The hidden cost of currency conversion for online sellers
Selling to the US or Europe from the UK? The exchange rate you see isn't the one you get. Here's what it really costs and how to price for it.
You sell a £30 item to a customer in the US. They pay in dollars, your platform converts it, and £28.10 arrives. Where did the rest go? Welcome to the quietest margin-eater in e-commerce: currency conversion. Here's where the money actually goes, and how to stop donating it.
Three separate costs hide in one conversion
- The rate spread: the rate you're shown is rarely the mid-market rate you see on the news. A 1–2% worse rate is common.
- The conversion fee: marketplaces and payment processors typically charge 1.5–2.5% on top for foreign-currency transactions.
- The payout currency choice: some platforms default to converting for you at their rate, when holding or converting elsewhere would be cheaper.
Stacked together, 3–5% of every international sale is normal. On a 20% margin product, that's a quarter of your profit, invisible on any single order, painful on the annual total.
Know your real number
Do this once: take your last ten international payouts, convert the customer's payment at the day's mid-market rate, and compare with what arrived. The gap, as a percentage, is your true conversion cost. That number, not the marketing page rate, is what belongs in your pricing. Quick conversions mid-calculation are exactly what we built QuickAIConvert for, type "85 USD to GBP" and price from the real figure.
Price international listings separately
The lazy approach is converting your UK price at today's rate and listing that. The robust approach: take your UK price, add your true conversion cost plus a buffer for rate movement, 3–5% above mid-market is typical, and set the international price from that. Rates move; your listing shouldn't need to.
Options that actually reduce the cost
- Multi-currency accounts let you hold USD or EUR and convert when rates suit you, not on every single sale
- Some platforms let you choose your payout currency, always run the maths on both options
- For high volumes, payment providers negotiate; below roughly £50k a year in foreign sales, they don't, so focus on pricing instead
The one-line rule
Never price an international listing from the rate on a search engine. Price it from the rate your bank actually gives you, minus the fees your platform actually charges. The difference between those two numbers is either your buffer or your leak.