If I google the exchange rate from one currency to another, it shows a much better rate than what I would get in a bureau de change for the same amount of money. Why are these two rates so different?
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Because the people working there need to make some kind of profit. It’s a service they’re providing.
Because business want to make money.
If you go to one of those place that let you change currencies, you will note that the rate they will give you for one direction is not the same as the one they will give you for changing money into the other direction.
The actual rate lies somewhere in the middle, but they want to make money on every transaction.
They still need to make money out of the transaction (commission), and there’s local tax as well.
Exchange bureaus have mostly switched to a “No Fees” model.
As they have to make money to stay in business, they do this by giving a much worse exchange rate and pocketing the difference.
The correct answer is already here, but you can find another example by looking up the market price of gold, then shopping around online for places that sell gold. Their price will always be higher, because they add a little to make a profit (which is ok; they’re a business and they’re providing a service). All of it is basically a fee or a handling charge or a surcharge or whatever you want to call it.
There are ways to get very close to the wholesale rate. One way is to use Wise (was TransferWise). I have no connection except as a very satisfied regular user.
Another way to look at this is that currencies are a commodity. The price you see on Google is the wholesale exchange price. The price you pay is the packaged retail price with all the middleman and marketing costs and profits built in. The same is true for any commodity. You’ll get a much better price if you can buy it in huge quantities on an exchange vs tiny quantities at a retailer.
At most banks the more you’re exchanging the better rate you’ll get too. If you’re picking up cash for holiday you’ll get one rate, but if you’re wiring a large amount you’ll get a better one.
I find whenever I go to Canada that going to the casino to exchange money gives me the best rates.
Saying something is worth *X* is different than someone actually paying *X* because they have to account for profit and overhead
If you google the exchange rate, you’ll get what is known as the interbank exchange rate, which is roughly what it says on the label: the rate at which banks will exchange currencies among themselves. It’s kind of the “real” exchange rate, if there is such a thing.
Exchange bureaus are a business. They provide a service, and charge you for it, like any other business (which is only fair!). They way they charge you for it is by offering you a less favourable rate, so they make money on the difference. Same with banks when you buy currency from them.
Traditional exchange bureaus and bank are not super clear about any of this, but many more modern services like Transferwise, Revolut, and such are actually a fair bit more transparent: They do the currency exchange at the interbank rate, exactly as if you googled them, but charge you an explicit percentage for the service.
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