Understanding currency
A market, not a constant.
What an exchange rate actually is, and why the number you see is rarely the number you'll get.
What an exchange rate is.
The exchange rate between two currencies is the price of one in terms of the other — and like any price, it's set by people actually trading. The rate USD → EUR you see on a screen is a recent sample from the foreign-exchange market: tens of thousands of trades a second, settled across major banks. There's no single authoritative rate; there's the rate you last saw, and the rate you'll be quoted next.
1 USD = the EUR price someone last paid for it
The mid-market rate.
The number quoted on news sites and converters is the mid-market rate — halfway between what banks bid for a currency and what they ask. It's the rate the wholesale market actually trades at. You, as a retail customer, almost never get it: by the time you buy euros at an airport kiosk, a credit card transaction settles, or a wire transfer clears, a margin has been added.
Bid, ask, and the spread.
Two prices exist for every pair: the bid (what a dealer pays to buy the currency from you) and the ask (what they charge to sell it to you). The difference is the spread, and it's how the dealer gets paid. Spreads are tiny in the wholesale market — a few ten-thousandths — and large at retail, especially at the airport, where 5–10% is normal.
Why your card statement disagrees.
When you pay in a foreign currency, the rate that lands on your statement is set by the card network (Visa, Mastercard) on the day the transaction settles — usually a day or two after you tap. Your bank may add a foreign-transaction fee on top. So what looks like one mid-market rate at purchase can differ by 1–3% by the time the bill arrives.
A note on volatility.
Major currency pairs (USD ↔ EUR, USD ↔ JPY) move about a percent on a typical day. Less-traded pairs and emerging- market currencies move several times that, and the spreads are wider too. If you're moving large sums, the rate you accept now versus tomorrow can swing meaningfully — that's the whole reason hedging exists.