A dollar priced 20 won above the reference rate
If buying one US dollar costs 1,420 Korean won, buying $100 costs 142,000 won. The quoted exchange rate can already include the cost of exchanging the money.
For this example, set the reference rate at 1,400 won per dollar and add a margin of 20 won. These are invented numbers, not current rates or an offer from a particular bank.
1,400 won + 20 won = 1,420 won
The reference rate is the starting point for this calculation. It need not equal the bank’s actual cost of obtaining the dollars. A difference added to or subtracted from that reference may be called an exchange margin or spread. Here, margin means the difference on one side of the transaction.
When a preferential rate discounts that margin, the 90% applies to 20 won, not to the full price of 1,420 won.
The 90% discount saves 1,800 won
Ninety percent of 20 won is 18 won. Removing it leaves a margin of 2 won per dollar, so the discounted rate is 1,400 + 2 = 1,402 won.
Buying $100 then costs 1,402 × 100 = 140,200 won. Compared with the original price of 142,000 won, the saving is 1,800 won.
| Discount | Margin left per $1 | Cost of $100 |
|---|---|---|
| None | 20 | 142,000 |
| 50% | 10 | 141,000 |
| 90% | 2 | 140,200 |
| 100% | 0 | 140,000 |
Moving from a 90% discount to a 100% discount saves another 200 won in this example. Most of the original cost has already been removed.
If the terms stay the same, exchanging ten times as many dollars gives ten times the saving. On $1,000, the same 90% discount would save 18,000 won. A real offer may have a transaction limit or different terms for different amounts.
An 80% discount can be cheaper than a 90% discount
The percentage alone does not tell you the price when the original margins differ. Keep the reference rate at 1,400 won and compare two fictional quotes.
Quote A removes 90% of a 20-won margin, leaving 2 won. Its final rate is 1,402 won per dollar. Quote B removes 80% of an 8-won margin, leaving 1.6 won. Its final rate is 1,401.6 won.
| Quote | Original margin per $1 | Cost of $100 |
|---|---|---|
| A · 90% off | 20 | 140,200 |
| B · 80% off | 8 | 140,160 |
Under these assumptions, B costs 40 won less. Real quotes may also use different reference rates or be taken at different times. Compare the final amount debited for the same amount of foreign currency.
Selling the dollars back can cost money even if the reference rate stays still
To turn spare dollars back into won, you use the rate for selling dollars. The terms you received when buying them do not necessarily carry over.
Suppose the reference rate stays at 1,400 won and the discounted margin is 2 won per dollar on each side. Add 2 won when buying dollars; subtract 2 won when selling them.
| Your trade | Rate per $1 | Amount paid or received |
|---|---|---|
| Buy dollars | 1,402 | 140,200 |
| Sell dollars | 1,398 | 139,800 |
You receive 400 won less than you paid. The reference rate did not move, but each transaction had a margin.
If the reference rate changes while you hold the dollars, the outcome changes too. The guide to dollar interest and exchange rates follows the difference between a dollar balance and its value in won.
Which cost does a 100% discount remove?
In the first table, a 100% discount removes the entire assumed 20-won margin. Within that example, you buy a dollar at the 1,400-won reference rate.
That label alone does not make every charge for a transfer, foreign-currency cash withdrawal or card purchase zero. Check the eligible currency, type of transaction, amount limit, hours and separate fees. The service’s method of setting its reference rate also matters.
Removing an exchange margin does not remove exchange-rate risk. If a dollar becomes worth fewer won after you buy it, selling it can return fewer won. A discount on exchanging money is also different from currency hedging.
Read the amount below the discount
- What you receive: match the currency and amount. Check whether the displayed rate is for one unit of currency or for 100 units.
- The rate for your transaction: use the correct side, buying or selling, and the correct service, such as cash exchange or a transfer.
- What leaves your account: multiply the applicable rate by the foreign-currency amount and include any separate charges.
- How unused money comes back: check the terms for exchanging it back, cancelling the transaction or collecting cash separately.
About the examples
All rates, margins, discounts and quotes are invented for the calculations. The reference rate is 1,400 won per US dollar, the starting purchase margin is 20 won, and the base transaction is $100. Only quote B uses an 8-won starting margin. The round-trip example holds the reference rate unchanged and leaves a 2-won margin on both the purchase and sale.
The calculations exclude separate fees, taxes, minimum transaction units, rounding and discount limits. Margins are simplified as won amounts added to or subtracted from a reference rate. The tables do not reproduce a bank’s product, published rates or trading terms, and do not recommend a provider or a time to exchange money. How we write and check our guides