How to Calculate the Cost of FX Payments

How to calculate the cost of FX payments

International payment costs can be frustratingly hard to understand. Some payment providers do this deliberately. To know exactly how much you're paying, use our guide based on two simple figures: the margin and the fee.

The full cost = the margin + the fee

There are two types of costs you might encounter when you exchange one currency for another: margins and fees. Many FX providers aim to mislead you by drawing your attention to their low fees (when they have high margins), or their low margins (when they have high fees). To know exactly how good the deal you're getting is, you always need to know both types of costs. As a general principle, Paytron makes money by charging a margin, not fees. When there are "fees" on Paytron, we are just passing on the cost of facilitating that payment for you.

The margin

Big financial institutions with deep market access (like the banks) can exchange between currencies at a special rate called the "mid-market" rate. When these institutions - or other services built on top of them - exchange currencies for other people, they will usually charge their customers for the service by giving them a slightly worse rate and pocketing the difference. This difference is called "margin". Generally, the more FX you exchange, the less margin you will have to pay.

The fee

Another way to charge for FX conversions is to charge a "fee". Often, this is required to cover a cost of using a particular payment rail. For example, when you choose to do a payment via the SWIFT network on Paytron, there will always be a fee. Paytron is not pocketing that money - the SWIFT network is. Paytron also has fees when you pay via local rails outside of Australia. You'll notice they are very low, because it doesn't cost us much to facilitate payments via those rails (although it isn't free).