What is Spread (Forex)?
The spread is the difference between the buy (ask) price and the sell (bid) price of a currency. For retail customers, this gap is the primary way exchanges, banks, and brokers earn revenue — often disguised as a "commission-free" service.
Definition
Every currency quote has two prices: what someone will pay you to take your currency (bid) and what they'll charge you to give you new currency (ask). The difference between these is the spread. On the institutional interbank market, spreads on majors like EUR/USD are typically 0.1–0.3 pips (essentially negligible). At a retail forex broker, you might see 1–3 pips. At a bank teller, 50–200 pips (1–4% spread). At an airport currency-exchange counter, 400–1,000 pips (8–20% spread). All of these are called "commission-free" because they don't charge a separate fee — the spread IS the fee, just hidden in the rate. The "tighter" the spread, the closer to mid-market you're trading.
Worked example
A bank quotes you USD/EUR with bid 0.8950 and ask 0.9200. If you're selling $1,000 USD (giving dollars, receiving euros), you get €895 at the bid. If you immediately bought back, you'd pay 0.9200 per euro to get $1,000 USD — needing €1,087. That €192 round-trip "loss" on €895 is the spread cost (~21% combined). At Wise, the same round trip might cost €5–10 total.
Why it matters
Always check the spread before any currency conversion. "0% commission" is misleading — the question is the bid-ask spread, not whether there's a separate fee line. The best rates come from providers with tight spreads regardless of whether they charge fees: Wise charges small explicit fees but ultra-tight spreads; some "no-fee" providers have terrible 4–8% spreads that cost you far more.
Check tight-spread rates
See spread (forex) in action with live rates.
Frequently asked questions
What is a "tight" spread?
For retail customers, anything under 1% (100 pips on majors) is reasonable; under 0.5% is good; under 0.2% (20 pips) approaches institutional rates. Wise and Revolut typically deliver under 0.5% on major pairs. Airport exchanges run 8–20%.
Are wider spreads ever justified?
For minor or exotic currency pairs with thin trading volumes (e.g., NZD/THB, NOK/TRY), wider spreads reflect genuine market reality — there are fewer buyers and sellers, so brokers price in more risk. For majors like EUR/USD, GBP/USD, or USD/JPY, wide spreads are almost always pure markup, not market necessity.
Why are spreads wider on weekends?
The interbank forex market closes Friday 21:00 UTC and reopens Sunday 21:00 UTC. During the closed period, retail brokers can't hedge their positions, so they widen spreads to cover risk. Avoid weekend conversions if possible — spreads can be 3–10x wider than weekday levels.
Related terms
Mid-Market Rate
The mid-market rate is the midpoint between the buy (bid) and sell (ask) price of a currency in the global interbank market. It is the fairest reference rate available and what Google, Reuters, Bloomberg, and Wise all display as "the exchange rate."
Pip (Forex)
A pip ("percentage in point") is the smallest standard price increment for a currency pair, typically the fourth decimal place (0.0001) for most pairs or the second decimal place (0.01) for pairs involving the Japanese Yen.
Dynamic Currency Conversion (DCC)
Dynamic Currency Conversion (DCC) is a service offered at point-of-sale terminals and ATMs that lets you pay in your home currency instead of the local currency. It almost always uses a worse exchange rate than your card's native conversion — costing you 3–8% extra.