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You may receive less money than expected from an overseas client, even when they pay your invoice in full. One reason could be the exchange rate your bank or payment provider uses to convert the payment into Indian rupees.
A markup fee in international transactions is an extra cost associated with currency conversion. A provider may build it into the exchange rate, making it less favourable than a reference rate, or charge a separate conversion fee. Because the cost may not appear as a separate entry on your statement, it's easy to overlook.
Understanding how markup fees work helps you see where the difference comes from and compare the real cost of receiving international payments.
TL;DR
A markup fee is an extra cost that may be built into the exchange rate or charged separately.
Comparing the reference exchange rate with the applied rate helps estimate the cost of currency conversion.
Banks and payment providers may also charge processing, transfer, and intermediary fees.
GST may apply to forex markup fees on credit card transactions, depending on the applicable tax rules.
Compare exchange rates, all applicable fees, and the final INR amount before choosing a payment method.
What is a Markup Fee?
A currency markup is the margin a provider adds to its exchange rate when converting one currency into another. To estimate the difference, compare the rate applied to your payment with a reference rate, such as the mid-market rate.
The reference rate gives you a benchmark, while the applied rate is what your provider uses to convert the payment.
Reference exchange rate: A benchmark for comparison, such as the mid-market rate.
Applied exchange rate: The rate your bank or payment provider uses for the conversion.
Suppose a client sends you USD 100. At a reference rate of ₹95.28 per USD, the payment is worth ₹9,528. If your provider uses a rate of ₹94.28 per USD, you receive ₹9,428 before any separate fees. That's ₹100 less because of the rate difference.
However, the ₹100 gap is not necessarily the provider's exact markup. The mid-market rate is a benchmark, and your provider may not offer that rate for the transaction.
A markup and a transaction fee are also different. A markup affects the exchange rate, while a transaction fee is charged separately to process the payment. Depending on your provider, you may pay one or both.
How Markup Fees Work in International Transactions
The cost of receiving an international payment depends partly on how the money is transferred. A bank transfer may involve currency conversion and charges from one or more banks. An online payment service may charge processing fees, conversion fees, or both.
Here's what to look for with different payment methods:
1. Traditional Bank Transfers via SWIFT
Receiving money through SWIFT does not guarantee that your bank will convert it at the reference market rate. Your bank may apply its own exchange rate, while the sender's bank or an intermediary bank may deduct transfer charges.
Suppose a client sends USD 1,000. At a reference rate of ₹95 per USD, the payment is worth ₹95,000. If your bank applies a rate of ₹91 per USD, you receive ₹91,000 before any other deductions. The difference is ₹4,000.
The ₹4,000 difference is not necessarily the bank's markup. The reference rate is only a benchmark, and the rate available when your payment is converted may be different. Check the rate your bank applied and its fee schedule to see what contributed to the difference.
2. Online Payment Gateways: PayPal and Stripe
PayPal and Stripe have different pricing structures for international payments. Depending on your transaction, you may pay a payment processing fee, a currency conversion fee, or both.
PayPal may use a conversion rate that includes a margin when converting a payment. Stripe's charges depend on factors such as the payment method, your account setup, and whether currency conversion is required.
If you receive payments from overseas clients, what matters is how much money you actually get after the fees are deducted. A provider may charge lower processing fees but still leave you with a smaller payout if its exchange rate is less favourable.
Before choosing a provider, check both the exchange rate and the total fees to see which option leaves you with more money.
3. International Payment Platforms: Infinity
Infinity uses a live mid-market exchange rate for standard incoming international bank payments, with no added FX markup. A separate transaction fee of 0.5%, inclusive of GST, applies.
For example, if you receive USD 1,000 and the exchange rate is ₹95 per USD, here's how much you'd get:
Amount after conversion: USD 1,000 × ₹95 = ₹95,000
Transaction fee: ₹95,000 × 0.5% = ₹475
Amount after the fee: ₹95,000 − ₹475 = ₹94,525
So, 0% FX markup does not mean the payment is free. You still pay the transaction fee, and charges from the sender's or intermediary bank may further reduce the final amount.
