Hello, I have a friend in Europe I will be visiting who wants to exchange dollars for Euros in anticipation of her upcoming trip to the States. Thus we can both avoid all the commisions, exchange rate "points" etc. I'm curious what this would be saving us over using an ATM to simply withdraw money from an account while in a foreign country. Say the rate published in the paper that day says $1.50 per Euro (to make the math easier). I want to get 1000 Euros, so I give my friend $1500. How much have I saved over buying Euros "retail" with all the fees involved? Thanks for your help? Is this way of changing money advantageous for both of us?
Posted by
Los Angeles, CA, USA
1449 posts
if you use an ATM you will pay a 1% exchange fee plus what your bank charges you. Many credit unions and some banks charge no other fee. So your savings is about $15, plus the inconvenience of having to make several trips to an ATM (most bank accounts have a daily limit of around $300-$500, ATMs may also limit how much you can withdraw).
Posted by
Hendersonvlle, NC
486 posts
Absolutely a good deal. You will NEVER get a better rate as the banks and money exchangers add fees or percentages to that number.
You can expect 1-3% exchange expense when using ATM plus any ATM usage fees charged by either bank.
For money exchangers, figure on more - possibly much more.
And likely the worst is any US company that exchanges money via AAA, travel agent, or whatever.
Posted by
Florida, USA
12172 posts
The fairest way to do it is call your friend's bank for their daily exchange rate when you arrive. Call a bank, not an exchange booth.
They will probably have selling and buying rate that represents their charge for the transaction (sometimes they have buying and selling plus a transaction charge). Split the difference between buying and selling, forget the charge, and exchange using that rate.
Expect it to be in the range of $1.45 to $1.50 per Euro but it varies day to day. Take $1,500 and let your friend pay you whatever the daily value is in Euros (will probably end up being a odd number like 997,46 Euros or 1005,15 Euros).
If you agree on a number today and currency exchange rates change significantly between now and then, one of you will feel shorted.
Posted by
Chicago, IL, USA
473 posts
When in Europe, when you use an ATM at a bank or post office, you will NOT pay a 1% fee, plus whatever your bank charges you. Banks and post offices in Europe do not charge a fee for ATM usage. While in Europe, you will pay only the fees that your bank charges you. Typically, your bank will charge 1-3% over the rate in the paper (the interbank rate), plus an "out of network" fee. All of which can vary greatly, depending upon your bank. Using the rate published in the paper is pretty much the best rate to use. There are 2 possible disadvantages. One, if there is a lot of movement in the price of the euro to the dollar between the time when you and your friend do the exchange and when you actually use the money. Two, is the security risk of carrying that much cash.
Posted by
Los Angeles, CA, USA
1449 posts
Rick writes "you will NOT pay a 1% fee, plus whatever your bank charges you". Rick is incorrect. The 1% fee is inescapable, and it is not a charge added by your bank. The banking networks (Mastercard and Visa) levy this fee for converting money between currencies. Even if you are using an ATM card your bank is still using these networks to handle the transaction. Rick has misunderstood the nature of this 1% when it shows up in your bank statement. It is NOT a fee charged by your bank, they are simply passing along a cost they already paid to the banking network.
In addition to this 1%, most banks figured they have found an easy source of extra profit and so they tag on their own charges for doing absolutely nothing. This can range from a per-withdrawal fee like $5 from Wells Fargo to a percentage of the transaction. If you look around you can find banks and credit unions that do not add anything else on top of the 1% charged for the currency conversion.
So in sum, at a European ATM you will pay 1% plus whatever your bank charges you.
If you want to confirm what I wrote from an authoritative source, see the info provided by the Federal Reserve Board at http://www.philadelphiafed.org/src/srcinsights/srcinsights/q3si4_05.html
Posted by
Eastern Iowa, USA
7534 posts
Aside from the arguments back and forth, what you propose is fair, on the day of the transaction, take a look at the posted exchange rate (oanda.com or xe.com) and calculate the equivalent currencies. Both of those sights will allow you to input the Dollar value and get equivalent Euros. Example: Right now the exchange rate is 1.46265 $ buys 1 Euro. You hand her $1500, she gives you 1025.54 Euro. You gain by avoiding the disputed fees incurred by using an ATM (Lets say 1% to 4% for sake of example). It should be noted that she probably gains more, since to change from Euros to Dollars over there would incur more fees than you using an ATM to do the conversion, but you both win in the end, and she could just as well wait until getting to the US to use an ATM. Using the website to do the calculation makes everybody feel safe.