What is a Forex Markup Fee? Meaning and and How to Avoid It

Have you ever been surprised by unexpected charges when receiving foreign funds or using your card overseas? You calculate the rupee equivalent using an interbank rate, only to see a lower amount credited to your account or a higher amount billed to your card. This difference is almost always due to the forex markup fee.

This article will clarify what a forex markup is, detail exactly how it impacts your finances. We’ll also provide tips on how to minimise this hidden cost. We'll also introduce you to the Wise Travel card, which allows you to hold 40+ currencies in on card and spend without any forex markups or hidden fees.

What’s forex markup fee: Meaning

The forex markup fee is an extra percentage cost that banks, credit card companies, and traditional forex card issuers add to the base interbank exchange rate when converting one currency to another.¹

In simple terms:

• Interbank rate: This is the exact midpoint between what buyers and sellers are willing to trade a currency for at a specific moment, also known as the mid-market rate. It is the rate you see on global exchanges, Google, or Reuters. Providers like Wise use this rate.
• Marked-up rate: When a bank converts your INR to a foreign currency (or vice versa), they take the interbank rate and add a margin or a markup on top.

This markup is usually a percentage, typically ranging from 1% to 5%, and it's how the issuer makes a profit on every transaction. The difference between the Interbank Rate and the marked-up rate is the forex markup fee - the hidden cost you pay to the bank for converting your money. Because this fee is built directly into the exchange rate itself, it often appears as if the bank is charging zero transaction fees, making it a common source of hidden costs for consumers.

You should always compare the rate your provider gives you to the real-time interbank rate to confirm there is truly no hidden markup.

Where is forex markup fee applied?

The forex markup fee is applied to nearly all transactions that require a currency conversion by the bank or card issuer where the real interbank rate is not used.²

The markup impacts the exchange rate used in these scenarios:

• Remittance: Applied when converting foreign currency into Indian Rupees (INR) during remittance transfers and vice versa.
• International Spending: Applied when you convert INR to foreign currencies on your debit or credit card for purchases abroad.
• Cash Withdrawal: Applied when you withdraw local currency with your debit or credit card and there is a currency exchange involved.
• Cross-Currency Spending: It is also applied when a multi-currency card converts funds from one loaded currency to another to complete a transaction.

These examples can simplify things for you.

Scenario 1: If you are due to receive an inward remittance of $10,000 USD from a relative abroad, the bank handling the conversion to Indian Rupees (INR) will use its marked-up exchange rate instead of the real interbank rate. If the true market value should result in a credit of ₹870,800, but the bank applies a markup (e.g., 2%), then you may only see ₹853,400 credited to your account. The substantial difference (₹17,400 in this example) is the direct loss incurred due to the markup fee embedded in the bank's exchange rate.

Scenario 2: Even when using a dedicated forex card, the markup fee may be applied. This occurs when a traveller has Euros (EUR) loaded onto their multi-currency card but uses it to pay for something in a different currency, such as Swiss Francs (CHF). The card issuer converts the loaded EUR into CHF using its own internal, marked-up exchange rate, and the card issuer often compounds the cost by charging an additional explicit cross-currency fee (e.g., 3%) on top.

How to avoid forex markups?

Now that we know what a forex markup fee means, can we avoid these expenses? The forex markup fee is embedded in the foreign exchange rates themselves. Hence, avoiding these fees can be difficult, but following these tips can help you minimise them.¹²

Choose zero-markup providers

Use providers, such as Wise, that operate on the true interbank rate, charging only a small, transparent conversion fee. This ensures you know exactly what you’re paying for. Before choosing any forex card, compare the bank or provider’s quoted exchange rate against the real interbank rate to calculate the true cost. This comparison helps you understand if there’s any hidden markup, even if the bank doesn't explicitly mention it.

Avoid dynamic currency conversion

Always choose the local currency (e.g., USD, EUR) when paying overseas, even if the merchant or ATM offers the option to pay in Indian Rupees (INR). Choosing INR activates Dynamic Currency Conversion (DCC), where the merchant's terminal handles the conversion using its own marked-up rate, a rate that is almost always worse than your card provider's rate. By selecting the local currency, you ensure you follow your own provider's exchange rate.

Meet the Wise Travel card: 40+ currencies in one card, with no forex markups or hidden fees

With no hidden markups, the Wise Travel card is a smart way to spend abroad. You'll always get the real interbank exchange rate for conversions across 40+ currencies. Wise's transparent, low pricing, plus no foreign transaction fees or forex markups, usually means you are getting the best value for your money.

The fully digital account opening and vKYC process allows you to sign up from the comfort of your home, and there are no annual or monthly fees either. Simply order your card, show proof of your travels, load your funds, and you're all set. Plus - card orders are currently free to Indian addresses (only until February 10, 2026)! A physical Wise card enables you to make secure chip and PIN payments and get some free ATM withdrawals while you're overseas. You can also instantly freeze or unfreeze your card in the app anytime for peace of mind.

Wherever your travels take you, the Wise Travel card is the only forex card you'll need to make spending internationally simpler and cheaper.

🚀 Get a Wise Travel card

FAQs

Is forex markup the same as a transfer fee?

No. A transfer fee is a fixed charge for sending money, whereas a forex markup is a percentage added to the exchange rate.

Is forex markup the same as the exchange rate?

No. The exchange rate serves as the base rate for currency conversion, whereas the forex markup is the additional percentage that banks and credit card issuers add to it.

Is forex markup the same as a currency conversion fee?

Many service providers use currency conversion fees interchangeably with forex markup fees. However, in the case of forex travel cards, the forex markup fee is zero. Still, currency conversion fees apply if you transact in a currency different from that loaded into the card.

Is forex markup the same as a foreign transaction fee?

Forex markup is a part of the foreign transaction fee. Foreign transaction fees include other charges, such as transmission and processing fees.