Summary Table
Platform | Markup Fee | Transactions Charges | Transparency |
|---|---|---|---|
Infinity | 0 | 0.5% | Fully Transparent |
Banks (SWIFT) | 2% – 3.5% | 1%-3% | Hidden in the exchange rate |
PayPal | 3.5%-4.5% | 4.4% | Limited transparency |
Consolidated FCY Markup Fee: Meaning and Explanation
FCY stands for foreign currency. If you see the description consolidated FCY markup fee on your bank or card statement, the wording alone may not explain how the charge was calculated.
Banks and card issuers can use different descriptions for their charges. Check your card's Schedule of Charges or Most Important Terms and Conditions (MITC) to see how the fee is defined. If the explanation is unclear, ask your bank for a breakdown of the amount.
Also check for other entries on the statement. Foreign transaction processing fees, overseas ATM withdrawal charges and taxes may appear separately, so the FCY markup entry may not reflect the full cost of the transaction.
GST on Forex Markup Fees
GST may apply to a taxable forex markup fee charged by an Indian card issuer. In the example below, GST is calculated on the markup rather than on the full purchase amount.
Example: GST on a credit card forex markup
Suppose an international purchase is worth ₹10,000 after conversion and your card issuer charges a 3.5% forex markup.
Purchase amount after conversion = ₹10,000
Forex markup at 3.5% = ₹10,000 × 3.5% = ₹350
GST on markup at 18% = ₹350 × 18% = ₹63
Markup fee, including GST = ₹350 + ₹63 = ₹413
Total transaction cost = ₹10,000 + ₹350 + ₹63 = ₹10,413
This example assumes GST at 18% applies to the full markup fee and excludes other charges.
Note: This applies to a credit card forex markup example, not every type of international payment. The tax treatment depends on the service and the applicable rules. Check your provider's fee schedule and tax invoice to confirm the charges on your transaction.
How to Calculate a Markup Fee
You can estimate how much an exchange-rate difference affects your payout, even if your provider does not list an FX markup separately. You will need the rate applied to your payment and a reference rate from around the same time.
The calculation shows the difference between the two rates. It does not automatically confirm how much of that difference is the provider's markup.
Step 1: Calculate the Applied Exchange Rate
Divide the rupee amount before separate fees by the converted foreign currency amount.
Formula:
Applied exchange rate = INR amount before separate fees ÷ Foreign currency amount converted
For example, if USD 1,000 converts to ₹93,000 before any separate fees, the applied exchange rate is ₹93 per USD.
Step 2: Work Out the Exchange-Rate Difference
Once you know the applied rate, compare it with the reference rate to see how much lower it is, as a percentage.
Formula:
Estimated exchange-rate difference (%) = [(Reference rate − Applied rate) ÷ Reference rate] × 100
Use exchange rates in the same format and from roughly the same time to get a fair comparison. For example, if the reference rate is ₹95 per US dollar, compare it with the applied rate in rupees per US dollar. Rates from different times may give you a misleading result.
Example: Calculating the Exchange-Rate Difference on USD 1,000
Suppose a client sends you USD 1,000. The reference rate is ₹95 per USD, but your provider uses ₹93 per USD.
At the reference rate, the payment is worth ₹95,000. At your provider's rate, you receive ₹93,000 before separate fees. The difference is ₹2,000.
To find the percentage difference: (95 − 93) ÷ 95 × 100 = 2.11%
Your provider's rate is about 2.11% lower than the reference rate. This does not automatically mean the provider charged a 2.11% markup. The ₹2,000 gap shows the difference in the converted amounts. The actual markup depends on the provider's pricing and the exchange rate available when the payment was processed.
If the Provider Discloses the Markup Percentage
If your provider publishes its markup percentage, you can calculate the charge using the value to which that percentage applies.
