Taking it to the money changers! (Lessons on exchanging your cash)

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I’m going to take a minute to stretch way back to my days as a budding economist (where has the time gone?) and talk about one thing everyone can relate to: money.

Don’t look now, but with the global financial turmoil and stock markets in spiral mode, the US Dollar and the Japanese Yen have actually gained some considerable ground on the Euro! Nerd talk, I know, but just hang with me here for a minute. Check out these graphs!

USD to EUR over the last 3 months:



JPY to EUR over the last 3 months:




This means that if you’re in Europe and you’re holding Yen or Dollars, the value of your money has increased between 18 and 25%!i(MISSING)n the last 3 months. Any trans-Atlantic or trans-Pacific traveler knows that both these currencies have taken a considerable beating in recent years. When the Euro came out back in 2002, it took about one dollar to buy one euro. This past spring and summer it took nearly $1.60 to buy yourself a euro! Today, only a month and a half later, it would have only cost you $1.34. It’s not one-for-one, but hey, it’s the best we’ve had in many moons. If you take a look at the Yen, it’s even more impressive. This summer it took 170 yen to buy a Euro, now it’s somewhere between 135 and 140.

But I know what you’re thinking: “That’s just the base rate, genius. Everyone knows that’s not what you get when you exchange your cash. Those money changers will cheat you with an above-market rate and then take off your right arm for commission!” And you’re right. I, like so many of you out there, have been taken to the cleaners by the money man more times than I can count. But today, I learned a valuable lesson on how to make the most of your Ben Franklins or Fukuzawa Yukichis when you cross currency zones. When I went to cash in the last of the leftover savings from Japan, they tried to take my arm and I stopped them at the elbow. When they tried to sell me a bogus rate, and I busted out my calculator on them (what?)! Here’s how I saved myself some serious heartache:

The key is twofold: 1) shop around, and 2) exchange in large sums rather than piece-by-piece.

First, I went shopping for the best exchange rate in town. The base exchange rate (at which banks and traders sell to each other) was 136 JPY to 1 Euro for today. Out in the real world, however, the going price on the exchange windows was marked somewhere between 144 and 147 Yen for one Euro (i.e. between 7 or 8%!h(MISSING)igher than the base rate). With each changer asking a different commission, I got some wildly different quotes. A few changers even added as much as 11%!f(MISSING)or commission on top of the inflated exchange rate. So even if you accept the rate they give you, it still pays to shop around because those rates and the commissions attached to them can vary.

The second lesson was that it pays to exchange larger sums of money rather than a pile of cash piece by piece. This is because some, if not most money changers are able and willing to negotiate prices with you if you present a large enough figure. The woman behind the plexiglass today told me that she could start improving the exchange rate and lowering commission charges if an individual presented 600 Euros or more. A few other changers also told me on the phone that if I came to the office in person with my money, they could negotiate with me.

Ultimately, when all was said and done I got a rate of 138 JPY to 1 Euro and paid 0 in commission! Thank you Travelex! On the screen her rate was 147/1. Next door the rate was 144/1 but they were not willing to negotiate. What’s more, the neighbors wanted to charge me an additional 11%!c(MISSING)ommission mark-up beyond the displayed price (leaving the real rate at 160 JPY/1 Euro if you convert the commission into an exchange rate). So in the end I saved 16%!o(MISSING)n the exchange by shopping around and negotiating.

What will I do with this extra cash you ask? Well, it’s Obamanomics 101: when Zehbuddha and his sugar-mama get some extra cash, they’re gonna spend it on their wedding (or on tuition, or on paying Joe-the-plumber to fix the leaky shower that has stained the carpet in the bedroom and destroyed some priceless books). Multiply that by some 10s of millions of households and what do you get? Give the cash-strapped middle and lower income a badly needed break and they’re gonna go out and spend it because they have to. In McCainomics (i.e. Bushonomics, i.e. Reaganomics), the rich man gets a break and puts his extra cash into an off-shore bank account. Which one do you think will create more jobs and fuel economic growth? This former budding economist is voting for change he can believe in!

(Sorry for the rant.)

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