Do ATM's always give a better exchange rate?

[Carolinian]

The answer is ''no''. I had always heard that they give the interbank rate. In some countries, where the receipt gave the exchange rate, it was indeed better than that offered by exchange houses.

Now that I am working in Europe, I have often taken my money out via ATM rather than using the exchange houses, even though exchange houses here generally do not charge commission and often have only about a 1% spread between buying and selling rates. The ATM receipts here do not show the exchange rate. Finally, yesterday I did the math myself on an ATM withdrawal, and discovered to my surprise that it was exactly the same rate as the most prevalent exchange house rate for buying dollars. That rate was about 2% below the interbank rate which I checked on a local website. Of course, with the dollar in the toilet these days, the exchange houses will even sell dollars for LESS than the interbank rate.

Since the exchange houses do not charge the 50 cent non-system ATM transaction fee that my credit union does, I get slightly more local currency to change through an exchange house here than to use the ATM.

 

[Icarus]

So, if I'm reading this correctly, if a tourist is savvy enough to be able to find an exchange house that doesn't charge commission, charges less than 2% under the interbank rate and because the exchange house doesn't charge the 50 cents non-system ATM transaction charge, then they can save a few cents by using that exchange house?

So you aren't saying that the ATMs don't give a very good rate, but you are saying that you've been able to do slightly better?

Have you considered using a bank or CU that doesn't charge you a non-system ATM fee?

-David

 

[Carolinian]

The 50 cent fee is a credit union non-system fee. It is the best such deal in the area I return to when I go to the states. If I used my Wachovia account, they would pop me with about $6 in fees, which is why I don't use that one with ATM's.

In countries that use the euro (€), it is usually impossible to find an exchange house with decent rates and no commission, so this is generally an option only in eastern Europe, the UK, and Switzerland.

I am not certain if the less than interbank exchange rate is now prevalent across all of Europe or not at ATM's, but it does seem to be the case here.

Since the slide of the dollar has led the exchange houses here to regularly sell dollars for 1-2% under interbank rate and buy dollars for about a percent less than that, I would love to find an ATM at which I could get local currency at the interbank rate.

Has anyone used ATM's for € lately and gotten interbank rates? If so, that might help some if I am in a € country.

 

[Icarus]

Conversion from US$ to/from Euros should be relatively cheap no matter how you do it. For some other currencies that aren't as prevalent, you usually have to pay more for the spread.

I think for most people, ATMs will give the best exchange rates. If you are local and know the ins/outs of the local markets, you can do better, but most people here aren't in that category.

My CU doesn't charge a non-system ATM fee. In my plan, I get 5 free non-system transactions a month. If I had more in my account, it would be unlimited and with even more they would rebate ATM fees charged by the other bank. The variance in the final exchange rate with a 50 cent fee probably isn't that much, if you don't make really small withdrawals.

Though I do think it's interesting that you're finding some variance because of the falling US$ when using local exchange houses. How much overall variance are you seeing for something like a conversion of US$150 or Euro 100? The other variable is that interbank rates used by banks for ATM conversions are usually a daily average, however, real exchange rates fluctuate by the second. xe.com has some calculators that let you determine the actual spread that you paid for a conversion on a specific date. Make sure you use the date the transaction posted to your account, which may be different than the transaction date.

-David

 

[Icarus]

I just checked some withdrawals I did in Hong Kong in December using my CU ATM card. I paid virtually nothing for the exchange according to xe.com's foreign exchange charges calculator.

I purchased 2500HKD for $320.78. The raw exchange rate for Dec 8 yielded a price of $320.75, so the spread was 3 cents.

On December 10, I purchased 3000HKD and paid a spread of 94 cents over the interbank average rate listed on xe.com for that day.

The first was at an HSBC ATM. The second one, I can't tell which one it was, it just lists the location (Imigration Tower) and not the bank name, but I used Citibank ATMs over there a few times.

Yes, this was HKG and not Eastern Europe.

-David

 

[Carolinian]

Conversion from US$ to/from Euros should be relatively cheap no matter how you do it. For some other currencies that aren't as prevalent, you usually have to pay more for the spread.


-David

Actually, I find this just the reverse when one is using an exchange house.
A country using the euro will have exchange houses with high spreads and almost always a commission on top of that. Eastern Europe is where you find the low spreads and absence of commissions, although you also find some of that in major cities in the UK and Switzerland. Using exchange houses, I can almost always do a two-step conversion, like dollars to forints to euros in Sopron, Hungary, a good bit cheaper than a direct conversion in, say, Vienna.
In fact, with a trip to Cyprus coming up last fall, I got really great rates in Sofia, Bulgaria changing dollars to leva to Cyprus pounds.

What happened in the countries using the euro was that the euro caused the volume of exchange business to collapse and the remaining exchange houses raised their fees to compensate.

And, of course, there are some countries like Greece, where it is impossible to escape an extra fee levied by the dispersing ATM, unless your bank back home reimburses it.

 

[Keitht]

I'm in the UK so the situation for visitors from the US may be different. I get the best exchange rates by taking either cash (not recommended for security reasons) or travellers cheques and converting them at bureau de change which have no commission charge. It works for me because my own bank doesn't charge commission on supply of sterling travellers cheques.
This method has worked well for me in Spain and in Turkey. You do have to be careful that the advertised exchange rate at the bureau de change is actually what they are offering you, but that aside it has always been OK.
If I use ATMs I get hit with foreign currency charges, commission etc etc.

 

[Icarus]

What happened in the countries using the euro was that the euro caused the volume of exchange business to collapse and the remaining exchange houses raised their fees to compensate.

But when you use an ATM, the conversion is done by your bank (or the bank card association). So the exchange house rates don't really apply there. They use wholesale rates.

Did you try calculating your exact rates for some of your ATM transactions using that historical calculator on xe.com to see the real rate your bank charged you compared to the average interbank wholesale rate for that day?

-David

 

[Carolinian]

But when you use an ATM, the conversion is done by your bank (or the bank card association). So the exchange house rates don't really apply there. They use wholesale rates.

Did you try calculating your exact rates for some of your ATM transactions using that historical calculator on xe.com to see the real rate your bank charged you compared to the average interbank wholesale rate for that day?

-David

The quote you are responding to deals with exchanges through exchange houses rather than ATM's.

The xe.com mid-market rate is similar to the daily interbank rate published every business day on a local news website. I used the daily figure for the transaction date. The local ATM rate was about 2% under than rate. I suspect the banks here are setting the ATM rates rather than banks back home. If I happen to be at the Embassy, I can use an ATM that dispenses dollars (although these days I rather find one that despenses euros or pounds or Swiss francs).