How can prices depend on the currency being used to pay?

Question

I’m never fully understood how currencies fluctuate beyond a layperson’s understanding of inflation/deflation, but still always assumed that $5 is $5 regardless of what currency it’s coming from or going into. But recent experiences have made me question that. M Not sure if this is the best way to ask my question because I think i actually have multiple closely related questions, so I’ll use examples instead:

My dad was recently in southeastern Europe and tried to pay for something at a store – they asked if he had dollars (or the local currency, i can’t remember) because it’s cheaper that way. If something costs $5, and I just exchanged the money into local currency, the merchant should be getting 5$ worth of currency regardless, no?

We went to Argentina in the spring, where it’s common for travelers to exchange dollars for pesos at non-government exchanges for a better rate. How does this happen? Are these exchanges getting dollars for less somehow, and thus able to offer better rates?

Again, I assume these questions are related, but what are the underlying concepts here? Thanks in advance!

EDIT: thanks everyone! I think between each of the responses I understand what I was missing!

In: 0

Answer 1

Exchanging currency often comes with fees to do the transaction. Those “non-government exchanges” aren’t free. You have to pay a fee for the transaction, then once you have the local currency you can just pay as normal. Or, a lot of places where tourism is very common will have an exchange rate at the register (but will probably build this fee into the price they charge you).

Protip: Try to find a credit card with a No Foreign Transaction Fees benefit when traveling. You’ll pay no fee and CC issuers are I believe required by to give you the true exchange rate at the time of the transaction. If you ABSOLUTELY need cash, find a major bank at your destination and withdraw from an ATM. You’ll pay a fee but it’s usually far lower than going to a currency exchange location (and some Checking accounts now refund a certain amount of ATM fees per month).