Forex Markup Fee: What You Should Know
Ever wondered why your international earnings seem slightly less than expected when they hit your account? The answer might be forex markup fees.
With Indian overseas spending reaching an all-time high of $31.7 billion in FY24 and more Indians earning in foreign currencies through salaries, freelance work, or export payments, understanding these hidden charges has never been more important.
These small percentage fees, typically 1% to 3.5% of each foreign transaction, can significantly reduce your international earnings over time. Knowing how forex markup works isn't just for travellers anymore (people carrying travel cards); it's essential knowledge for anyone receiving money from abroad.
This article will help you understand forex markup fees and how they impact international earnings. It will also provide practical solutions to minimize these charges when receiving foreign currency payments.
What is Forex Markup Fee?
Understanding Forex Markup fees
A forex markup fee is an additional charge added to the exchange rate by banks, credit card providers, and payment processors when handling foreign currency transactions. While the mid-market exchange rate (what you see on Google or financial news sites) represents the actual value between two currencies, financial institutions rarely offer this rate. Instead, they add a small percentage, typically between 1% and 3.5%, to cover their costs and generate profit.
How do these small forex markup fees add up?
These seemingly small percentages can have a significant impact on your earnings:
Let's say you're a freelancer who received $10,000 from a US client. With a live exchange rate of ₹83 per dollar, you should ideally receive ₹830,000. However, if your bank applies a 3% forex markup fee, here's what happens:
- The bank adjusts the exchange rate by applying the 3% markup
- Instead of ₹83 per dollar, the effective exchange rate becomes approximately ₹80.51 per dollar (₹83 minus 3%)
- At this reduced rate, your $10,000 converts to only ₹805,100
- This means you're losing ₹24,900 on just one transaction due to the markup
These seemingly small percentages can have a significant impact on your earnings:
- A professional earning $5,000 monthly with a live forex rate of ₹83 per dollar should receive ₹4,15,000, but with a 3% forex markup fee, the effective exchange rate drops to ₹80.51 per dollar, resulting in only ₹402,550—losing approximately ₹12,450 each month
- Now, considering that this remains the exchange rate throughout the year and the bank continues to levy a 3% forex markup fee, then over a year, that's nearly ₹149,400 lost to hidden fees.
- Now consider a business receiving $100,000 quarterly. Now, at a live forex rate of ₹83 per dollar the business should receive ₹8,300,000, but with a 3% forex markup fee, the effective exchange rate becomes ₹80.51 per dollar, yielding only ₹8,051,000—losing about ₹249,000 per transaction or nearly ₹10 lakhs annually.
The hidden nature of Forex Markup fees
What makes forex markup fees particularly problematic is their lack of transparency. Many financial institutions, especially traditional banks, don't explicitly mention these fees in their marketing materials or statements. Instead, they're quietly embedded in the exchange rate offered.
These hidden charges often go unnoticed for new businesses and freelancers entering the international market. You might assume the amount received is correct without realizing that a significant portion has been skimmed off through an unfavorable exchange rate.
To verify this yourself, always check the Foreign Inward Remittance Advice (FIRA) document provided by your bank for each international transaction. This document shows the exact exchange rate applied to your payment. Compare this rate with the live mid-market exchange rate prevailing on that specific date (which you can find on Google or currency websites like XE.com). The difference between these rates reveals how much your bank has marked up the exchange rate—often without explicitly mentioning this fee.
Many professionals discover these fees only after comparing their FIRA documents and the actual mid-market rates—and by then, they've already lost considerable amounts of money on numerous transactions. Indian banks typically apply markups ranging from 1.5% to 3%, which can significantly reduce your international earnings.
Understanding these fees and regularly checking your FIRA against live exchange rates is the first step toward keeping more of your hard-earned international income in your pocket rather than paying unnecessary charges to financial institutions.
Where is the Forex Markup Fee Levied?
Forex markup fees appear in various financial transactions involving foreign currencies. Understanding where these fees lurk helps you recognise potential costs when receiving international payments. Here are the main places where forex markup fees are commonly charged:
Credit card transactions
During international travel and online shopping, people are already familiar with forex markup fees when using their credit and debit cards abroad or on international websites. When you purchase items in foreign currencies, your Indian credit card issuer company typically adds a 2-3.5% markup to the exchange rate, making that €100 souvenir cost more than the equivalent of ₹9,100 at a ₹91 per euro mid-market rate.
The same principle applies in reverse when you receive credit card payments in your home country from other countries. When a client pays you using their US-based credit card for services billed in Indian rupees, the card company similarly applies these markup fees during processing.
For example, a freelance graphic designer in Mumbai charging $1,000 for a project might see only ₹81,000 arrive instead of the expected ₹83,000 (at an exchange rate of ₹83 per dollar) because of a 2.4% markup fee applied by the payment processor. This reduces the effective exchange rate from ₹83 to approximately ₹81 per dollar, with the difference going directly to the payment processor or credit card company.
