How do they do it?

Walked past one of those currency exchange booths this evening. I was checking out the rates out of idle curiosity and noticed that they were selling for less than they bought. ie USD buy for 87.13 sell for 77.10 (or something like that) asked the lady behind the counter how that worked and she couldn't tell me, she just did what the 'puta screen in front of her said. I checked out all the different currencies and they were all the same, selling for less than they bought it for. How do they make money?:?

Mick

one word


FEES

Yeah, but a lot of them have signs boasting that they don't charge a commission, (didn't notice if this one had this or not) Surely even if you were charging fees you'd at least make it a one-for-one exchange? I'll have to check it out next time to see what fees they charge. Hmm, I can see it now, "Mick's shonky back alley currency exchange" that coupled with some special paper and a really good laser printer, I'd be (literally) making money.:o

Mick

Quote:

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Originally Posted by journeyman Mick

Walked past one of those currency exchange booths this evening. I was checking out the rates out of idle curiosity and noticed that they were selling for less than they bought. ie USD buy for 87.13 sell for 77.10 (or something like that) asked the lady behind the counter how that worked and she couldn't tell me, she just did what the 'puta screen in front of her said. I checked out all the different currencies and they were all the same, selling for less than they bought it for. How do they make money?:?

Mick

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Mate they dont run at a loss , buy for 87.13 means that for every 87.13 cents of US money you change you get 1 aussie dollar and for every aussie dollar you can buy 77.10 cents of US money
better off using ATM'S overseas as you get the daily rate and are only ( usually ) charged between 0.4 and 1% per transaction

Rgds
Russell

Depends where you are and what you are changing.

I can't quite remember which way is best now. :-

But I think it is change the money when you get there, unless you can wangle a deal of some sort.

When we went to San Francisco, through a little canoodling we managed to get the rate at the airport (this end) that was in the newspaper that morning. Basically it meant visiting all of them, and making them argue with each other.

The trick there is that very few Japanese people bargain (like about 5 of them, total) so if you try it, they get all flustered and give in pretty easily. I doubt that trick will work elsewhere and we were very lucky it worked for us here.

We bought back $6, so no need to change it back. :rolleyes:


What we bought came in an envelope, there was a set figure inside and you just bought the thing like it was a postcard or something like that.


(The best way is to avoid changing any money at all if you can. ;) )

I'm sure they don't run at a loss, and I've no need to change any money, but it just intrigued me.

Mick

Wasn't trying to have a go at you Mick
The buy sell rates can be quite difficult to understand but basicly the buy is if you are giving them foriegn currency to change into aussie $ and the sell is if you are using aussie $ to get foreign currency

Rgds

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Originally Posted by Schtoo

When we went to San Francisco, through a little canoodling...

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Not suprised you got a better rate :-:D

what they have as there exchange rate isn't always what the actual exchange rate is.

I came back from the US with what would have been 700 AU using the currant exchange rate, but it was actually 675 AU once it was changed using there system. Still got a CD Burner out of it, but it was less then it should have been!

Quote:

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Originally Posted by journeyman Mick

USD buy for 87.13 sell for 77.10

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Buy: you give them USD 87.13c, they give you AUD $1.
Sell: they give you USD 77.10c, you give them AUS $1.

The correct exchange rate should be around the average of the 2 figures. -> 82.1c

You have USD 87.13c
They buy it for AUD $1.
Now use your AUD $1 to buy back the US $$
You only get USD 77.10c back.

You lose USD 10.03c in 2 quick transactions.

Quote:

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Originally Posted by Wongo

Buy: you give them USD 87.13c, they give you AUD $1.
Sell: they give you USD 77.10c, you give them AUS $1.

The correct exchange rate should be around the average of the 2 figures. -> 82.1c

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Okay, I see now they're referring to our dollar that's being bought and sold.

Mick

Its how they make their money. The official exchange rate is the official rate only, and you can vary a certain amount as an exchange service as your profit making margin. I forget the maximum allowable %'s allowed.

In my younger days I used to work in a bank, and worked for 2 years in Melbourne's overseas departments. The work involved setting buying and selling rates for numerous transactions and currencies.


Setting a rate depended on whether it was a telegraphic transfer, mail draft and to where or actual cash currency and whether it was buying or selling. It also varied depending on our forward quotations and fixed contracts in providing specific overseas funds and when.


Each type had a different interest component and commission component built into the quoted rate as well as the minimum commission charged on the transaction.


It was a fun time and the overseas department was the Banks most profitable department. Admittedly that was before the Reserve bank stopped banks subsidising their operating costs by way of higher interest charged on loans and made them recover everything by way of fees and charges. So now it may be a bit different, but the bank never looses money on currency tranactions.


Hope this doesn't confuse you even more Mick. :D



Peter.