For example, if a 1% markup applies to a reference transaction value of ₹95,000: ₹95,000 × 1% = ₹950
Check the provider's terms to confirm the calculation basis. Processing fees and taxes may be charged separately.
How to Avoid or Minimise Markup Fees
The lowest advertised transaction fee does not always mean the lowest overall cost. The exchange rate also affects how much money you receive, so compare it with the other charges before choosing a provider.
If you receive international payments in India, focus on how much money reaches your bank account after currency conversion and all applicable fees.
1. Compare Exchange Rates and Total Fees
Compare each provider’s exchange rate with a reference rate for the same currency pair at roughly the same time. Then factor in transaction fees, intermediary bank charges and withdrawal fees to work out how much you’ll actually receive.
For example, Infinity's standard incoming international bank payment service offers 0% FX markup and charges a 0.5% transaction fee, inclusive of GST. External bank charges may still apply.
Estimate the net payout for each option. This gives you a more useful comparison than choosing a provider based only on its advertised transaction fee.
2. Check Whether Consolidating Payments Reduces Costs
If the same client pays you several times, ask your provider whether combining payments would reduce your total charges.
It depends on how the fees are calculated. Consolidating payments may help if there's a fixed fee for every transaction. It may make little difference if the fee is based on a percentage of the amount received.
Consider your cash flow as well. Waiting for a larger payment may delay access to the money you need. Before changing your payment schedule, weigh the potential savings against the cost of waiting.
3. Ask About Lower Fees for Higher Payment Volumes
If your business regularly receives large international payments, ask your bank or payment provider whether it offers volume-based pricing or negotiated fees.
Higher payment volumes may qualify for different terms, but a lower transaction fee does not automatically mean a cheaper service. Compare the exchange rate and all applicable charges before deciding.
Infinity’s International Payment Fees and FX Markup
For standard incoming international bank payments, Infinity uses the live mid-market exchange rate with 0% FX markup. The transaction fee is 0.5%, inclusive of GST.
To calculate what you will receive, first convert the payment to INR using the applicable exchange rate, then deduct the transaction fee. The exchange rate determines the rupee value of your payment, while the fee reduces your final payout.
Before your client sends the money, check these three details:
Exchange rate: The rate that will be used to convert your payment into INR.
Transaction fee: The fee that applies to your chosen payment method.
Estimated INR payout: The amount you can expect to receive after conversion and applicable fees.
The final credit may be lower if the sender's bank or an intermediary bank deducts charges. The 0.5% transaction fee applies to Infinity's standard incoming bank-payment service. QuickLinks card payments have separate pricing: 5% of the payment amount, subject to a minimum fee of USD 5.
Check the pricing for your chosen payment method before arranging the transfer. Explore Infinity's international payment service and check the fees applicable to your payment method.
Frequently Asked Questions About Markup Fees
1. Can an international transaction markup fee be refunded?
Whether you can get a refund depends on your provider’s policy and why the fee was charged. If you believe the markup fee was applied incorrectly, contact your bank or payment provider with the transaction details and ask them to review the charge. Whether you receive a refund will depend on the outcome of that review and the provider’s terms.
2. Where can I find my card's forex markup rate?
Your card issuer's Schedule of Charges or card terms and conditions should explain the applicable forex markup or foreign transaction fee. If you can not find the rate, contact the issuer and ask which charge applies to your card.
3. Can a bank change its forex markup rate?
Yes. A bank can change its forex markup rate over time. To check the current rate, refer to the bank’s latest fee schedule or contact the bank directly, as the rate may differ from what applied to an earlier transaction.
4. Does the markup percentage vary by foreign currency?
It depends on the provider. Some providers use the same markup across currencies, while others have different pricing structures. The currency pair, payment method, and other applicable charges can affect the overall cost of conversion.
5. What should I do if an international transaction fee looks incorrect?
If your international transaction fee looks incorrect, check your transaction details and the fee schedule to confirm whether the charge matches. If something still seems off, contact your bank or payment provider with the transaction reference and relevant records. Ask them to explain the charge and confirm whether it needs correction.
