Today, currency exchange services in the UK aren't limited to banks like they were traditionally. Now there are many faster, cheaper options that let you get currency swapped with greater convenience and lower fees. However, switching currency isn’t just about finding a convenient provider or service. In financial matters, where your hard-earned money is at …
Today, currency exchange services in the UK aren’t limited to banks like they were traditionally. Now there are many faster, cheaper options that let you get currency swapped with greater convenience and lower fees. However, switching currency isn’t just about finding a convenient provider or service. In financial matters, where your hard-earned money is at stake, you can’t just completely rely on them, believing everything they have advertised. Especially if your life or business involves frequent exchanges, it is a must to know how to read and calculate rates.
Being the most trusted provider of currency exchange services in the UK, we have created this blog to help you understand rates, with a step-by-step guide on how to calculate currency exchange rates, so that on your next exchange, you know what you will get.
Whenever you exchange currency, you get a different value for your money each time. This is because the value of one currency relative to another isn’t static; it keeps changing due to several factors at play. The value of one currency in relation to another, or in simple terms, the amount you get in exchange for your currency, is known as the exchange rate.
Factors that influence exchange rates are:
You might be wondering why it is still essential to understand rates and calculations when currency exchange services in the UK, including banks, online platforms, and local providers, display an exchange rate list. The answer is that every provider keeps its profit margin; some show it as an upfront fee, while others disguise it under unfavourable rates and hidden costs. This way, you might be getting far less value for your currency than the actual rate. So, knowing how exchange rates work can save you from scams, short-changing, poor rates, and hidden costs, helping you analyse service providers better so you can make the right choice and protect your money from slipping away in calculations without you even noticing.
For example, you want a trip to Italy and need to calculate the exchange rate to see your budget, you check a website that says £1 equals €1.15, and another shows €1.11, so you have a £500 budget for the trip. Now you might be wondering how to determine the actual price to identify unfavourable rates and markups.
To understand the rate and its differences, you first need to know the actual market rate for that currency pair. In the example we have discussed, let’s say the market rate for GBP/EUR is 1.16. This is the interbank rate, which you can find via trusted websites.
Before going for conversion, ask the currency exchange services provider in the UK for a full breakdown, including charges, conversion fees, markups, etc. This will help you spot the difference between the market rate and the offered rate, which will indicate hidden costs.
You can calculate manually using the following method or a converter app. Let’s calculate the amount you’ll get, taking the example mentioned above.
The basic formula for currency conversion is:
Amount in target currency = Amount in base currency × Exchange rate
So, if you have £500:
Subtract them to find the difference, which in this case is 20 euros. That might seem small, but in reality, it can cover one dinner or another expense; therefore, it is important to make the right choice.
It is essential to do your market research instead of settling for the first rate you see. Calculating and comparing rates will show you noticeable differences and might save you a significant amount that you could gain by finding more favourable rates, money you would otherwise lose by not knowing how it works. Especially when exchanging larger amounts, even a tiny, unnoticeable difference can eat into your profit, so it’s crucial to be careful when choosing an exchange service provider.
Looking for a reliable currency exchange provider? Choose Linea Global!
Whether you are looking for currency exchange at the current rate or want to lock in a rate for future transactions, we’ve got you covered. At Linea Global, we offer transparent pricing, minimal fees and competitive exchange rates without any hidden markup.
Choose us and save time and money on every transaction!
