60 second read…Interbank exchange rate vs Mastercard and Visa

Written by: YourMoney.com
If you want to know the difference between the Interbank exchange rate, and the rates offered by Mastercard and Visa, our 60 second guide gives you an introduction.

Chris Spalding, Caxton head of product development explains the difference:

The way to think of the interbank exchange rate is to think of currency just as any commodity. The interbank rate is the wholesale rate used by traders (banks) to buy and sell between themselves in very high volumes, measured in the 10s of millions.

Thereafter, any company involved in getting the foreign currency to the public adds a little mark-up, resulting in the final retail exchange rate. The difference between interbank and the retail currency is known as the “spread”.

In relation to your credit and debit card, when you make a payment abroad, Visa and Mastercard are a currency retailer – giving currency to the shop or restaurant abroad and charging sterling from your card account.  So, Visa and Mastercard have their own retail exchange rate.

In addition, of course, your card issuer may apply their charges for overseas use – either as a fee or as a percentage of the transaction. You need to check with your card issuer what the overseas charges are.

In the evolving world of currency payments, new service providers are changing their commercial models. Some are reducing their spread but applying limits, for example, to the amount you can transfer or number of ATM transaction you can make in a month.

You need to work out what your volume requirements are to see which model works best for you. Other currency service providers, having used low cost foreign currency as a “loss leader” to build their customer base, are now broadening their services, offering, for example, insurance or mortgages to make their money. It remains to be seen how these businesses grow.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Autumn Statement: Everything you need to know at a glance

Yesterday Chancellor Jeremy Hunt made his first fiscal statement in the role, outlining a range of tax measure...

End of Help to Buy: 10 alternatives for first-time buyers

The deadline for Help to Buy Equity Loan applications passed on 31 October. If you’re a first-time buyer who...

Moving to an energy prepayment meter: Everything you need to know

As households struggle with the soaring cost of energy, tens of thousands of billpayers are expected to move o...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week

Privacy Preference Center