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Finance 2026-05-04 4 min read By Konvertibly Team

Currency Exchange Guide: How Exchange Rates Work and How to Get the Best Rate

Understand how currency exchange rates work, why rates differ between banks, cards, and bureaux de change, and how to get the best rate when converting money abroad.

Currency Exchange Guide: How Exchange Rates Work and How to Get the Best Rate

How Exchange Rates Work

An exchange rate is the price of one currency expressed in terms of another. Rates fluctuate constantly based on supply and demand, interest rates, inflation, and economic data.

Mid-Market Rate vs. Retail Rate

Mid-market rate: the true interbank rate (what banks charge each other)
Retail rate: what you get — always worse than mid-market

Example: USD/GBP mid-market = 0.7900
Bank retail: 0.7600 (bank keeps 3.8% spread)
Bureau de change: 0.7400 (6.3% spread)

Best approach: use the mid-market rate as your benchmark

Where to Get the Best Rate

  • Travel cards (Wise, Revolut, Starling): close to mid-market
  • ATM abroad (use local currency, decline DCC): good rate
  • Airport bureau de change: worst rate — use only for emergencies
  • Your home bank's travel card: decent, check fees
  • DCC (Dynamic Currency Conversion): always decline — uses bad rate

Factors That Move Exchange Rates

  • Interest rates: higher rates attract foreign capital → currency strengthens
  • Inflation: high inflation erodes purchasing power → currency weakens
  • Trade balance: more exports → more demand for currency
  • Political stability: uncertainty → investors flee to safe havens (USD, CHF, JPY)

Convert currencies at mid-market rate: Free Currency Converter