How Much Do Banks Charge for Currency Exchange?

Most banks make money on currency exchange in two ways:

1. A hidden markup built into the exchange rate (often around 2.5–3% above the “mid-market” rate).

2. Extra fees, like flat service charges or foreign transaction fees on cards and ATMs.

So even if you don’t see a big obvious fee, you’re usually still paying through the rate.

KOHO Everything Helps You Save on FX

If you travel or shop in other currencies a lot, those fees add up fast.

With the KOHO Everything Account, you can cut out a big chunk of that cost:

• Grow your savings with 3.5% interest, one of the highest rates in Canada

• Earn a 2% cash back rate on groceries, eating, drinking, and transportation and 0.5% cash back on everything else

• There are no foreign exchange fees, so you save on international purchases and travel

• Unlimited transactions and free e-transfers

• No minimum balance required, ever

Where Banks Charge You on Currency Exchange

1. Exchanging Cash at the Branch

When you walk into a bank and swap CAD for another currency:

• You’re given a retail exchange rate, which is worse than the mid-market rate you see on Google.

• The difference between that rate and the real market rate is the bank’s markup.

• Some banks also add a flat service fee, especially for small amounts.

For Example:
If the real market rate says $1,000 CAD should get you $730 in another currency, a 3% markup might mean you only get around $708–$710 instead.

That ~$20–$22 difference is what you’re paying the bank.

2. Using Your Debit or Credit Card Abroad

When you tap your card in another country, you can get hit with:

• A foreign transaction fee (often ~2.5% of the purchase).

• The card network’s exchange rate, which may already include some spread.

So a meal that costs the equivalent of $100 CAD might effectively cost you $102–$103 CAD once the FX fee is layered on.

3. ATM Withdrawals in Another Currency

Using your card at a foreign ATM usually involves:

• Your bank’s foreign transaction fee

• An out-of-network ATM fee

• The ATM’s own surcharge, sometimes

• Plus the same exchange rate markup

That means small withdrawals can be especially expensive since flat fees bite harder on small amounts.

How to Pay Less for Currency Exchange

A few simple habits can reduce how much you lose to FX:

• Use cards or accounts with no foreign transaction fees when you can.

• Avoid “dynamic currency conversion” (when a terminal offers to charge you in CAD instead of local currency—it’s usually a bad rate).

• Take out fewer, larger ATM withdrawals instead of many tiny ones (if it’s safe to do so).

• Compare rates if you’re exchanging a large amount of cash.