During currency conversion by banks
Banks apply forex markup fees whenever they convert currency, whether receiving wire transfers from abroad, depositing foreign checks, or when clients send money to your Indian account from their foreign bank accounts.
Consider an IT consultant receiving a €5,000 payment from a German client via bank transfer. While the mid-market rate might be ₹91 per euro (totaling ₹455,000), the bank might apply a 2% markup and convert at ₹89.18, resulting in only ₹445,900 reaching the consultant's account—a ₹9,100 difference that's rarely itemized on statements.
Online payment platforms
Popular payment platforms like PayPal, Payoneer, and Stripe apply their forex markup fees when handling cross-border transactions. These platforms promote convenience but may charge higher markup fees than traditional banks.
For instance, an e-commerce seller receiving $2,000 from international customers through a popular payment platform might face two separate fees:
- A transaction processing fee (typically 1-3% of the transaction amount)
- A forex markup fee (typically 2-3.5% built into the exchange rate)
For example, if the platform charges a 1.5% transaction fee and a 2% forex markup on a $2,000 payment:
- The foreign transaction fee would be $30 (1.5% of $2,000), reducing the amount to $1,970
- With a mid-market exchange rate of ₹83 per dollar, the $1,970 should convert to ₹163,510
- However, with a 2% forex markup, the effective exchange rate drops to ₹81.34 per dollar
- This results in only ₹160,240 reaching their account
The combined effect of both fees means instead of receiving ₹166,000 (at ₹83 per $1), they only get ₹160,240—losing ₹5,760 in the process, with the indirect loss coming from two separate types of fees.
Some platforms are more transparent about these fees than others. While some break down their conversion rates and markups, others bundle these costs into a single "international transaction fee," making it difficult to understand precisely how much you're paying for local currency conversion.
Knowing where these fees appear allows you to make an informed financial decision about which payment methods to accept and which financial services to use for your international transactions.
How to avoid forex markup fee?
When receiving international payments, you can take several practical steps to minimize or completely avoid forex markup fees. These strategies help ensure you keep more of your hard-earned money rather than lose it to hidden currency conversion fees (Basically achieving zero forex markup fees).
Always enquire about the Forex Rate your payment platform is offering
Don't just accept the rate you're given. Before settling on a payment method or platform:
- Ask your bank or payment provider specifically what exchange rate they'll apply to your incoming payments
- Request written confirmation of their markup percentage over the mid-market rate
- Compare the quoted rate to the actual mid-market rate you can find on Google or currency sites like XE.com
For example, if a client is sending you $5,000, a difference of even 1% in the exchange rate could mean ₹4,150 more or less in your pocket. Making a simple inquiry could save you thousands of rupees per transaction.
Check your FIRA to know what Forex Rate you were offered
Your Foreign Inward Remittance Advice (FIRA) is a critical document that shows the details of incoming foreign currency transaction fee, including:
- The original amount sent
- The exchange rate applied
- Any fees deducted
- The final amount credited to your account
Review this document carefully for each transaction and compare the rate you received against the mid-market rate on that due date and time. This practice helps you track exactly how much you're losing to markup fees over time and provides documentation if you need to challenge unfair rates.
Choose a platform that offers live Forex Rates
Some modern financial services and payment platforms now offer mid-market or "interbank" rates with transparent fee structures:
- Specialized forex cards and payment services like BookMyForex provide rates much closer to the interbank rate
- Specific business banking solutions now offer reduced markup fees for regular international transactions
- Digital platforms like Skydo, Wise (formerly TransferWise) advertise transparency in their exchange rates
When evaluating platforms, look for those that separate their service fees from the exchange rate rather than hiding their profit in an inflated exchange rate.
By implementing these strategies, you can save thousands or even lakhs of rupees annually on your international earnings. The key is staying informed and proactive about how your money is converted rather than accepting whatever rate you're given.
Receive International Payments without any Forex Markup Fee with Skydo
Tired of losing chunks of your hard-earned international payments to hidden forex charges?
Skydo offers a transparent solution for freelancers and businesses receiving foreign currency. With zero forex markup fee and live exchange rates, you'll get substantially more from every payment.
Skydo calculator shows the difference clearly—on a $7,000 payment, you'd receive ₹6,06,299 with Skydo compared to just ₹5,98,869 through banks (1.2% loss) or ₹5,53,272 via PayPal (8.7% loss).
Stop losing money on international earnings!
What are Forex Markup fees?
Additional finance charges (1-3.5%) added by banks and payment platforms when converting currencies are hidden within exchange rates rather than shown separate
How do I avoid Markup fees in Forex?
Is the Markup fee refundable?
