Thread: Getting hosed on currency exchange

Hey guys I just thought I would bring this up. So I just purchased one of the fine razors from our classifieds and when I got to the currency exchange I noticed that although the Canadian dollar has been slightly higher than the U.S. Dollar for a few months we are still being Dinged as if it was lower. Now I'm not really goin to make a stink or really b!tch about a few cents but I would really like to know how and how offen they change the currency exchange.
So Paypal is converting the Canadian dollar into .981612 US
Ex is converting the Canadian dollar into 1.01035 US

I've got no real answer but it may not be a lag in forex rate changes but a built in margin in case a particular currency takes a dive.

That market moves SO fast they may figure it's needed.

I honestly thought I had the forex beat...until I learned that there can be up to a 5 pip "slide"...even when you're staring at the computer screen update the rate every second.

5 pips blew my silly idea out of the water...as the whole of my strategy was to not get greedy and take the 2 and 3 pips wins ALL the time. Had visions of being a millionare in a the course of 3 years until I learned that little secret about "slide"

It was all "play" money, thankfully.

Paypal adds some spread to the exchange rate, I think around 2%-4%, but when I looked few years ago I couldn't find any details on what they do exactly. I'm sure it's an average that works to their benefit, i.e. the increases contribute more and the drops contribute less. They had just ambiguous "we update our rates several times a day and use the rate from our bank" without any specifics.

Also I noticed that with transactions in foreign currencies sometimes paypal does the conversion at their rate, sometimes (usually when I've paid with American Express) they charge in the foreign currency and leave the conversion up to my bank, and at one point there was an option where I could choose whichever way I like.

I don't think there is anything to be done about it though, but if you call paypal or find anything specific may be you can share it.

What burns my but is that EBay shows the current exchange rate but when you get to paypal you end up paying a few cents more than you expected. But once again it's just a few cents but it does add up.

That's because though there is a pretty specific exchange rate individual banks and services can put any kind of surcharge on the rate that they want.

No one uses the "real" exchange rate for consumers, and everyone has their own individual fees, patterns etc. so you will often see differences of 1-5 cents, depending on who's doing the exchange.

It has always been so, and likely always will be.

One of the trends in buying and selling currencies is the Velocity of Money. Everything and everyone/country is tied into exchanges and computers. Transactions are executed at high speed, per second with each transaction exacting a "fee". One reason for the high cost of things today.

Paypal also charges a fee for foreign transactions no matter how small but as you mentioned it does add up mostly for "Them".

The credit-card companies have increased their spread (buy-side vs sell-side) to something over 3%.

You could get (and use) a $US credit card (from a Canadian bank) for US purchases, _if_ you don't use Paypal. [Paypal won't let you set up a "foreign-currency" account, tied to a foreign-currency card.] Of course, you need a way to pay off the $US credit card, which means a $US checking account . . .

Except for a $US credit card, there's no way around the charge, as far as I know.

Charles

Ya, but you are getting a great razor out of the deal!!! After you have your first shave you will forget the pain in the wallet...

Well ebay's converted price is always approximate and they say that, that it's there just for convenience. Plus paypal never changes the rate from the time they display it to you until you click on the 'submit payment' button, so you always know exactly how much you are paying before you do it.

Of course, bidding on something in foreign currency you commit to pay in that currency and therefore it's up to you to figure out how to make the payment. The way I look at it is that paypal makes it awfully convenient for me to pay anybody in the world that uses their system and it's really cheap compared to any other option I have, so I don't mind at all.
If you don't use paypal, what are the alternatives? Send a wire? Almost all banks charge $20-$50 fee just for doing it and then they also add their spread to the exchange rate. Not to mention the time I have to spend if my bank wants me to do it in person....

Few percents is well below the margin of error when I decide how much an item is worth to me, so I don't really care. I have exactly the same amount of control over it, as I have control over how much the second highest bidder decided to bid, and their choice is orders of magnitude more important to what I end up paying.

If that amount is enough to buy me the convenience of paying instantly anybody in the world by taking only 2-5 minutes of my time - I'm really happy to live in 21st century!