question about exchange rates
 

hi, i'm just wondering if the exchange rate (US to euros) stays the same, no matter how you convert the money. for example, if i look here: http://www.xe.com/ucc/ and the exchange rate is 1 euro = 1.36 US dollars, is that what i'd be getting if i exchanged the money at a bank, withdrew the euros from an atm etc.? or does the exchange rate vary depending upon how you change the money? will i encounter different exchange rates, like for example, how western union has a different exchange rate from banks, or does it pretty much stay the same? hmm i hope i make sense...
also if you have a canadian or us bank account are you charged every time you withdraw euros from a european atm an additional fee from the one you're normally charged for using an atm?

Robyn:

The exchange rate posted on xe.com is a "middle rate"; in general, each institution charges its own rates for buying and selling foreign currency which are usually a few cents above (from USD) or below (back to USD) the middle rate. Ask your bank about specific exchange rates (which of course also vary from day to day but at least give you a general idea). You can also ask them if there is a "foreign transaction fee" for using overseas ATM's; mine does not, but each bank is different.

I have heard airport exchange counters charge the worst rates for converting currency, but have never tried it myself.

ah i see. thanks for the help!

The 'exchange rate' is a daily value established in the money markets. 'Retail' values will vary. Yes, airport and hotel 'exchange rates' are usually the highest. Rates are posted, 'buy' and 'sell'. An exchange will buy your dollars with local currency for less than the 'exchange rate', they will sell you dollars for the local currency at more than the 'exchange rate'. The exchange rate changes daily. WU and other such operations are retail money stores and their 'prices' include a profit amount. An ATM use fee is charged with each use. It is separate from conversion costs. Obfuscation may best describe efforts by money changers to describe their operations. Safety suggests using debit/check cards. Economy suggests changing your cash for local currency.

"Economy suggests changing your cash for local currency"

I respectfully disagree. a) exchange rate for cash is always worse than the interbank rate, and b) many currency exchange booths charge an additional fee of 5-10Euro.

As always, the final answer lies in the details. With any method you need to compare actual exchange rates, fees added by your bank (for ATM), and conversion charges (cc or ATM), and fees added on the spot (cash or TCs)

Hi RT,

ATMs give you the best rate.

European banks do not add fees for use of ATMs.

You have to ask your bank what fees they charge for using "out of network" ATMs and whether they add a "conversion fee".

All other forms of currency conversion will cost 5-8% more than using an ATM.

((I))

And do not be fooled by the term "no fee". Many airport changing booths, for example, proudly proclaim "no fee". They don't add on a special fee. Why would they when they are already factoring in something like 10% additional by giving you a horrible rate?

When dealing in many countries, large businesses typically use www.oanda.com as their source for exchange rate.

The exchange rate that is published daily in the newspapers is usually the Interbank Exchange rate - which you get only if changing millions of dollars at once.

No matter how you change normal amounts of money you will not get that rate.

The closest you will get - usually 3% or so worse - is to use credit cards as much as possible and pull walking around cash from ATMs. (This assumes you don;t have a bank that's greedy and charges out of network fees or similar. If so, get a better bank.)

It's easyt to change cash (bank or bureau de change) - but you will generally get rates 7 to 10% worse than the Interbank rate.

Travelers Checks are worse - the 7 to 10% rate premium, plus usually fees to buy the checks - plus MANY places - even banks will NOT change the checks at all. So you can waste a ot of time trying to get rid of them.

Oh - and you will get the best rate for any currency is the country that uses that currency. that is - euros are cheaper in France or italy than in the US.

Where do you look for a good ATM machine? Do you go to a bank when you land? My bank (WAMU) we need a machine that has the Cirrus emblem. Are those easy to locate?

Most, if not all the ATM machines you see in a major airport or train station will be bank owned. They will have the name of a bank on them. Any of those are fine -- and will not charge you a fee for withdrawing money.

Plus is usually associated with Master Card and Cirrus is usually associated with Visa. Some banks may still be associated with only one or the other, but large banks are usually associated with more than one of the major networks.

I carry two ATM-Debit cards - one Cirrus and one Plus. I also carry two credit cards: one Cirrus and the other Plus just to make sure I have all my bases covered as best I can.

As a doomsday, last resort type of defense I carry a few $100 American Express checks. In 9 years I have used 2 of the directly. On a 3rd occasion I showed them to prove I had money but did not actually need to convert one.

As for the exchange rates, they fluctuate daily and different organizations charge what they wish.

Think of money as a commodity that is bought and sold like produce in a grocery store. If you go from store to store the price of apples is not always going to be the same for the same type of apples.

In my experience, the money game is laden with pitfalls. Let me review some of the questionable practices:

1. Exchange booths at airports and hotels usually have the most expensive rates from your point of view. The rates can run up to 10%.

2. Exchanging banknotes at a bank usually results in a 5% or higher charge. The same is true of travelers checks.

ATMs usually give the best rate at the wholesale rate plus 1% BUT some banks hit you with a fee of $5.00 (e.g. Bank of America) per ATM or debit card usage unless you are using one of their partner banks, e.g. Bank of American and Barclays have an agreement.

3. Credit cards were a good way to pay for goods and services overseas, but that scene too has changed. Some banks add on 3% (e.g. Bank of America) for no real service added. Some people may argue that Visa (or Master Card) charges you 1% and the bank adds on 2% more.
At any rate, your charges will reflect a mark up of 3% for essentially nothing.

Capital One last I heard does NOT sock you with the extra percentages.

4. Dynamic currency conversion is most odious of the current practices. This practice is one of converting your charge in a foreign currency to US dollars (or whatever the home currency might be) right there on the spot. The exchange rate is always poor on your side of the transactions and very good for the bank doing the converting.

To combat this type of fraud (and I am using the term with full intent), refuse to sign the bill. Tell the cashier you want your bill in the local currency.

If the cashier refuses, you have two options: pay cash in the local currency or write "Local currency refused. Disputing the charge." on the charge slip. When you get home, notify your bank that you are contesting the charge.

I normally ask first these days, but sometimes in a foreign country where you do not speak the language, the question is difficult to ask in an understandable language.

Always inspect your bills before you sign them.

I do not in which nations you will find most of the practitioners of dynamic currency exchange, but I ran into it in Switzerland. I paid the bill before I woke up to the fact that I had been cheated. It has not happened again.

Bob Brown, you are concise and thorough. Thanks for the clarification.