The spread, worked through
The spread is the gap between the mid-rate and the effective rate, and it is easier to trust when it is worked rather than asserted. This page takes one conversion from the mid-rate to the amount received, then reverses it from the amounts alone.
Row 01One conversion, from mid-rate to received
Take a conversion of 1,000 from one major currency into another, with an illustrative mid-rate of 1.1000 and an effective rate of 1.0835 — a gap of 0.0165, which is 1.5 percent of the mid. At the mid, 1,000 would produce 1,100.00; at the effective rate it produces 1,083.50. The difference is 16.50, and that is the spread in money. Nothing about this depends on the operator; it is arithmetic on two rates and an amount. The figures are illustrative — the real mid and the real effective rate differ by currency pair, method and moment — but the method is exactly how a spread is measured on any conversion.
| Step | Figure | What it is |
|---|---|---|
| Mid-rate | 1.1000 | undefined |
| Effective rate | 1.0835 | undefined |
| Amount at the mid | 1,100.00 | undefined |
| Amount received | 1,083.50 | undefined |
| Spread | 16.50 | undefined |
Row 02From amounts alone, when no rate is shown
Many statements show the two amounts and not the rates. The spread is still recoverable. Divide the amount received by the amount sent to get the effective rate, and compare it with the mid-rate for the same pair at the same moment. The percentage gap between the effective rate and the mid is the margin; the money gap between the mid-amount and the received amount is the cost. This reverse method matters because it lets you measure a conversion from a bank statement or a wallet history without needing the operator to publish its rate, and it is the same figure the forward method produces.
- Effective rate
- amount received ÷ amount sent
- Mid-rate
- from a reference source, same pair, same moment
- Margin %
- (mid − effective) ÷ mid, as a percentage
- Cost in money
- margin % × the amount sent
Two amounts are enough
If you know what you sent and what you received, you can recover the effective rate and the cost without the operator publishing either.
Row 03How to read a rate on a statement
A conversion line usually carries an amount sent, an amount received and, on a good statement, the rate and the date. Read it in this order: confirm the pair and the date, because a rate without a date and a pair cannot be checked; take the effective rate, or derive it from the amounts; compare it with the mid at that date; and note any separate conversion fee line so the totals are complete. A statement that shows only a single converted amount, with no rate and no date, is the case where the reverse method is the only option — and where asking the operator for the effective rate and the date is a fair request, because those are the facts of the conversion.
Row 04Why size and corridor change the number
Two conversions with the same headline margin produce different money costs if the amounts differ, because the margin is a percentage. And two conversions of the same amount produce different costs if the corridor differs, because dissimilar currencies carry wider margins. A 5,000 conversion at 1.5 percent costs about 75; the same 5,000 across an exotic pair at 3 percent costs about 150. Both are the same arithmetic applied to a wider rate. This is the practical reason a large payout deserves more attention than a small one: the cost scales linearly, so the absolute figure is largest exactly where the amounts are.
| Amount | Major pair | Wider corridor |
|---|---|---|
| 1,000 | undefined | undefined |
| 5,000 | undefined | undefined |
Row 05What this number is, and is not
The spread measures the cost of the conversion that happened; it is not a prediction about rates, and it is not a rate you could have received. No consumer transacts at the mid, so the spread is the fair benchmark of cost, not a recoverable amount. It also does not capture a bank’s foreign-transaction fee or a separate conversion fee, which have to be added where they apply. And it says nothing about whether a conversion should have happened at all: where a currency boundary is crossed, a rate applies, and the spread is simply the honest measure of what that crossing cost.
Who sets the rate
Which party supplies the rate at each leg, and why the mid is only a reference point.
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