When you compare payment processors, you compare card rates: 1.5% here, 2.9% there. But if your client pays in another currency, there is a second fee that almost no pricing page puts next to the first, and it is often the bigger one.
What the mid-market rate is
The wholesale currency market always has two prices: the one banks buy a currency at and the one they sell it at. The midpoint between them is the mid-market rate. It is the rate you see when you search "USD to EUR" on Google or Reuters, and it is the fair reference: nobody trades at exactly that point, but every step away from it is a cost to someone.
When a provider converts your payment, it does not use the mid-market rate. It uses one slightly worse for you and keeps the difference. That difference is the conversion markup, sometimes called the spread.
Why it does not show up on your statement
The card fee appears as a line: "fee: $75.25". The conversion markup does not. What you see is an amount that has already been converted, and because the rate moves every minute, you cannot tell at a glance whether you were charged 0.3% or 4%.
Some providers publish it as a percentage. Stripe states 2% for European and UK accounts (1% for US accounts). PayPal publishes 3% to 4% depending on the account's country. Others publish nothing at all and build it straight into the rate they give you.
A worked example with real rates
A US client pays a $5,000.00 invoice by card, and your business account is in Spain, in euros. Here are the fee layers for two processors and for a bank transfer to Wise, at today's published rates:
- Card fee
- Cross-border
- Conversion
- Payout
| Fee layer | Stripe | PayPal | Wise Business |
|---|---|---|---|
| Card fee | −$75.25 | −$145.35 | — |
| Cross-border surcharge | −$82.50 | −$99.50 | — |
| Currency conversion | −$96.85 | −$142.65 | −$14.50 |
| Total cost | $254.60 (5.09%) | $387.50 (7.75%) | $14.50 (0.29%) |
On Stripe the conversion takes $96.85, more than the card fee itself. On PayPal it takes $142.65. Note the order, too: the markup is applied after the other fees, to what is left. The layers do not simply add up; they chain.
Wise converts at the mid-market rate and charges an explicit 0.29% fee for dollars to euros. That is why it comes out so cheap: it does not hide the markup, it shows it. The catch is that your client has to pay you by bank transfer, not by card.
How to measure what it costs you
You do not need to trust anyone's numbers. Take a payment you have already received:
- Write down the gross amount in the client's currency and the date and time it was charged.
- Look up the mid-market rate for that moment (Google Finance, XE and Reuters all show it by the hour).
- Multiply the gross by that rate. That is what the payment was worth in your currency with no fees.
- Subtract what actually reached your bank. The difference is the total cost. Divide it by the fair value and you have your real percentage.
I go through it step by step, with a spreadsheet template, in the guide to working out what a payment really cost.
How to pay less
- Ask for a bank transfer to a multi-currency account. Wise, Revolut Business and Payoneer give you local bank details in the US or the UK. Your client pays as if it were a domestic transfer, and you convert at a much smaller markup.
- Keep the balance in the original currency. If you have costs in dollars (software, ads, suppliers), paying them in dollars avoids converting twice.
- Invoice in your own currency. Then your client's bank does the conversion, not your processor. It has its own downsides, which I cover in the guide to choosing an invoice currency.
- Turn off automatic conversion. Many processors convert by default when they pay out. If your account can hold several currencies, switch that off and convert when it suits you.
To see the split for your own case, run the calculator with your amount and country pair, or open the US to Spain route on the map.
Every figure in this guide is calculated from the providers' public pricing pages, with the same function as the calculator. See the methodology for what the model includes and leaves out.