How do currency exchanges work?

Question

And how do I avoid losing money?

In: 3

Answer 1

You tell someone you want to convert $100 US dollars to UK pounds.

The conversion rate tells us it should be £86.31 as of typing this.

However, this is a service, and like most services, you get charged. And who you do it with (bank, place at an airport, a store in another country, etc.) they have different fees.

Bank of America for instance is telling me if I give them $100 US dollars, they will give me £81.43, so a loss of £4.88 ($5.65 US dollars).

Depending on your credit card, especially if you have a travel credit card, you don’t get foreign transaction fees.

However, “no foreign transaction fee” isn’t the same as “no currency conversion fee”. So you can still be charged for the currency conversion, but you can’t be charged for it solely being a foreign transaction. Also, places may ask you if you want to be charged in their currency or yours, usually you pick their’s as then the banks do the conversion fee whereas if doing it in your currency then the store is doing the conversion and usually has worse rates than the banks.