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Currency Exchange Basics for Travelers

Currency exchange refers to a business that exchanges one currency for another legally. It can be a standalone business or part of banking services. A currency exchange earns profit by charging commissions or adjusting exchange rates. Key terms include the sell rate to exchange local currency, buy rate to exchange foreign currency back, and the spread between buy and sell rates. A money exchange performs exchanges near the spot rate between banks but adjusts for profits.

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223 views2 pages

Currency Exchange Basics for Travelers

Currency exchange refers to a business that exchanges one currency for another legally. It can be a standalone business or part of banking services. A currency exchange earns profit by charging commissions or adjusting exchange rates. Key terms include the sell rate to exchange local currency, buy rate to exchange foreign currency back, and the spread between buy and sell rates. A money exchange performs exchanges near the spot rate between banks but adjusts for profits.

Uploaded by

Harshita Thapar
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

Money Exchange

Money exchange or currency exchange refers to a business or financial institution that


is legalized by the law to exchange one currency for another currency for the customers
of the exchange. Currency exchange can be a standalone business i.e. business in
itself or a part of the various services offered by a bank or any other financial institution.
A currency exchange earns profit either by charging a commission for the services
provided or by adjusting their profit in the exchange rate offered. A money exchange
can also be referred to as a bureau de change or foreign exchange market.
Here are some common terms that are related to currency exchange or money
exchange and are used on a daily basis in the market:
Sell Rate: It refers to the rate at which foreign currency is sold in the market in
exchange for local currency or the domestic currency.
Buy Rate: Buy rate refers to the rate at which currency is bought back from the traders
into local or domestic currency. This usually takes place when some spare foreign
currency is held by a traveler after a trip or travel.
Tourist Rate: Tourist rate or holiday money rate are synonyms of sell rate.

Spot Rate: Spot rate refers to the rate at which banks and other large financial
institutions charge each other when trading in huge amounts of foreign currency. It is
also referred to as the interbank rate. 

Forward Rate: Forward rate refers to the rate fixed between the buyer and seller of
foreign currency today for a transaction that is supposed to take place in the future.

Spread: spread refers to the difference between the buy and sell rates of a foreign
currency offered by a money exchange provider to the customers. It is usually the
margin saved by the exchanger like banks or other institutions.

Cross Rate: Cross rate refers to the rate offered to the customers or traders who do not
del in local currency i.e. they trade in two foreign currencies. For Example: An Indian
exchanging US dollar for euro would be offered cross rate.

Commission: it is a common charge that money exchangers apply for the services that
they provide to the customes.it mostly depends upon the amount of transaction that is
carried out by the customer or trader.

A money exchange or a currency exchange is never performed at the spot rate however
it is somewhere near the spot rate. It varies because the money exchangers adjust their
profits in the rates that they provide to the customers. The profits charged sometimes
may seem expensive to the customers especially people travelling abroad.
It is better for travelers to carry foreign currency in a forex card or multi-currency card
which is a great alternative for money exchange.

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