The exchange rate you looked up is not the one you were charged
Between the rate on your screen and the number on your statement sit three separate margins, one of which you are invited to accept by a card machine abroad.
Every price on this site is converted to dollars at a rate captured when the data was compiled. Be suspicious of what that conversion does and does not tell you, because there is no such thing as *the* exchange rate.
There is a wholesale rate that almost nobody gets, and then there is a series of margins between it and you.
The rate on your screen
The number a search engine gives you is the mid-market rate: the midpoint between what buyers are bidding and what sellers are asking in the wholesale currency market. It is the fairest single description of what a currency is worth, and it is not a price anyone is offering you.
It is a midpoint, so by construction nobody trades at it. Institutions trading millions get close. You do not.
Three margins between there and your statement
Spend abroad on a card and up to three separate charges can land on the same transaction.
The network's rate. Visa and Mastercard each publish a daily conversion rate. It is close to mid-market but not identical, and it is set once for the day rather than moving with the market.
The issuer's foreign transaction fee. Your own bank may add a percentage on top, historically around three percent, though the fee-free travel cards of the last decade have made this far less universal than it was.
Dynamic currency conversion. This is the one to be angry about. It is the moment a foreign card terminal, or a foreign website at checkout, offers to charge you in your home currency instead of the local one. The offer is framed as a convenience, presented as certainty about the amount, and always phrased so that accepting is the path of least resistance.
Why the tourist rate is the worst one
Airport bureaux de change advertise "no commission", and the claim is usually true and entirely beside the point. The margin is in the rate, not in a fee. Compare the buy and sell rates on the board: the spread between them is the business model, and at an airport it can be very wide indeed.
This is a general principle worth internalising. Whenever a currency service is free, the price is in the rate. Whenever it charges a visible fee, check whether the rate is closer to mid-market, because a transparent fee on a fair rate frequently beats a free service on a bad one.
What this means for every table on this site
Three things, and they are the reason the methodology page says what it says.
First, a dollar figure here is a conversion, not a quote. It says what the local price was worth at one moment at one rate. A traveller paying with a card would have paid a little more; a traveller changing cash at an airport, meaningfully more.
Second, the conversion date matters more for some currencies than others. Between two stable currencies, a rate captured months ago is still roughly right. For a currency that has moved sharply, any single conversion is contestable and the local-currency column is the more honest number.
Third, and most importantly, none of this affects the comparison that actually matters. The work-time column, which shows how long the average local wage takes to earn an item, never leaves the local currency: it is a local price divided by a local wage. The exchange rate cancels out entirely, so that column holds up when a currency is in motion.
Practical rules
- Look up the mid-market rate to know what fair looks like, then expect to do slightly worse.
- Decline dynamic currency conversion every time, at terminals and at online checkouts alike.
- Compare a currency service's rate against mid-market rather than comparing advertised fees.
- Treat any single-day conversion of a volatile currency as an estimate with a wide error bar.
- When comparing two countries' living costs, prefer a measure where the exchange rate cancels out.
The honest caveat
This is the part of the site's data that is least stable, and pretending otherwise would be dishonest. Prices in local currency change slowly, at the speed of shop shelves. Exchange rates change continuously, and for a handful of currencies they can move by tens of percent inside a year.
So the local-currency figure ages gracefully and the dollar figure does not. Where the two disagree about whether a country has become more expensive, the local column is usually describing the country and the dollar column is usually describing the currency market. They are different subjects.
Sources
More guides
- How to compare two countries without fooling yourselfCost-of-living comparisons go wrong in the same six ways every time. What follows is a method that survives contact with a real decision.
- Eggs are the most honest price in the shopNo brand, no marketing, barely any processing. When the egg price moves, something real happened to the birds, and everyone finds out at once.
- The price did not go up. The bag got smaller.Shrinkflation is a price rise disguised as a package redesign. Statisticians catch it, shoppers mostly do not, and there is a reason companies prefer it.
- A fifth of what you paid was tax, and you never saw the lineConsumption tax is the largest single wedge between two countries' prices for an identical product, and the one shoppers are least able to see.