Why is it that, when I check exchange rates online, the rates are far better than those in travel shops? Is it possible to buy currency at the online rates and, if so, how?
John A Grummitt, Chiryu Japan
- In order to make a profit, banks and other money changers use different rates for buying and selling currency. The online rates you see are probably mid-rates - half-way between the buying and selling rates. Of course, just to be on the safe side, banks also charge commission on the transaction...
Andrew Taylor, Cambridge UK
- The rates you see on the internet are probably - like those quoted in newspapers - the interbank exchange rates. These numbers are taken from international currency exchange markets that, like share prices, go up and down over the course of a day's trading.
While banks and other institutions (and probably some private individuals, though not mere mortals like you or I) can purchase other currencies at these rates on the open market, the average traveller must purchase them from intermediaries - banks, travel agencies and so forth. It is a common misconsception that you 'exchange' money at these places - you are buying money from them, and like any product sold it must make a profit.
On top of any commission or service fee, such intermediaries also 'tweak' the rates in their favour which is why you will never get the same rates at Thomas Cook that you see in the papers. Bear this in mind the next time you hear about banks complaining of the costs of changing to the Euro!
Michael, Kaohsiung Taiwan
- If you are checking general rates on the interent, then there is probably not much spread involved, which is how the banks make their money. But some banks (ie Citibank) offer internet banking where you can exchange money between your foreign currency accounts at a better rate than if you phoned or went to a branch (since you don't use up someone's time, they are saving money, so can do this). Once you've transferred the money to whichever currency, you could use an ATM card to withdraw it in the country with that currency. You can thus reduce the spread and avoid any commissions being charged.
Kim Walker, Auckland New Zealand
- The easiest way to get close to the interbank rate is to use a local cashpoint to get banknotes and/or charge purchases to a credit card. Many banking networks interoperate on both sides of the Atlantic, at least; the computed daily rate on such transactions tends to be far more advantageous than walking into a travel office and purchasing currency.
Dan Barrett, Cambridge, Massachusetts United States
- Unfortunately, most banks also impose hefty charges on withdrawing cash from a cashpoint abroad - cancelling out any savings made by the different exchange rate
Daniel O'Ryan, Sunderland UK
