Klarinet Archive - Posting 000349.txt from 2001/10

From: Tom.Henson@-----.com
Subj: RE: [kl] A case of currency blues
Date: Fri, 12 Oct 2001 01:46:48 -0400

Kelly,

I can only comment about my experiences in Europe when I lived there quite a
while back.

Whenever you change dollars for a foreign currency there is on "overhead"
that financial institutions build in to cover their extra costs. I do not
know what these extra costs are though. That is why foreign currency
speculation is such big business. Profits can be small or large depending on
the "spread" that you bought it at and the "spread" that you sold it back
for dollars.

In my experience, I found it is always better to change dollars into the
foreign currency in the country in whose currency you want. I found that
when I traveled to France from Germany, I could get a better "exchange" rate
if I waited until I actually arrived there. I would only change what I
actually needed on the trip, and then get the rest at the airport or train
station when I arrived.

I also learned that when it comes time to sell back that currency into
dollars you lose again, as it does not change back at the same rate, it is
lower. So no matter which way you go, they are making a profit on it. I also
found that changing the money back to dollars was best if I did it before I
left that country as I would get a better rate than if I waited to do it
when I got back home.

The rates that you see posted in newspapers are mainly for bank to bank
transfers and as you found out, do not apply to the general public. Kind of
like the Federal Reserve interest rates. Who gets those rates, not us, but
the banks. That's not to say that some institutions might actually honor
that rate.

Howard would do himself and everyone else a favor if he would arrange to
accept credit cards. Then you can pay with a credit card in dollars, and
when the transaction goes through, it will be changed into pounds sterling
and he will receive payment in pounds sterling at the current rate on the
day of the transfer. He has to pay a small fee for credit cards, and I
believe there is a higher international fee that applies, so he does not
want to absorb this cost or pass it on to you by raising his prices. Also,
since the conversion rate changes daily, he may simply not want to hassle
with this problem, and consider it money out of his own pocket and not worth
the effort.

I hope this helps a little to explain how money exchange works and why the
advertised rates are not necessarily the rate you pay. I suggest you shop
around for the best exchange rate, and Howard is probably correct in looking
for a British bank doing business in the U.S. You might even search the
Internet for currency exchanges. Maybe there is one you could use online
with a credit card that will wire him the money for a fee.

Also, what about purchasing an International Money Order and mailing it to
him registered mail. You may actually come out ahead and save the wire
transfer cost to send him this if he will accept them. I did a search on
google.com and found places where you can buy an international money order
and have it sent directly to them and charge the whole thing on your credit
card. You might want to check this out, assuming he is willing to accept
one. An International Money Order should be accepted for payment by any bank
or post office here or in England. I just cashed 2 International Money
Orders at the good old US Post Office I received from Japan for a camera I
sold on Ebay.

Tom Henson

Kelly said: << The big question I still have is about the currency
exchange. If the exchange rate is 1.42 US dollars to 1
GBP on a given day, WHO USES THIS CONVERSION RATE? I
have yet to find a bank, nor an airport currency
exchange kiosk that ACTUALLY USES the rate that is
published for that day. The banks aren't even close!
1.6 is 13% higher than 1.42. That's a hell of a
service fee for just exchanging monies, wouldn't you
say? When the GBP was much stronger in relation to the
US dollar (or vice versa, US dollar weaker) the
published rate was 1.68-1.7, if I remember correctly.
The bank is using a rate close to a much harder
conversion time and is pocketing all the profits,
while just exchanging money. >>

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