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Comment by charlesdm | Hacker News Reader

In general, banks do charge excessive fees on exchanging currencies. For example, if you want to exchange €1,000 to $ or £, they'll charge you (by default) a 2.5-5% conversion fee. After negotiating with them, you generally get it down to 0.3%.

These days, I convert through my broker, because they only charge me 0.2% for FX conversions.

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It's insane, borderline criminal. I knew someone who wanted to convert ~1m AUD -> USD -- and the banks were still trying to offer to do at 2-3% ! At that amount, you can open a brokerage account and trade through EBS or CNX directly and pay basis points.

Of course they would. Most people don't understand how the fee structure works, so will comply.

You can open up a brokerage account at Interactive Brokers with a few thousand and use it to exchange FX. It's pretty accessible.

I agree, most people are just not aware. I like the machines I've seen in airports and train stations that offer currency conversions. They have 'No Fees! No commission!' posted all over them -- ignoring the fact that the bid-ask spread they're charging is 15-20%. Again, criminal.

Sad but true. :( That said, people do pay for convenience, which I assume is the main function of those cash machines. If I end up in a foreign country that I haven't visited before, I'll likely withdraw some cash (not much) from one of those machines just to be safe.

You never know when your credit cards might stop working.. (I've had my main card blocked randomly while travelling and it frankly was a pain)

Just withdraw cash on a credit card from a regular ATM. Most "normal" credit cards charge on the order of 3% over spot on the FX, some cards further charge a flat fee, but this is still better than those markups.

It's even possible to get cards that doesn't charge a fee and gives you spot FX, even for cash withdrawal (Halifax Clarity in the UK is one). That leaves any fee the ATM might charge you, but if you can find one that doesn't, this is a supremely efficient way of getting cash abroad.

Charles Schwab checking/debit: no foreign transaction fee, uses the exchange rate, and refunds all ATM fees internationally.

Charles Schwab checking is only available to US residents though -- if you're in a foreign country, you're out of luck.

Which is why we're suggesting different cards that are available in different countries.

Credit card ATM withdrawal incurs punitive cash advance interest rates. I guess you can pay it off within the day though if you can calculate how much it is.

Is this relevant? http://news.forexlive.com/!/interactive-brokers-to-cut-off-u...

Might be. I'm actually not based in the US (but I did exchange FX recently).

Perhaps someone in the US using IB could check?

I don't think it's just lack of information. There are probably structural differences having to do with who is taking the fraud risk that account for the different rates.

With a brokerage account, how easy is it to get your foreign currency sent to a bank account in that country?

Very easy. Check out Interactive Brokers (horrible interface, but great rates)

Often surprisingly hard. The other country is a big factor - Ireland is easier than Iran, the Netherlands is easier than North Korea.

What stops banks from dropping those fees to compete with TransferWise? Are they serving a fundamentally different slice of the market?

Probably nothing, but the loss of customers probably doesn't make up for the fees they currently make.

Banks in Germany are competitive with TransferWise for fairly large amounts (several thousand euros). You can achieve sub 0.5% charges with DKB, including the exchange rate penalty, for example. The main problem is that the pricing structures are opaque. Often the exchange rate is not properly advertised (and may not apply depending on the time of the transfer) and there are additional charges to include.

Banks are starting to compete, and they have great advantages to put them right in the middle of the battlefield.. if they move fast enough. For them it would be FX trade volume play and they can forego the fees to the end customer

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