The interbank rate for exchanging currencies is the rate at which large banks make large currency transactions, typically worth millions or billions of pounds. It is seen as the most competitive rate which most closely represents the value of one currency against another.
The interbank rate is found by taking the mid-point between the selling price of a currency and the buying price of a currency. Typically, banks have enjoyed large profits by taking a spread on this price: always charging a percentage, say 2.5%, above the spot price when they give customers a conversion rate. Some companies then might charge an additional conversion fee. If you take out money abroad, you might also have to pay another fee to the bank that runs the ATM. All in all, this means that the average person gets an exchange rate that is very far from the interbank rate – sometimes as much as a 12% mark up just to spend their own money in a different currency.
As a result, many new financial firms are offering lower rates. Glint gives you currency transactions (pounds, dollars, euros, gold) at the interbank rate plus a fee of just 0.5% per transaction.
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