4 ms·

In general, banks do charge excessive fees on exchanging currencies. For example, if you want to exchange €1,000 to $ or £, they'll charge you (by default) a 2.

In general, banks do charge excessive fees on exchanging currencies. For example, if you want to exchange €1,000 to $ or £, they'll charge you (by default) a 2.5-5% conversion fee. After negotiating with them, you generally get it down to 0.3%. These days, I convert through my broker, because they only charge me 0.2% for FX conversions.

consz 9y ago
It's insane, borderline criminal. I knew someone who wanted to convert ~1m AUD -> USD -- and the banks were still trying to offer to do at 2-3% ! At that amount, you can open a brokerage account and trade through EBS or CNX directly and pay basis points.
- charlesdm 9y ago
  Of course they would. Most people don't understand how the fee structure works, so will comply. You can open up a brokerage account at Interactive Brokers with a few thousand and use it to exchange FX. It's pretty accessible.
  - consz 9y ago
    I agree, most people are just not aware. I like the machines I've seen in airports and train stations that offer currency conversions. They have 'No Fees! No commission!' posted all over them -- ignoring the fact that the bid-ask spread they're charging is 15-20%. Again, criminal.
    - charlesdm 9y ago
      Sad but true. :( That said, people do pay for convenience, which I assume is the main function of those cash machines. If I end up in a foreign country that I haven't visited before, I'll likely withdraw some cash (not much) from one of those machines just to be safe. You never know when your credit cards might stop working.. (I've had my main card blocked randomly while travelling and it frankly was a pain)
      - mseebach 9y ago
        Just withdraw cash on a credit card from a regular ATM. Most "normal" credit cards charge on the order of 3% over spot on the FX, some cards further charge a flat fee, but this is still better than those markups. It's even possible to get cards that doesn't charge a fee and gives you spot FX, even for cash withdrawal (Halifax Clarity in the UK is one). That leaves any fee the ATM might charge you, but if you can find one that doesn't, this is a supremely efficient way of getting cash abroad.
        ihattendorf 9y ago
        Charles Schwab checking/debit: no foreign transaction fee, uses the exchange rate, and refunds all ATM fees internationally.
        cbhl 9y ago
        Charles Schwab checking is only available to US residents though -- if you're in a foreign country, you're out of luck.
        mseebach 9y ago
        Which is why we're suggesting different cards that are available in different countries.
        pishpash 9y ago
        Credit card ATM withdrawal incurs punitive cash advance interest rates. I guess you can pay it off within the day though if you can calculate how much it is.
  - pishpash 9y ago
    Is this relevant? http://news.forexlive.com/!/interactive-brokers-to-cut-off-us-forex-clients-sept-1-20160812 http://news.forexlive.com/!/interactive-brokers-to-cut-off-u...
    - charlesdm 9y ago
      Might be. I'm actually not based in the US (but I did exchange FX recently). Perhaps someone in the US using IB could check?
  - pishpash 9y ago
    I don't think it's just lack of information. There are probably structural differences having to do with who is taking the fraud risk that account for the different rates.
- TorKlingberg 9y ago
  With a brokerage account, how easy is it to get your foreign currency sent to a bank account in that country?
  - charlesdm 9y ago
    Very easy. Check out Interactive Brokers (horrible interface, but great rates)
  - tacostakohashi 9y ago
    Often surprisingly hard. The other country is a big factor - Ireland is easier than Iran, the Netherlands is easier than North Korea.
msrpotus 9y ago
What stops banks from dropping those fees to compete with TransferWise? Are they serving a fundamentally different slice of the market?
- charlesdm 9y ago
  Probably nothing, but the loss of customers probably doesn't make up for the fees they currently make.
- xioxox 9y ago
  Banks in Germany are competitive with TransferWise for fairly large amounts (several thousand euros). You can achieve sub 0.5% charges with DKB, including the exchange rate penalty, for example. The main problem is that the pricing structures are opaque. Often the exchange rate is not properly advertised (and may not apply depending on the time of the transfer) and there are additional charges to include.
- faramarz 9y ago
  Banks are starting to compete, and they have great advantages to put them right in the middle of the battlefield.. if they move fast enough. For them it would be FX trade volume play and they can forego the fees to the end customer

consz 9y ago

It's insane, borderline criminal. I knew someone who wanted to convert ~1m AUD -> USD -- and the banks were still trying to offer to do at 2-3% ! At that amount, you can open a brokerage account and trade through EBS or CNX directly and pay basis points.

