What is the exchange rate?
An exchange rate (also called the exchange rate) is the price of one currency expressed in terms of another. In a nutshell: how many units of local currency you receive for every dollar you send.
For example, if the exchange rate of the dollar to the Mexican peso is 20.15, it means that for every $1 dollar sent, your payee receives 20.15 Mexican pesos. If you send $300, you receive 6,045 pesos. If the rate were 19.80, you would receive only 5,940 pesos. A difference of 35 cents in the rate equals $105 pesos less for your family.
The interbank rate and the supplier's margin
Not all rates are the same. There are two that you should know:
Interbank rate (mid-market rate): It is the “real” market rate, the one that banks use against each other to exchange currencies. It's the right reference point and you can search for it on Google by searching, for example, for “dollar to Mexican peso” or tools such as /dolar-today/Mexico-mxn.
Provider Fee: This is the rate that the remittance service offers you. It is almost always less favorable than the interbank one because the provider applies a margin, which generally ranges from 0.5% to 3%. That difference is part of how the vendor generates revenue.
A 1% difference in a monthly shipment of $300 means $3 less per transfer, or $36 a year that your family doesn't receive. In larger shipments, the impact is greater.
Exchange rate types
How to check the rate before shipping
- Search for the reference rate on Google (“dollar to Mexican peso today”) or in our real time exchange rate.
- Compare the rate offered to you by the provider against that reference.
- Calculate how much your family member will receive with each service, not just how much you pay.
- For large shipments, it's worth comparing two or three same-day services.
To understand how costs and rates affect the actual price of your shipments, check out our guide: Remittances and money transfers from the US: everything you need to know.