Getting Paid by Foreign Clients: How Much the Exchange Rate Really Costs You
What the exchange-rate markup costs freelancers paid in another currency, and how to check it.
If you freelance or sell to clients in another currency, the price you agreed is not what lands in your account. The gap is usually a mix of two costs, and only one of them is labelled as a fee.
The two costs
- Visible fees: incoming wire fees, intermediary bank fees, platform payout fees.
- Exchange-rate markup: the difference between the mid-market rate (the one you see on Google or Reuters) and the rate your bank or platform actually gives you. It is often not shown as a fee at all.
Example
Invoice: 2,000 euros. Mid-market rate: 1 EUR = 1.08 USD, so the ‘real’ value is $2,160.
- Bank converts at a rate 2.5% worse than mid-market: $2,106.
- Incoming wire fee: $15.
- Received: $2,091, about $69 (3.2%) less than the invoice was worth.
On $3,000 of foreign invoices a month, a 3% gap is over $1,000 a year.
How to check what you are paying
- Note the mid-market rate at the time of conversion.
- Divide what you received by what the client sent. Compare with the mid-market rate.
- The difference, plus any fees, is your real cost.
Ways to reduce it
- Compare the final amount received, not the advertised fee. Some providers use the mid-market rate and show the fee upfront, for example Wise (link below); others advertise ‘no fee’ and build the cost into the rate.
- Hold a balance in the client’s currency and convert in larger, less frequent amounts if fixed fees are high.
- Ask clients to pay by local bank transfer in their currency where possible, rather than international wire.
- Track every payment in a spreadsheet: invoice amount, mid-market value, amount received. After a few months you will know exactly what each channel costs.
Disclosure: the Wise link below is an affiliate link; it does not change the price you pay.
- Compare a transfer with Wise: https://smartbudgetsheets.surge.sh/go/wise/?utm_source=nostr
- Simple bookkeeping for freelancers: https://smartbudgetsheets.surge.sh/blog/simple-bookkeeping-for-freelancers/?utm_source=nostr
Free tools
- Hourly to salary calculator: https://smartbudgetsheets.surge.sh/calculators/hourly-to-salary-calculator/?utm_source=nostr
- Irregular income budget calculator: https://smartbudgetsheets.surge.sh/calculators/irregular-income-budget-calculator/?utm_source=nostr
- Debt Payoff Planner, up to 8 debts (Payhip): https://payhip.com/b/PtBLU?utm_source=nostr
- 42 free budget templates, pay what you want ($0 is fine): https://smartbudgetsheet.gumroad.com/l/ngpkrb?utm_source=nostr
General information, not financial advice. Figures are rounded examples.
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