Personal Finance Term
forex spread
Foreign Exchange Spread
The gap between the rate at which a bank or money changer buys a currency and the rate at which it sells it. This spread is a hidden cost you pay whenever you convert ringgit to another currency or back, even when there is no stated fee.
When you exchange money, you rarely get the mid-market rate you see quoted on financial sites. Instead, the provider buys foreign currency from you at a slightly lower rate and sells it to you at a slightly higher one, and the difference is their margin. A provider can advertise zero commission and still make money purely on a wide spread, so the spread, not the fee, is often the real cost of converting currency.
For Malaysians sending money abroad, travelling, or shopping in foreign currencies, the practical lesson is to compare the actual rate you receive against the mid-market rate, not just the advertised fee. Banks, money changers, e-wallets, and specialist transfer services all have different spreads, and over a large transfer or a long trip the difference can be significant. Tools that show the live official rate help you judge whether a given quote is fair.