All About FX Rates: Meaning, Calculation, and How to Avoid FX Fees

This content is for educational purposes only and should not be considered financial advice. Crypto investments carry risks, including loss of capital. Always do your own research or consult a licensed advisor before investing.

Key Takeaways

• The FX rate is the price of one currency expressed in another.
• Banks and many platforms often add hidden markups or fees.
• Wise uses the real mid-market rate but charges a transparent fee.
• Bleap gives you the daily FX rate with no fees, no spreads, and free EUR↔USD conversion.

What Does FX Rate Mean?

An FX rate shows how much one currency is worth in another. For example, 1 EUR = 1.17 USD. This matters because exchange rates directly impact international trade, global investing, and even everyday travel expenses.

How Are FX Rates Determined?

Rates are shaped by supply and demand in global markets, central bank policies, inflation, and speculation. The interbank market, involving big banks like JP Morgan and HSBC sets these rates.

How to Calculate FX Rate

Use this formula:

Amount in foreign currency = Amount in base currency × FX rate

Example (mid-market rate):

• Base Currency: €1
• FX Rate: 1 EUR = 1.17 USD
• So if you have €500: €500 × 1.17 = $585

Example with a 3% FX Tax (Bank Markup)

• If your bank adds a 3% fee to the rate:
  
  • New effective rate = 1.17 × (1 – 0.03) = 1.135 USD
  • €500 × 1.135 = $567.50

👉 You receive $17.50 less, which is 3% below the real amount.

FX Rates and Fees: Banks vs Crypto vs Bleap

To highlight the real impact of FX taxes and hidden markups, we simulated the conversion of €1,000 into USD using the official ECB reference rate from 5 September 2025 (1 EUR = 1.1697 USD).

This benchmark reflects the true mid-market price, the same rate banks trade with each other. We then applied the typical FX markups or fees charged by banks, fintechs, and crypto platforms to show how much USD you would actually receive in practice.

Key Takeaways

• Fintechs (Wise): real mid-market rate with a small and transparent fee.
• Banks (Bank of America, Chase, Citi): add hidden markups of 3–5% and often flat fees.
• Crypto exchanges (Coinbase, Kraken): close to market rate but with spreads and trading fees.
• Bleap: real daily FX rate with 0% markup or spreads.

* Rates are approximate and subject to change at the time of use.

How to Avoid FX Fees

Here’s how to keep costs low:

• Traditional banks: add hidden markups and extra charges.
• Fintech apps (like Wise or Revolut): closer to the real rate, but still include fees.
• Bleap: no markups, no hidden costs, and truly free EUR↔USD conversion with global access.
  

Is a Bank or Wallet Better for Currency Exchange?

Banks are reliable but usually the most expensive option, adding hidden markups and fees. Digital wallets and fintech apps can be cheaper, but most still charge small spreads or conditions.

• Traditional banks: safe, but costly.
• Fintech apps: better rates, but not truly fee-free.‍
• Bleap: combines both worlds: full security, global access, and 0% FX fees.
  

Where Can You Exchange Currency?

You have several options, but costs and convenience vary widely:

• Banks: Safe and reliable, but usually expensive due to hidden markups.
• Airport kiosks: Convenient for last-minute cash, but almost always the worst rates.
• Fintech apps: Often cheaper than banks, though most still include small fees or limits.
• Bleap: The only option that combines global access, transparency, and 0% FX fees on EUR↔USD conversions.

FX Rates in Latin America: Brazil, Mexico, and Colombia

Latin American currencies are widely used for travel, remittances, and cross-border trade, but they are also among the most expensive to exchange. Banks, exchange houses, and even government taxes increase the cost of conversions, often leaving users with significantly less than the fair market value.

Brazil: Brazilian Real (BRL)

All foreign exchange transactions in Brazil are subject to a government tax called IOF (Imposto sobre Operações Financeiras):

• 3.5% on purchases with cards abroad.
• 1.1% on cash exchanges.
  
  
• On top of this, banks typically add spreads of 3–5% over the mid-market rate.
• As a result, converting BRL to USD or EUR can cost 5–8% or more.
  

Mexico: Mexican Peso (MXN)

Currency exchange in Mexico is dominated by casas de cambio (exchange houses), which often advertise “no commission” while hiding a 2–4% spread in the rate.

• Banks may add both spreads and flat fees, especially for international card use.
• In practice, consumers lose 3–5% on conversions.
  

Colombia: Colombian Peso (COP)

In Colombia, banks and exchange houses frequently apply 5–7% spreads.

• Remittances into Colombia, a major flow from countries like the United States and Spain, are even more expensive, with service fees of 3–6% plus spreads.
• Combined, total FX costs can exceed 8–10%.

Bleap’s Plans for Latin America

Bleap is preparing to expand into Brazil, Mexico, and Colombia, with the goal of offering the same benefits it already provides in Europe:

• 0% FX fees on all conversions.
• Real daily market rates without spreads or hidden markups.
• Global Mastercard access for spending and ATM withdrawals abroad.

Once launched, this will allow users in these countries to exchange and spend money at the true market rate, avoiding the high FX costs typically charged by banks, exchange houses, and traditional providers.

FAQ

What does FX stand for?

FX stands for foreign exchange, which refers to the conversion of one currency into another. It is commonly used in global trade, investing, and travel.

The “FX tax” isn’t an official government tax in most countries (with the exception of Brazil’s IOF). Instead, it refers to the hidden markups and fees that banks and card providers add to currency conversions, making users pay more than the true mid-market rate.

Why do banks charge so much more?

They include hidden markups and sometimes fees. Not the real interbank rate.

Can I get the real rate?

Yes, use platforms like Bleap for transparent or zero-cost conversions.

Are online exchanges safe?

Yes, when using trusted, regulated platforms. Bleap is non-custodial and only you control your funds.

Where can I exchange currency before traveling?

You can exchange money at banks, currency exchange offices, or fintech platforms. However, banks and airport kiosks are usually the most expensive options due to hidden markups. Digital wallets or platforms like Bleap offer far better value.

What is the safest way to exchange money abroad?

Using a regulated card or wallet that applies the daily market rate is the safest and most transparent way. With Bleap, you can spend or withdraw worldwide at the real FX rate, with no additional platform fees.

Conclusion

FX rates are central to global finance, but the extra costs added by banks and most providers don’t have to be part of the equation. By understanding how markups and hidden fees work, you can keep more of your money when converting currencies.

Traditional banks remain the most expensive option, and even fintech apps often include small spreads or limits. Bleap is different: it applies no FX fees, no spreads, and always uses the real daily market rate.

Start converting with Bleap today and avoid FX costs entirely.

👉 Want to start converting with Bleap at zero FX cost? Download Bleap App!