Everything You Need to Know About Mid-Market Exchange Rate | CompareRemit
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What Is a Mid-Market Exchange Rate?

Updated on September 13, 2022 10:44 am
exchange rate

When people mention "the exchange rate" between any two currencies, they are referring to the mid-market exchange rate.

The rate at which banks trade currencies with one another is referred to as the "mid-market exchange rate".

Every currency pair have its mid-market rate influenced by national and international macroeconomic forces. For example, there is the USD to INR mid-market exchange rate which is subject to change depending on imports, exports, trade agreements, economic conditions, and a variety of other factors.

When converting one currency for another, these factors affect how much money a person can receive. If you are sending or receiving money internationally and there is a currency exchange involved, you may want to keep an eye on the exchange rates.

Is the Mid-Market Rate the Same as the Interbank Rate?

Due to banks being the major seller or buyers of currencies, the mid-market rate is commonly called interbank rates. This rate is used to exchange currencies between banks. The middle or interbank rate can vary from time to time based on several parameters.

How Is the Mid-Market Exchange Rate Calculated?

Global banks calculate the mid-market rates as the midpoint between the buying and selling prices of any two currencies.

Currency buys and sells rates are based on the constantly shifting supply and demand for the currency in the FX markets.

Price differences between purchase and sale are called Spreads. The average of this spread (buying and selling prices) determines the mid-market rate.

How to Find the Mid-Market Exchange Rate

The mid-market exchange rate is essentially the exchange rate found in the results of Google searches and the rates displayed by currency exchange providers like XE.

Can I Send Money at Mid-Market Exchange Rate?

In general, sending money at the mid-market exchange rate is not possible. Banks and other currency exchange providers set their exchange rates, different from the mid-market exchange rate for customers, known as exchange rate margins.

What Is an Exchange Rate Margin?

The exchange rate margin is the percentage difference between the mid-market rate and the rate offered to customers. This is one of the ways banks and other providers make money from cross-border money transfers. 

These margins might range from 0.01% to 10% or more of your transfer amount, depending on the provider you choose to send your money through.

Some money transfer businesses charge 0% fees or no commission to attract customers. They may be hiding the charges in their exchange rate.

Why Does the Mid-Market Rate Matter?

If you want to save money on international money transfers, you should transfer money as closely as possible to the mid-market exchange rates. Mid-market rates are considered the fairest rate possible. It will probably be the rate when you find a foreign currency rate on Google.

This rate is a good starting point in comparison with other transfer companies to see if it is a fair exchange rate that is being offered to you.

The closer you are to the mid-market rate, the more money your recipient will ultimately receive because most money transfer providers and banks make money from the exchange rate margin.

How to Use the Mid-Market Rate to Avoid High FX Rates?

Several money transfer companies, including Wise and Instarem, provide the mid-market rate for your international money transactions. Other providers may let you lock in a good rate, protecting your transfer from rate fluctuations for a limited time.

Before transferring money overseas, it can be helpful to compare the exchange rates offered by the providers to that of the mid-market rate.

When using international wire transfers via banks, you can find that FX rates are not nearly as favorable as inter-bank rates. Banks often add a markup to the interbank rate. The costs of currency conversion are sometimes not disclosed to the customer. And they wind up paying exorbitant fees without even realizing it as hidden fees.

While the majority of money transfer providers will display the offered exchange rate to you once you have entered all the necessary details for your currency exchange before you press the send button.

Furthermore, compared to bank fees, third-party money transfer services' transfer fees and exchange rate margins are substantially lower.

International Transfer Options

Now, the straightforward method is an international wire transfer through your bank, although they are not the cheapest. Keep in mind that banks use the SWIFT system to carry out transactions which tend to take 3 to 5 business days. If you are not in a hurry and don't mind paying extra money on correspondent banks fees, banks may be your best option.

Other options include cashier's checks, bank drafts, and ACH transactions. They are safe because if the checks or drafts do not reach the intended recipient in another country, it is possible to track them down. However, it takes them longer to get to the recipient.

On the other hand, money transfer companies tend to be more specialized and offer more affordable services because they have lower overhead costs than traditional banks. This results to lower transaction costs, more transparent pricing, quicker delivery, a better exchange rate than banks, and an improved user experience with international money transfers.

How Can I Find the Best Exchange Rate?

Comparing service providers is strongly advised because different money transfer service providers have varying charges, rates, and promotional offers.

Using CompareRemit's comparison engine can help you save money on international money transfers by ensuring that you get the best exchange rates.

CompareRemit's tool enables you to quickly and easily compare exchange rates provided by various money transfer services in real-time. You can compare transfer fees, speed, and amount receivable to help you find the best option for your transfers.

To check out top money transfer companies' best currency exchange rates, compare remittance providers using CompareRemit today!

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