When Banks Hide Fees in FX Rates

I just transferred some money from my US bank account to a vendor in the UK. Citibank’s wire-transfer fee was a modest flat rate of $20 — or so I thought until I looked at the exchange rate, which was fixed today, for wires under $10,000, at

2.0613 US dollars per British pound. Or, to put it another way, 3.5% above the actual exchange rate of 1.9916. In other words, the Citi fee isn’t $20, it’s $20 plus 3.5%. They just hide the 3.5% in the exchange rate.

Do banks do this for credit-card transactions too? If you buy something abroad do they charge the currency-conversion fee as well as making money on the FX conversion? And how is one meant to judge bank fees when they’re hidden like this and the exchange rate isn’t revealed until you’re all but done with the transaction?

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