How exactly does Revolut calculate the currency exchange?

[Brendan Burgess]

I bought a book via ABE Books for $7.59. If I had paid in euro it would have been €6.78

So I paid with my Revolut card but was charged €6.83.

I would have assumed that ABE would be charging a much higher rate.

It's only a small item and the difference is small. But on a bigger item it could well be significant.

Brendan

 

[Lightning]

The vast majority of the time FX rates applied by online stores are far worse than market exchange rates. There are sometimes rare exceptions, especially if the store rate was set a couple of hours/days ago rather than being dynamic. Sounds like that might have happened in your case. This week FX rates have a moved a bit so maybe the rate was set by the store some time prior.

If one Google's the Revolut rate, at the time of purchase, the Revolut rate is normally in line with the market FX rate.

 

[Brendan Burgess]

Hi Ciarán

Thanks for that.

I have now googled it but can only find Revolut's policy. Can you link me to their actual exchange rates?

Is there an official market FX rate? Where can I find that?

Google gives me a rate, but I don't know what it is.

Brendan

 

[Lightning]

There are vendors (providers) that track market FX rates. Google uses Morning Star to track market FX rates. Their FX rates tend to be very accurate.

One can see Revolut FX rates inside their app when one goes to do a FX exchange.

 

[tomdublin]

If the transaction is on a weekend Revolut adds around 1% to the interbank rate.

 

[Brendan Burgess]

One can see Revolut FX rates inside their app when one goes to do a FX exchange.

Ah, that makes sense. But if I am buying something online and charging it to my Revolut card , I can't see the exchange rate?

Brendan

 

[Lightning]

One can log into the app just before conducting the transaction to see what the current rate is.

One can also obviously view the FX rate straight away after the transaction.

 

[Brendan Burgess]

OK

So according to Revolut 1 euro is $1.1063

I want to buy a book on ABE for $7.85 and they will charge me €7.06

If I pay by Revolut in dollars, I will pay 7.85/1.1063 €7.10

Google said the exchange rate was 0.9 so $7.85 should cost me €7.06

Ah, the Revolut includes the 1% weekend hike.

Brendan

 

[tomdublin]

That's why us ultra cost-conscious nerds use Revolut for forex transactions during the week and N26 on weekends..

 

[Andrew365]

Brendan, if you open the exchange option on Revolut you will see the rate change every few seconds. This is because they track the spot rate which changes a small bit every second (or less / tick). Revolut don't calculate it, it is just the actual spot rate.

Shops or standard currency exchanges use a rate that is spot + spread so that they don't have to keep up dating, you get a set price but it is much higher than the actual spot.

 

[Brendan Burgess]

Shops or standard currency exchanges use a rate that is spot + spread s

That is what I understood but I was surprised when the rate I turned down from ABE turned out to be cheaper than Revolut

For those interested, to find the exchange rates on Revolut....

Details
Rates

Brendan

 

[p15574]

That's why us ultra cost-conscious nerds use Revolut for forex transactions during the week and N26 on weekends..

I have several different fx "accounts" setup on my Revolut app - but mainly just use Euro (main currency) and Sterling. If there's a currency move I deem good enough, I might transfer funds. For example, if a No Deal Brexit threat means Sterling plummets, I usually transfer some euros into sterling. Then, if I'm buying off Amazon.co.uk on a weekend, it will use funds from this sterling 'account' first, so no exchange is required. It's only if insufficient funds exist that it taps the main account currency, resulting in an exchange.

 

[DoraExplora]

Piggy backing on this post as it is related.

I have an issue with the rates used in Revolut's statements. I am concerned with calculating gains in Euro from disposal of US shares. The one that concerns me is the USD - EURO rate. I normally convert this to the EURO - USD equivalent by subtracting it from 2.
As an example for a transaction on 26/08/2021 15:57 the USD - EURO rate given in my Revolut statement is 1.1801. When I go the Revolut exchange UI in the app and check the rate for that date it is 1.1769. In other words the statement says I was getting more dollar for my euro in August than I would have if I did an actual exchange then.
Or to flip it to the Euro USD rate the statement has 0.8239 but the app UI of that date shows 0.8493. Or in other words I would have got less euro for my dollar according to statement.
I checked a few random dates and the difference seems to be consistently around 4%.
The rate in the app seems to match the XE.com rate which is the mid-market rate.
So what rate is in the statement? It seems to correlate with the "spot rate" monthly average on ECB website. I don’t think I can honestly use it for tax purposes as it understates my tax owed. Any thoughts or advice on this appreciated.

 

[NoRegretsCoyote]

I normally convert this to the EURO - USD equivalent by subtracting it from 2.

That's not how it works. To convert one rate to the other you need to divide 1 by the rate.

You will only get the same answer by a fluke.

 

[jpd]

There is no such thing as Euro/USD official rate, mid-market or otherwise - what you get are whatever rates the FX broker you are using, or your platform is using, at the time of the the transaction.

This rate changes all the time, every second or probably ever milli-second these days.

The rates are kept in line by the fact that if they get out of line, someone will arbitrate to bring them back again. But the FX market is like every other real-time market - it's a cacophony of buyers and sellers all shouting different prices all the time

 

[DoraExplora]

That's not how it works. To convert one rate to the other you need to divide 1 by the rate.

You will only get the same answer by a fluke.

Thanks. That certainly cleared that up. What am I like.