BER Currency News

BER Home/s

  1. Home
  2. Currency News
  3. Why is it that when I go to a foreign currency exchange rate counter I never get the rate that I see on the news?

Why is it that when I go to a foreign currency exchange rate counter I never get the rate that I see on the news?

You may well think that you are being ripped off, but it is not always the case. In simple terms what you see on the news or in the paper or on yahoo finance is the Middle Rate or mid-rate. Some people want to buy a currency and some people want to sell a currency. There is a gap between the price at which you buy and the price at which you sell. In market terms this is normally called the ‘profit spread‘ or just the ‘spread’.

In the financial markets registered foreign exchange dealers normally deal in amounts of greater than $1m. So unless you are looking to buy or sell more than $1m you won’t be able to access the very fine ‘spreads’ that the foreign exchange dealers can exchange their currency. If we take a common exchange rate the AUD to USD exchange rate this is expressed as $1 AUD = $0.78 USD or an exchange rate of 0.7800. To give you an idea the normal spread between the buy rate and sell rate is 5 points ie you might Sell AUD at 0.7800 and Buying AUD at 0.7805.

When it comes down to small businesses or an individual looking to exchange foreign currencies – the spread we get is a lot different. If you look at the average bank they are giving you a spread of around 400 points! Or to compare that to the example above you would Sell AUD at 0.7600 and Buy AUD at 0.8000. As you can see these rates are vastly different. Does it really matter?

Well if you take an amount of $10,000 AUD and you convert it to USD the additional cost of the size of the spread is roughly as follows:

Spread Amount Approximate Cost
5 points or 0.0005 $6.60
50 points or 0.0050 $66.20
100 points or 0.0100 $131.50
200 points or 0.0200 $260.00

So if you can save a 200 point spread then you can save up to $260 when exchanging money!

At Best Exchange Rates we show you the rates that you really get not just the mid-rate that is displayed on the TV or in the paper. This allows you to make real decisions about where you can get the best exchange rates and get better value.

BER Admin Author: BER Admin

Please note that the opinions of our authors are their own and do not reflect the opinion of Best Exchange Rates and should not be taken as a reference to buy or sell any financial product. Full Disclaimer

BER logo Best Exchange Rates - We make it Easy to Compare Exchange Rates & Fees of Banks and Currency Exchange & Payment Providers


Level 2, 50 Bridge St, Sydney NSW 2000.

Disclaimer | Copyright | Privacy Statement


DISCLAIMER

Best Exchange Rates is an information only service. By browsing on the website, using our comparison tools or FX provider referral service, you are asking Best Exchange Rates to provide you with information about currency exchange products & services from multiple financial institutions.

We will try to show you a range of products & services in response to your request for information. The search results do not include all providers and may not compare all features relevant to you. In giving you product information we are not making any suggestion or recommendation to you about a particular product.

If you decide to conduct foreign exchange you will deal directly with a financial institution, and not with Best Exchange Rates. Rates and product information should be confirmed with the relevant financial institution, see our terms of use for further details.

Best Exchange Rates may receive fees or other benefits in relation to activity on the Best Exchange Rates website. Best Exchange Rates may receive remuneration for vendor referral links. Please note that the opinions of our authors are their own and do not reflect the opinion of Best Exchange Rates and should not be taken as a reference to buy or sell any financial product.

Read our Full Terms of Service



COPYRIGHT

This website and its contents are the copyright of BEST EXCHANGE RATES PTY LTD © 2009-17. All rights reserved.

Any redistribution or reproduction of part or all of the contents in any form is prohibited other than the following. You may print or download contents to a local hard disk for your personal and non-commercial use only. You may copy some extracts only to individual third parties for their personal use, but only if you acknowledge the website as the source of the material.

You may not, except with our express written permission, distribute or commercially exploit the content. You may not transmit it or store it on any other website or other form of electronic retrieval system.

For more details or request distribution right please contacxt us here.