What is an Exchange Rate?
An exchange rate is the value of one currency expressed in terms of another. When you send money abroad, you're essentially buying foreign currency with your local currency.
For example, if the USD/INR rate is 83.50, it means 1 US Dollar equals 83.50 Indian Rupees.
Types of Exchange Rates
Mid-Market Rate (Interbank Rate)
This is the "true" exchange rate – the midpoint between buy and sell prices on the global currency market. It's what you see on Google or XE.com. No markup, no profit margin.
**Important:** You'll rarely get this rate when sending money. Providers add their margin on top.
Provider Rate
This is the rate offered by money transfer services. It includes a markup over the mid-market rate, which is how providers make money (in addition to fees).
What Affects Exchange Rates?
- **Interest rates** - Higher rates attract foreign investment, strengthening the currency
- **Inflation** - Lower inflation typically leads to a stronger currency
- **Economic performance** - Strong GDP growth supports a currency
- **Political stability** - Uncertainty weakens a currency
- **Supply and demand** - More buyers = stronger currency
How to Get the Best Rate
1. Compare Before You Send
This is why RemitRadar exists! Always compare rates from multiple providers before transferring.
2. Look at the Total Cost
Don't just compare exchange rates. Factor in fees too. A better rate with a high fee might cost you more overall.
3. Consider Timing
Rates fluctuate throughout the day. If you're not in a rush, set a price alert for your target rate.
4. Avoid Airport/Bank Exchanges
Traditional banks and airport kiosks typically offer the worst rates. Use online providers for better value.
5. Send Larger Amounts (When Possible)
Fees often have a fixed component, so larger transfers tend to be more cost-effective per dollar sent.
Understanding the "Spread"
The spread is the difference between the mid-market rate and the rate you're offered. It's essentially a hidden fee.
Example:
- Mid-market rate: 83.50 INR per USD
- Provider rate: 82.50 INR per USD
- Spread: 1.00 INR (or about 1.2%)
On a $1,000 transfer, that 1.2% spread costs you approximately $12.
Conclusion
Understanding exchange rates helps you make better decisions when sending money abroad. Always compare providers, look at the total cost (rate + fees), and don't be afraid to wait for a better rate if timing permits.
Use RemitRadar to compare rates in real-time and find the best deal for your transfer.
Disclaimer: Exchange rates fluctuate constantly. The rates and examples in this article are for illustration only. Always verify current rates with providers before transferring.