charlesdm 9y ago
Of course they would. Most people don't understand how the fee structure works, so will comply. You can open up a brokerage account at Interactive Brokers with a few thousand and use it to exchange FX. It's pretty accessible.
- consz 9y ago
  I agree, most people are just not aware. I like the machines I've seen in airports and train stations that offer currency conversions. They have 'No Fees! No commission!' posted all over them -- ignoring the fact that the bid-ask spread they're charging is 15-20%. Again, criminal.
  - charlesdm 9y ago
    Sad but true. :( That said, people do pay for convenience, which I assume is the main function of those cash machines. If I end up in a foreign country that I haven't visited before, I'll likely withdraw some cash (not much) from one of those machines just to be safe. You never know when your credit cards might stop working.. (I've had my main card blocked randomly while travelling and it frankly was a pain)
    - mseebach 9y ago
      Just withdraw cash on a credit card from a regular ATM. Most "normal" credit cards charge on the order of 3% over spot on the FX, some cards further charge a flat fee, but this is still better than those markups. It's even possible to get cards that doesn't charge a fee and gives you spot FX, even for cash withdrawal (Halifax Clarity in the UK is one). That leaves any fee the ATM might charge you, but if you can find one that doesn't, this is a supremely efficient way of getting cash abroad.
      - ihattendorf 9y ago
        Charles Schwab checking/debit: no foreign transaction fee, uses the exchange rate, and refunds all ATM fees internationally.
        cbhl 9y ago
        Charles Schwab checking is only available to US residents though -- if you're in a foreign country, you're out of luck.
        mseebach 9y ago
        Which is why we're suggesting different cards that are available in different countries.
      - pishpash 9y ago
        Credit card ATM withdrawal incurs punitive cash advance interest rates. I guess you can pay it off within the day though if you can calculate how much it is.
- pishpash 9y ago
  Is this relevant? http://news.forexlive.com/!/interactive-brokers-to-cut-off-us-forex-clients-sept-1-20160812 http://news.forexlive.com/!/interactive-brokers-to-cut-off-u...
  - charlesdm 9y ago
    Might be. I'm actually not based in the US (but I did exchange FX recently). Perhaps someone in the US using IB could check?
- pishpash 9y ago
  I don't think it's just lack of information. There are probably structural differences having to do with who is taking the fraud risk that account for the different rates.
TorKlingberg 9y ago
With a brokerage account, how easy is it to get your foreign currency sent to a bank account in that country?
- charlesdm 9y ago
  Very easy. Check out Interactive Brokers (horrible interface, but great rates)
- tacostakohashi 9y ago
  Often surprisingly hard. The other country is a big factor - Ireland is easier than Iran, the Netherlands is easier than North Korea.

msrpotus 9y ago

What stops banks from dropping those fees to compete with TransferWise? Are they serving a fundamentally different slice of the market?

charlesdm 9y ago
Probably nothing, but the loss of customers probably doesn't make up for the fees they currently make.
xioxox 9y ago
Banks in Germany are competitive with TransferWise for fairly large amounts (several thousand euros). You can achieve sub 0.5% charges with DKB, including the exchange rate penalty, for example. The main problem is that the pricing structures are opaque. Often the exchange rate is not properly advertised (and may not apply depending on the time of the transfer) and there are additional charges to include.
faramarz 9y ago
Banks are starting to compete, and they have great advantages to put them right in the middle of the battlefield.. if they move fast enough. For them it would be FX trade volume play and they can forego the fees to the end customer