If you’re a business or freelancer sending or receiving money from abroad through banks or platforms like PayPal or Payoneer, you may have noticed something odd. The amount you receive or pay often ends up slightly different from what you expected.
You raise an invoice and calculate the amount using the mid-market rate displayed on Google, yet the amount that lands in your account is noticeably lower—especially for large transactions.
This happens because of multiple fees applied by banks and third-party platforms. Among these, forex markup fees are the most significant. These fees are hidden and not disclosed transparently, which can be confusing and decrease your net profits.
In this blog, we’ll explain what forex markup fees are, how they work, why they differ across platforms, and what you can do to minimize them.
What Is Forex Markup Fee?
Forex markup fee means the difference between the mid-market exchange rate and the rate offered by banks or payment platforms.
When you receive USD, EUR, or GBP into your INR account, the platform doesn’t use the mid-market rate (the “real” exchange rate you see on Google). Instead, they add a small percentage, usually 0.5% to 3%, to cover their costs and profit margin. It basically increases the cost of currency conversion.
Most of the time, these fees aren’t disclosed that transparently. If you look closely in your bank statement after receiving an international payment, you can identify the forex markup fees.
For small transactions, it may seem negligible, but for larger sums, it’s a significant cut that banks and a few third-party platforms charge.
The Impact of Forex Markup Fees
Let’s understand the impact through an example:
Scenario: You are an Indian IT consultancy receiving $10,000 from a client in the US.
- Mid-market rate: 1 USD = ₹83
- Bank rate with 2% markup: 1 USD = ₹81.34
Calculation:
- Expected INR at mid-market rate: 10,000 × 83 = ₹8,30,000
- INR received with markup: 10,000 × 81.34 = ₹8,13,400
Loss due to markup: ₹16,600
That’s a significant amount lost in just one transaction. If your business receives multiple international payments every month, the losses can easily run into lakhs per year.
Who Charges Forex Markup Fees?
Almost every financial institution handling foreign currency charges markup fees. Here’s a breakdown:
- Traditional Banks: Most Indian banks, including SBI, HDFC, ICICI, and Axis, charge 1–3% markup on top of the mid-market rate.
- Digital Payment Platforms: Platforms like PayPal, Wise, or Karbon also charge markups, but usually lower than banks.
- Credit/Debit Cards: When using your card internationally, the bank may charge a foreign currency conversion fee (often around 2–3%).
Some platforms are transparent about their markups, while others hide them in the rate itself. Always check the fine print.
How to Find the Forex Markup Fees You Are Currently Paying
Finding out your markup isn’t hard, but it requires a bit of calculation. Here’s how:
- Compare with mid-market rate: Check the current mid-market rate on Google, XE, or OANDA. Compare it with the rate you received. The difference is your markup.
- Check your statement: Some banks show it as a separate fee. Others embed it in the conversion rate.
- Use online calculators: Platforms like Wise provide transparent calculators showing mid-market vs. applied rates.
Example:
If you received 1 USD = ₹82.5 and the mid-market rate is 83, your markup is 0.5%.
Why Does the Percentage of Fees Vary Between Institutions?
Not all banks and platforms charge the same markup. Here’s why:
- Operating Costs: Some banks have higher overheads, which they pass on to customers.
- Risk Management: Platforms handling volatile currencies may add extra markup to protect themselves from exchange rate fluctuations.
- Profit Margins: Banks often make profits from markups, while some digital platforms prioritize lower fees to attract users.
- Currency Popularity: Major currencies like USD and EUR often have lower markups, while exotic currencies can cost more.
Comparing Forex Markup Fees of Different Platforms
Let’s see how a typical $5,000 transaction from USD to INR would fare across different platforms:
PlatformMid-Market Rate (USD to INR)Applied RateMarkupINR ReceivedLoss Due to MarkupSBI Bank₹88.16₹87.47~0.78%₹4,37,350₹7,500HDFC Bank₹88.16₹85.20~3.38%₹4,26,000₹22,500PayPal₹88.16₹83.69~5.13%₹4,18,450₹35,500Wise₹88.16₹88.160%₹4,40,800₹0Karbon₹88.16₹88.160%₹4,40,800₹0
Karbon & Wise offer mid-market rate with no markup, while banks and PayPal apply higher markups, reducing the INR received.
Can You Avoid Forex Markup Fees?
Completely avoiding markup fees is rare but minimizing them is possible. Here’s how:
- Use low-markup platforms: Digital platforms like Wise or Karbon often have lower fees than banks.
- Multi-currency accounts: Hold foreign currencies in a dedicated account and convert when the rate is favourable.
- Negotiate rates: High-volume businesses can sometimes negotiate better conversion rates with banks.
- Batch payments: Instead of multiple small transactions, combine them into fewer larger transfers to reduce total markup costs.
- Avoid unnecessary conversions: If possible, receive and pay in the same currency to skip conversions entirely.
FAQs On Forex Markup Fees
Q: Is forex markup the same as a transfer fee?
A: No. Transfer fees are separate charges, while markup is hidden in the exchange rate itself.
Q: Do all currencies have the same markup?
A: No. Popular currencies like USD, EUR, and GBP usually have lower markups, while other currencies can cost more.
Q: Can I negotiate forex markup fees with my bank?
A: Yes, clients doing high volume transactions can often get better rates.
