If the currency exchange shop in Bulgaria exchanged my Euros to Lev at a rate of €1 to 1.96lev, which is currently the exact market price, how do they make their profit?
In: Economics
Currency exchanges make money in a couple ways.
* Straight up charge you a fee for the service. For example, you may need to pay €20 (or whatever) on top of what you’re exchanging.
* They will also have a bid-ask spread, which is the difference between what the listed, official exchange rate is and what one is actually willing to pay. For example, even though the exchange rate is officially 1:1.96, the exchange shop may only offer 1:1.9. That means you’re not getting the full value of the exchange, effectively charging you a percentage of the transaction.
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