Embarassing...but need to ask

[Libby]

I hate to admit this, but I don't have a clue how currency exchanges work. I go to my bank and I say I want to buy "X" number of British pounds. How much does this cost me? Why is it cheaper to do this in the UK?

I'm asking because the Canadian dollar has shot up this past week. A month ago we needed $2.44 to make a pound. Today it is $2.28. Should I take advantage of that rate??

[WillTravel]

Here is my experience living in Vancouver (also reported on other threads).

If I ask my bank to get currency, it will cost about 5% above the interbank exchange rate (see www.xe.com or www.oanda.com for that rate).

If I go to my favorite currency exchange bureau, it will cost about 2% above the interbank exchange rate.

If I go to an ATM in Europe, it costs $3 CAD for the withdrawal plus 1% above the interbank exchange rate. Americans can find a bank that doesn't charge them for each withdrawal in Europe, but Canadians rarely can (report back if you do).

If I use a credit card, I am charged between 2.25% to 2.75% above the interbank rate, depending on the terms of the card (different for each card I have).

So it's a tossup between the currency exchange bureau and a European ATM.

Some people do make money by getting their currencies at the exact right moment, but it's usually not much different.

[Libby]

I'm still not sure I get you.

You pay 5% to your bank if you exchange currency with them?

So if I want to buy 100 pounds and it costs me 234 CDN I have to pay them 5% of my 234?

[WillTravel]

Today the interbank rate is 1 GBP = 2.28552 CAD.

So if you bought 100 pounds from the bank today, you would probably have to pay $228.55 + 5% of $228.55, which would be $11.43, so the total cost of those 100 pounds would be about $240 Canadian.

[LHR02]

Speaking as an American who does not pay for each withdrawal......the very best rate I can get is to withdraw funds from an ATM in country. With an ATM you get (almost always) the banks/very best exchange rate. However...once again, my bank charges me nothing other than the exchange costs for that so I always come out ahead buying currency there rather than here.

[Libby]

Thanks for helping me out with this.

I've a friend who works at the bank who does all this stuff for me and usually does it in her name so I get her employee discount rate. In most cases (such as with Money orders and the like) I don't have to pay any fees.

[WillTravel]

I'd be curious to hear what rate your friend would have to pay. My guess would be 1% over the interbank rate. Toronto has the same currency exchange bureau as Vancouver does, but I don't know that there's a branch in Halifax.

It is interesting that the pound has dropped so dramatically against the Canadian dollar lately. That's the lowest rate that I recall since I started paying attention a couple years ago. I wish I had a crystal ball so I could know if that will continue!

[Libby]

It went back up today.

2.32! Still not all that bad. I think I'll pick up some cash tomorrow anyway.

I checked with my friend and she said that I should only pay for the exchange, and should have to pay no fee if I get some cash tomorrow.

If the rate at noon is 2.35 and I want 100 pounds I'll be charged $235 bucks and that's it!

That's Bank of Nova Scotia