Are You Getting the Best Exchange Rate?

A quick search of the internet will provide many answers about how to get the best exchange rate.  If you have done a similar search, you will know that these answers are not all the same.   

Banks versus Currency Exchange Companies

Both banks and currency exchange services provide foreign currency exchange services.  One article you read may say that a bank has the best rate and another may swear by currency exchange service providers.  With so much conflicting information available, how do you decide which is best?  The answer is, it depends.

Do the Math

The fact is, to truly know you are getting the best exchange rate, you need to do the math.  A few minutes can save you more than a few dollars, especially if you are exchanging large sums of money.  It isn’t enough to simply look up the exchange rate online, and choose a day when the exchange rate is favorable. This is because whatever money exchange service provider you ultimately choose, they need to make a profit. There will be an added fee to the transaction. Many financial institutions will not post their fee, they will instead include it in their posted exchange rate.  

This means to get the best rate, you need to consider timing and also do your homework when picking a service provider.

Formula to Calculate Exchange Rate

The profit your service provider receives is the difference between the market exchange rate and their own posted exchange rate.  The percentage of profit they receive can be calculated by taking the difference between the two rates, then dividing it by the market exchange rate, and multiplying the answer by 100. 

A simple way to calculate the percentage that a service provider is charging is to use this formula: 

Service provider’s exchange rate – Market exchange rate = x

x / market exchange rate = y

y * 100 = percentage markup (or profit of service provider)

Using this formula will help you to calculate which exchange rate is better.

An even easier way to determine if you are getting the best rate is to find the exchange rate that is closest to the market exchange rate on the day you do the exchange.  Check the exchange rate online and then compare it to the rate offered by your financial institution or preferred exchange service provider.

Time Considerations

Not all currencies are kept on-site, either by banks or by currency exchange services.  If you need money for travel, it is a good idea to call ahead and make sure that they have the currency you need available, especially if you are under a tight timeline.

In addition, remember that currency exchange rates fluctuate daily.  Make sure to check the market rate on the same day you intend to make the exchange.


With a small amount of effort, you can ensure you are getting a good exchange rate when you exchange foreign currencies.  Checking the market rate and comparing it against your service provider’s rate can help you easily find the best rate of exchange.

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