Exchanging Currency In Bank.

strobe

Hi, just a couple of quick questions.

1. When getting foreign currency in a bank have they to use the official exchange rate or are they allowed to set their own rate? So would different banks be giving different rates or do all banks have to use the official exchange rate?

2. Do banks usually charge a fee for exchanging currency for you? If so, is it usually a flat fee or is it a percentage or what? Does is depend on the amount of currency you are exchanging or what currencies you are exchanging?

3. Do banks here accept foreign currency in exchange for euros as well as euros for foreign? Are you charged differently when swapping Yen for Euro, for example, versus Euro for Yen?

Thanks a million.

coylemj

Banks can charge anything they like, it's a free market. However with foreign currency it follows a pattern.....

There is a theoretical exchange rate called the 'Interbank' rate, this is the exchange rate between two currencies which is applied when huge amounts of money are being converted and as the name implies, it's only used between banks.

For consumer transactions, a bank or bureau de change will have a rate for buying and a different rate for selling, the difference being their profit. The current interbank rate will be somewhere in the middle of these two rates. Say the US Dollar/Euro Interbank exchange rate is 1.30 (i.e. 1.30 dollars to 1 Euro), the bureau de change might offer to buy at 1.33 and sell at 1.27.

This means that they will buy from you at the rate of 1.33 dollars per Euro and they will sell you 1.27 Dollars per Euro. So taking a hypothetical scenario, person A sells 133 dollars for 100 euros followed by person B who buys 127 dollars for 100 euros, the profit as you can see is 6 dollars on the two deals.

The spread between the buy and sell prices tells you how much profit the bank is making, divide the buy price by the sell price and the higher the result, the more profit the bank is making. If you don't remember which is which, divide the larger number by the smaller number, the result should be just over 1 e.g. 1.12. Sometimes they add on commission which makes the transaction even more profitable. What catches out a lot of people is the carrot of 'No Commission', you need to pay more attention to the spread between the Buy and Sell rates since that is usually the big differentiator between the outlets, not the commission.

On specific currencies, if you walk into a large branch of the bigger banks in Dublin they will usually have a big range of currencies to sell and they'll buy pretty much any regular currency from you. If you want to buy and it's not one of the more popular currencies then it's no harm to phone ahead and they can pre-order it from head office for you.

strobe

Cheers Coyle.