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Part of the guideOne account, every currency: a guide for cross-border businesses
The short answer
A hidden FX margin is the gap between the exchange rate you are given and the mid-market rate at that moment; providers who advertise "no fee" usually earn their money there. To see the real cost, convert the same amount at the mid-market rate, compare it with what you actually pay or receive after all fees, and express the difference as a percentage. That single number lets you compare any two providers fairly.
Every currency conversion has a price, even when the screen says the fee is zero. The price is either a visible fee, a margin built into the rate, or both. This article shows how to find the margin and put one number on the total cost. It is part of our guide to multi-currency business accounts, which covers the wider choice of provider.
Where the margin hides
Foreign exchange is traded wholesale at a buy price and a sell price. The midpoint between them is the mid-market rate, the figure you see on financial news sites. No business customer trades at exactly that rate. The provider quotes you a rate a little worse than mid, and the gap is its margin, also called the spread or markup.
There are three common pricing styles:
- Margin only. A rate noticeably away from mid, with "no fee" or "zero commission" in the marketing.
- Fee only. A rate at or very close to mid, with a percentage or flat fee shown separately.
- Both. A smaller margin plus a fee. Many banks and payment firms price this way.
None of these is wrong in itself. The problem arises when the margin is not disclosed. In its May 2025 review of international payment pricing, the UK Financial Conduct Authority (FCA) described as poor practice any marketing that calls a payment "zero cost" because there is no fixed fee while a markup is applied, and any failure to make clear that a rate contains a markup over a reference rate. The FCA's good-practice example shows the markup converted into a fee: a 3% markup on a 1.30 reference rate shown as a £3.00 cost on a £100 transfer.
How to calculate the real cost of any quote
- Note the mid-market rate at the moment of the quote. Rates move constantly, so a rate from an hour ago is not a fair benchmark. For the euro, the European Central Bank publishes daily reference rates that are useful for checking past conversions.
- Work out the amount at mid-market. Divide or multiply the amount by the mid rate, so you know what a cost-free conversion would give you.
- Work out what you actually pay or receive. Use the quoted rate, then add every fee: conversion fee, transfer fee, and any intermediary charge you are told about.
- Express the difference as a percentage. Total cost % = (actual amount − mid-market amount) ÷ mid-market amount. Use this number, not the headline fee, to compare providers.
A quick shortcut for the margin alone: margin % = (mid rate − offered rate) ÷ mid rate, when the rate is quoted as units of foreign currency per pound and you are buying the foreign currency.
Worked example: paying a €25,000 invoice
A UK company owes a supplier in Spain €25,000. Assume the mid-market rate is €1.1500 per £1, so the invoice is worth £21,739.13 at mid. Three quotes arrive. The figures are illustrative, not quotes from real providers.
| Provider A: "no fee" | Provider B: margin + flat fee | Provider C: near-mid rate + % fee | |
|---|---|---|---|
| Rate offered (€ per £) | 1.1270 | 1.1440 | 1.1490 |
| Margin in the rate | 2.0% | 0.52% | 0.09% |
| Pounds for €25,000 at that rate | £22,182.79 | £21,853.15 | £21,758.05 |
| Fee | £0 | £15.00 | 0.5% = £108.79 |
| Total paid | £22,182.79 | £21,868.15 | £21,866.84 |
| Cost against mid-market | £443.66 (2.04%) | £129.02 (0.59%) | £127.71 (0.59%) |
The "no fee" quote is the most expensive by more than £300. Providers B and C look completely different on the surface, one with a tiny fee and a visible margin, the other with a rate near mid and a larger fee, yet they cost almost exactly the same. Only the total-cost percentage reveals that.
Two further checks matter. First, if the payment travels by SWIFT, intermediary banks may deduct charges, so the supplier may receive less than €25,000 unless you choose to pay all charges; our article on SWIFT vs local payment rails explains why. Second, run the calculation at your usual payment size. A flat fee that is trivial on €25,000 can be a large percentage on €500.
What providers must show you
Disclosure rules differ by region and by type of customer, so do not assume you will always be shown the margin.
| Region | What the rules require | Who it protects |
|---|---|---|
| UK | The FCA expects firms, under the Consumer Duty, to show the amount sent, the rate applied, any markup and all fees, and to warn that third-party charges may reduce the amount received. | Retail customers; the expectations come from a review of consumer-facing payment services |
| EU | Under the Cross-Border Payments Regulation, before an online credit transfer involving conversion, the provider must give an estimate of the conversion charges, the total in the payer's currency and the amount the payee will receive. For card payments, the markup must be stated as a percentage over the ECB reference rate. | Payment service users in the EU |
| Everywhere | Contract terms and price lists. Business terms often allow the provider to set its own rate without stating a margin. | Only what your contract says |
For a business, the practical rule is to ask every provider the same question: for this amount, right now, how much will I pay and how much will arrive? If the answer comes as a rate alone, run the four steps above. If you receive foreign currency regularly, the same method applies in reverse, and our guide to getting paid by international clients shows how much a margin costs over a year of invoices.
Where Pryme fits
Pryme's Swap shows the rate before you confirm and holds it for about 30 seconds, and any fee is shown on its own line. On a business account, the rate and fee that apply are shown in the app before you confirm, so you can run the calculation above against the mid-market rate in a few seconds. "When it hits" lets you name a target rate and wait; you approve before anything executes.
Because Pryme accounts hold GBP, EUR, USD and NGN with local details, you can also convert less often by paying costs from the currency you already hold. Outside Nigeria, these services are provided through regulated partners. For how conversion cost fits with protection and accounting, see the multi-currency business account guide.
Questions people ask
What is the mid-market rate?
It is the midpoint between the wholesale buy and sell prices for a currency pair at a given moment. It is the fairest benchmark for comparing quotes, although business customers rarely trade exactly at it. Check it at the same time as the quote, because it moves through the day.
How do I know if my bank is charging an FX markup?
Compare the rate on your statement with the mid-market rate at the time of the conversion. If your rate is worse, the difference is a markup, even if no fee is listed. Divide the gap by the mid rate to get the markup as a percentage.
Is a 0% commission currency exchange really free?
Rarely. Most "0% commission" offers price their service through the exchange rate. The FCA has said that calling a payment zero cost while applying a markup is poor practice. Work out the total cost against the mid-market rate before you decide.
What is a reasonable FX margin for a business?
It depends on the currency pair, the amount and the provider. Rather than aim for a target figure, compare the total cost percentage for the same amount at the same moment across two or three providers, including any transfer and intermediary fees.
Are FX fees tax-deductible for a UK company?
Conversion costs incurred in the course of trade are normally part of the company's costs, and for companies the tax treatment of exchange gains and losses generally follows the accounts. Ask your accountant how your conversions should be recorded.
Sources
- FCA: Consumer Duty, international payment pricing transparency, good and poor practice (May 2025) · accessed Oct 2026
- Good Money Guide: FCA guidance on transparency around costs in international currency payments · accessed Oct 2026
- EUR-Lex: Regulation (EU) 2019/518 on cross-border payments and currency conversion charges · accessed Oct 2026
- Deloitte: Revised Cross-Border Payments Regulation (CBPR2) · accessed Oct 2026
- HMRC: Corporate Finance Manual CFM60010, foreign exchange overview · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.