How Exchange Rates Work | Invorya

Currency • 6 min read

How Exchange Rates Work

Q: Why is my bank’s rate different from Google’s spot rate?

Banks and apps typically add a markup (spread) and sometimes fixed or card fees. The spot rate is mid-market and not the consumer deal.

Q: Should I pay in local currency or my home currency when traveling?

Choose the local currency. Dynamic Currency Conversion (DCC) often uses a worse exchange rate and adds fees.

Q: Do weekends make conversions more expensive?

Some providers widen spreads on weekends or during volatility, but the day itself isn’t the key factor—compare the effective rate.

Q: How do I minimize FX costs?

Use 0% foreign transaction fees, avoid DCC, compare providers for large transfers, and watch fixed fees on small amounts.

Spot vs. average rates, why rates move, and how to estimate a fair conversion.

Exchange rates tell you how much one currency is worth in another—for example, how many euros you get for a US dollar. They change constantly as markets react to interest rates, inflation, growth expectations, and risk sentiment.

Quick “Rate Reality Check”

See how provider markups and fees change what you actually receive. Defaults assume USD ➜ EUR, but you can edit anything. Use the dropdown suggestions or type a code.

From currency

To currency

Amount (from currency)

Spot rate (to per 1 from)

Provider markup (%)

Card/FX fee (%)

Fixed fee (from currency)

Simulate rate move (±%)

Try +1% or −1% to see the impact.

Effective Rate

—

What you actually get per 1 USD after all fees

Amount You Receive

—

EUR after all fees

Total “Cost” vs Spot

—

Shown in USD (vs. perfect mid-market)

Breakdown

Spread: — • Fixed: — • Card: —

Provider rate = Spot × (1 − markup%)

We treat fixed/card fees as taken in the USD side before conversion.

Effective rate = (to-currency received) ÷ (original from amount).

Spot vs. Average (Reference) Rates

Spot rate is the live market price right now. A bank, app, or card processor may show a reference/average rate, which is usually a daily snapshot and can differ slightly from what you actually receive after fees and spreads.

Tip: When comparing providers, always look at the effective rate you’ll receive (after fees). That’s the real cost.

What Moves Exchange Rates?

Interest rates & central banks: Higher rates tend to attract capital and can strengthen a currency.
Inflation & growth: Persistent inflation can weaken purchasing power; strong growth can lift a currency.
Risk sentiment: In risk-off periods, funds often move into “safe haven” currencies.
Trade & capital flows: Imports/exports and cross-border investing change demand for each currency.

How to Estimate a Fair Conversion

For small purchases, tiny differences don’t matter much. For larger transfers, compare: (1) the market/spot rate you see on a trusted source, and (2) the provider’s quoted rate after fees. The gap is your total cost.

FAQs

Why is my bank’s rate different from Google’s spot rate?

Banks/apps usually add a markup (“spread”) and sometimes fixed or card fees. The spot rate is mid-market; you rarely get that exact rate as a consumer.

Should I pay in local currency or my home currency when traveling?

Choose the local currency. Dynamic Currency Conversion (DCC) often adds a poor exchange rate and extra fees.

What’s a “good” rate?

For major currencies, a consumer rate within ~0.5–1.5% of mid-market is often competitive. Use the calculator above to see your effective rate vs. spot.

Do weekends make conversions more expensive?

Not inherently. Some providers widen spreads when markets are closed or volatile. Compare the effective rate, not just the day.

How do I minimize FX costs?

Use cards with 0% foreign transaction fees, avoid DCC, compare providers for large transfers, and watch fixed fees on small amounts.

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