Exchanging money without getting ripped-off


A Currency Exchange, or "CE" is a business that makes a living by buying and selling currencies with a margin. It is a paying service exactly like any other.
Some CE offer fair rates while others are complete rip-offs.

Ignore the "no commission / no fee" signs, look at the rates

What you first need to do, is to look at the rates. Is is usually a big table that goes like this:

Currency Buy Sell
EUR 37.10 39.55
USD 31.22 41.40
RUB 0.491 0.615

All the values are relative to the local currency. This means that:

  • The "buy" column refers to the rate at which they buy your foreign currency for the local currency
  • The "sell" column refers to the rate at which they sell local currency for your foreign currency

If we take a look at the column "EUR" for instance, it means that they buy 37.10 baht from you for 1 euro and they sell you 1 euro for 39.55 baht.

If you can check the exchange rate online

The first thing you should do is to Google the actual current exchange rate: type "1 EUR in THB" to get the EUR/THB rate, for instance. You can
compare this rate to the column that interests you (whether you want them to buy or sell the local currency). The bigger the difference, the more expensive
the exchange.

To calculate the real commission, use the following formula:

  • If you want local currency against foreign currency: (1 - "buy" rate / actual current rate) * 100
  • If you want foreign currency against local currency: (1 - actual current rate / "sell" rate) * 100

Note: be careful with your calculator the division has priority over the substraction.

If the current rate is 38.93 (Google response to "1 EUR in THB") the results would be the following:

  • Commission taken by the CE when they buy you the local currency: (1 - 37.10 / 38.93) * 100 = 4.70%
  • Commission taken by the CE when they sell you the local currency: (1 - 38.93 / 39.55) * 100 = 1.57%

Commission Note
Less that 1% Exceptional rate
1 to 2% Good rate
2 to 5% Ok rate
5 to 10% Bad rate
more than 10% Rip-off
more than 40% Legendary rip-off

The commission depends on a lot of factors. For instance some currencies will be very hard to exchange abroad at a good rate while it will be very easy with
other currencies. The competition between the CE can also lower the prices. If the CE you found is the only one in a 200km radius, chances are that its rates will be very bad.

If you cannot check the exchange rate online

If you cannot check the current rate online, you can always calculate the difference between the buy and the sell rates:

  • (1 - buy rate / sell rate) * 100

This method is less precise because the commission might not be exactly the same whether the exchange service buys or sells, but it gives you an idea of the
commission percentage. You don't know if the current rate is closer to the "buy" rate, closer to the "sell" rate or exactly in the middle.

In this case (EUR / THB) it would be: (1 - 37.10 / 39.55) * 100 = 6.19%. Meaning that if you exchange 100 euro in baht and then exchange the baht back to
euro, you would lose 6.19 euro.

Doing the exchange

If you decide that you are good to go, ask the clerk how much you would get for the amount of money that you want to exchange. The clerk will print you a little ticket with the amount of money are exchanging, the rate and the amount of money you will get. Check carefully this ticket before accepting, take your time to verify that the amount matches what you expected.

Be very careful, sometimes the rates displayed on the board require a minimum amount of money. In this case the ticket will show you another rate than the
one you expected.

Watch the clerk counting the bills, and once the exchange is done, count the bills again in front of the clerk. Once you're gone, you won't be able to make
any claim.

In some countries you need to bring your passport to be able to exchange money, don't forget it.

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Written by Clem
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