How exchange rates and spreads really work

The exchange rate you see in a search result or a converter is not the rate anyone will give you. It is the mid-market rate: a reference point halfway between the prices at which banks trade currencies with each other. When you change cash, pay by card abroad or send money home, the rate you actually get is that reference minus a margin, sometimes plus a fee. Knowing how the pieces fit together lets you work out what a quote really costs, in a few seconds.

All the conversions below were made with the currency converter on the rate table saved with it on 12 October 2026 (23:57 UTC). On that table 1 US dollar is 25,897.062624 Vietnamese dong and 0.895156 euro. Rates move every day, so your numbers will differ; the method will not.

The mid-market rate

In the wholesale market, banks quote each currency pair with two prices: the bid, at which they buy, and the ask, at which they sell. The mid-market rate is the average of the two. Data providers collect these quotes and publish a reference table, usually against the US dollar, which is what a converter downloads. It is useful precisely because it has no margin built in: it is the fairest single number for "what is this worth".

With the saved table, 100 USD is 2,589,706 VND at the mid-market rate. Turning that around, 1,000,000 VND is 38.61 USD.

Cross rates: everything goes through the dollar

Most rate tables list each currency against one base currency, almost always the US dollar. To convert between two other currencies you compute a cross rate: divide by the rate of the currency you have and multiply by the rate of the one you want.

For euros to dong with the saved table:

1 EUR = 25,897.062624 ÷ 0.895156 = 28,930.22 VND

So 50 EUR is 1,446,511 VND. The calculation is exact as long as you keep enough digits and round only at the end; rounding the euro rate to 0.90 first would give 28,774.51, about 156 dong per euro too little. That is why the converter treats each rate as an exact decimal and rounds once, to the currency's own number of decimals (none for the dong, yen and won, two for most others).

Cross rates are also why a bank's euro-to-dong price can look worse than its dollar prices suggest: it may be charging a margin on both legs.

Buy and sell prices: the spread

A bank or exchange counter quotes two prices for each currency:

• the buying rate: what it pays you for one unit of foreign currency;
• the selling rate: what it charges you for one unit.

The selling rate is always higher. The difference is the spread, and it is how the counter earns money. Suppose a bank quotes the dollar at 25,650 VND to buy and 26,050 VND to sell. These are example figures for illustration, not any bank's real quote, but the arithmetic is the same for any quote.

• The spread is 26,050 − 25,650 = 400 VND, which is 1.55% of the midpoint of the two (25,850).
• If you sell 100 USD to that bank, you receive 2,565,000 VND. At the mid-market rate it was worth 2,589,706 VND, so you gave up 24,706 VND, or 0.95%.
• If you buy 100 USD from it, you pay 2,605,000 VND, which is 15,294 VND (0.59%) more than the mid-market value.
• Buying 100 USD and selling it straight back costs 2,605,000 − 2,565,000 = 40,000 VND.

Notice that the bank's own midpoint (25,850) is not the published mid-market rate (25,897.06). Each counter sets its prices around its own view, so the fair comparison is always against the reference rate, not against the counter's midpoint.

How to measure the margin in any quote

You need two numbers: the mid-market rate from a converter, and the rate you are offered.

• When you sell foreign currency: margin = (mid − offered) ÷ mid.
• When you buy foreign currency: margin = (offered − mid) ÷ mid.

Or skip the rates entirely and compare amounts: convert the amount at the mid-market rate, then compare it with what you would actually receive or pay. The difference, divided by the mid-market amount, is the total cost of the exchange, including any fees that are folded into the rate. This works for transfer services, airport kiosks and card statements alike.

Card payments abroad

When you pay by card in another currency, the card network converts the amount at its own daily rate, which is usually close to the mid-market rate. Your bank may then add a foreign transaction fee as a percentage. If a 50 EUR dinner is converted at the mid-market rate (1,446,511 VND) and your card adds a 2.5% fee, the statement shows about 1,482,674 VND. The 2.5% is an example; check your own card's terms, because some charge nothing and others more.

A separate trap is dynamic currency conversion: a terminal or cash machine abroad offers to charge you in your home currency "for convenience". The conversion is then done by the merchant's provider at a rate it chooses, often well away from the mid-market rate. Declining and paying in the local currency usually leaves the conversion to your card at a better rate. Whatever you choose, the converter tells you what the amount should be worth.

Common mistakes

1. Treating the mid-market rate as a price. It is a reference. Expect to receive less when you sell currency and pay more when you buy it.
2. Comparing two counters by one price only. A low selling rate may come with a fixed fee per transaction. Compare the total amount you get for the same money.
3. Using yesterday's rate for a large transfer. Rates move during the day; a 1% move on a large amount is real money. Check the update time shown next to the rate.
4. Rounding the rate before multiplying. For large amounts, keep the full rate and round only the result.
5. Converting in the wrong direction. "1 USD = 25,897 VND" and "1 VND = 0.0000386 USD" are the same rate written both ways; the converter shows both so you can check you multiplied rather than divided.
6. Forgetting the decimals of a currency. Dong, yen and won have no minor unit in everyday use, so an amount of 2,589,706.26 VND is shown as 2,589,706.

Where the converter's rates come from

The currency converter downloads one public table of rates against the US dollar from open.er-api.com, the free service of ExchangeRate-API, and shows when the provider last updated it. That request is identical for every visitor and contains nothing you type; the conversion itself runs in your browser. If the table cannot be loaded, the converter says so and uses its saved copy, with the date. For prices that include tax, the VAT calculator separates net and tax after you have converted.