwallex (high-volume businesses)
- Revolut Business (enterprise plans)
- OFX (large transfers)
Not negotiable:
- Wise (fixed transparent pricing)
- PayPal (fixed rates)
Hidden Fee Red Flags
🚩 "Zero Fee" Transfers
Claim: "Send money abroad with zero fees!"
Reality: Terrible exchange rate (3-5% markup hidden in rate)
How to spot: Compare their rate to mid-market rate on Google
🚩 "Free" International Cards
Claim: "No foreign transaction fees!"
Reality: 3-4% markup on exchange rate
How to spot: Check the exchange rate used, not just the fee
🚩 Unclear Total Cost
Claim: "Low 1% fee"
Reality: 1% fee + 3% exchange rate markup = 4% total
How to spot: Ask "What is the total cost including exchange rate?"
🚩 Weekend Markups
Claim: "Free transfers anytime"
Reality: 0.5-1% extra markup on weekends
How to spot: Check provider's weekend pricing policy
Tools to Track FX Costs
1. XE.com Currency Converter
Use: Check real-time mid-market rates
How: Compare provider's rate to XE.com rate
Cost: Free
2. Wise Calculator
Use: Calculate exact transfer costs
How: Enter amount and currencies on wise.com
Cost: Free
3. Google Sheets FX Tracker
Use: Track all international payments and fees
Template:
| Date | Amount | Currency | Provider | Rate | Fee | Total Cost |
|---|
Cost: Free
4. Accounting Software Integration
Use: Automatic FX tracking
Providers:
- Xero (integrates with Wise, Airwallex)
- QuickBooks (integrates with Wise, Airwallex)
- NetSuite (integrates with Airwallex)
Cost: Included with accounting software
Frequently Asked Questions
What is the cheapest way to send money internationally?
Wise for most use cases (0.41-0.69% total cost). Airwallex if you need unlimited virtual cards or payment collection.
Can I avoid FX fees entirely?
No, but you can minimize them to <1% using providers like Wise or Airwallex. The mid-market rate itself fluctuates, so there's always some cost.
Are "zero fee" transfers really free?
Usually no. They hide fees in a bad exchange rate. Always check the total cost including the exchange rate markup.
How do I know if I'm getting a good exchange rate?
Compare to the mid-market rate on Google or XE.com. Good providers are within 0.5-1% of mid-market.
Should I use my bank for international transfers?
Only if you have a negotiated corporate rate. Otherwise, use Wise, Airwallex, or Revolut to save 2-4%.
What's the difference between Wise and Airwallex?
Wise: Lowest FX fees (0.41%), best for pure currency conversion
Airwallex: Slightly higher FX fees (0.5%), but offers unlimited virtual cards and payment collection
Can I negotiate FX rates?
Yes, if you transfer $100,000+/month. Airwallex and Revolut Business negotiate. Wise does not.
Conclusion
Foreign exchange fees are a significant cost for international businesses, but they're also one of the easiest costs to reduce.
Key Takeaways
- Traditional banks charge 3-5% in hidden FX fees
- Wise and Airwallex charge 0.4-0.6% (5-10x cheaper)
- Switching providers can save $10,000-$300,000/year depending on volume
- Multi-currency accounts eliminate conversion fees on received payments
- Timing conversions can save an additional 1-5%
Action Plan
Week 1: Calculate your current FX costs
- Review last 3 months of international payments
- Calculate total fees paid
- Estimate annual cost
Week 2: Choose a new provider
- Compare Wise, Airwallex, Revolut
- Sign up for chosen provider
- Complete verification (1-7 days)
Week 3: Make first transfer
- Start with small test transfer
- Compare cost to previous method
- Calculate savings
Week 4: Full migration
- Move all international payments to new provider
- Set up multi-currency accounts
- Implement batching strategy
Expected savings: 2-4% of annual international payment volume
Time to implement: 2-4 weeks
Typical ROI: 10-50x (save $10,000-$50,000 per $1,000 spent on setup)
Disclosure: This guide is based on independent research. We may earn a commission if you sign up through our links, but this does not influence our recommendations.