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For some time, one of the usual best bets on foreign exchange was to use an ATM machine with your debit card. You received local currency at the interbank midmarket rate, usually avoided fees from the dispensing machine, and with some US banking institutions, also avoided fees or at least major fees to the account the money came from. Credit Unions were often the best bet. That may be changing.
First I noticed that on ATM transactions here, the dipensing bank was giving its own exchange desk rate instead of the interbank midmarket rate on ATM transactions, which was about 1.5% below the interbank midmarket rate. Then I saw that my credit union had not only increased its fee from 50 cents to 75 cents per transaction, but had also added a 1% ''exchange'' fee for foreign currency transactions through the Plus system. The 75 cent fee represents about 0.3% on the maximum local ATM transaction. So the total cost is 2.8% for an ATM foreign currency delivery from my credit union account.
If I use my Wachovia account, it is worse, in that they charge a $2.00 transaction fee and 2% ''exchange'' fee, added to the local bank's 1.5%, for a grand total of a 4.3% cost for an ATM foreign currency delivery.
In making inquiries with the credit union, I discovered that it can get worse, as they allow up to a $5.00 transaction fee to be charged by the dispensing bank, and that is not even itemized so you wouldn't necessarily realize it is being charged. This seems to vary by country. All ATM's in Greece charge a transaction fee, and every one I have checked in Poland did as well. On the other hand, most in the UK do not, and tell you that right on the ATM screen.
What is somewhat maddening is that many ATM's, including every one I have encountered in Romania, Bulgaria, Italy, and Switzerland just don't tell you one way or the other, so they make it a crap shoot.
Since I can do a two currency transaction - dollars to local currency to euros - at independent exchange houses here for less than 1% total cost, why in the world would I want to use an ATM? I have also often found other currency rates at local exchange houses where their buying rates are not good buy their selling rates are close to interbank midmarket rates, so two currency transactions at local exchange houses are clearly the best bet for me. And fortunately, here in eastern Europe, commissions are not charged by most exchange houses, as they make their money entirely on the spread between buying and selling rates.
The problem for anyone getting off a plane from the US in a € using country of Europe is that the € has driven many exchange houses out of business, decreasing the competition and making it difficult to avoid bad rates and high commissions at exchange houses in those countries. Without competitive local exchange houses in those countries, the increasing cost of ATM's may still be better than the alternatives.
And if that is not bad enough, posts over at Flyer Talk indicate that a number of major US banks are increasing their foreign ATM transaction fees to $5 per transaction very shortly. If they get you for $5 on each end plus 2%, ATM transactions get expensive overseas.
First the banks nailed credit card users, and now they are going after the ATM users. To avoid unpleasant surprises, check the current policies of your bank before heading overseas.
All of this has gotten me to increase the portion of my salary I get paid to me in cash here in eastern Europe rather than deposited in a US account.
First I noticed that on ATM transactions here, the dipensing bank was giving its own exchange desk rate instead of the interbank midmarket rate on ATM transactions, which was about 1.5% below the interbank midmarket rate. Then I saw that my credit union had not only increased its fee from 50 cents to 75 cents per transaction, but had also added a 1% ''exchange'' fee for foreign currency transactions through the Plus system. The 75 cent fee represents about 0.3% on the maximum local ATM transaction. So the total cost is 2.8% for an ATM foreign currency delivery from my credit union account.
If I use my Wachovia account, it is worse, in that they charge a $2.00 transaction fee and 2% ''exchange'' fee, added to the local bank's 1.5%, for a grand total of a 4.3% cost for an ATM foreign currency delivery.
In making inquiries with the credit union, I discovered that it can get worse, as they allow up to a $5.00 transaction fee to be charged by the dispensing bank, and that is not even itemized so you wouldn't necessarily realize it is being charged. This seems to vary by country. All ATM's in Greece charge a transaction fee, and every one I have checked in Poland did as well. On the other hand, most in the UK do not, and tell you that right on the ATM screen.
What is somewhat maddening is that many ATM's, including every one I have encountered in Romania, Bulgaria, Italy, and Switzerland just don't tell you one way or the other, so they make it a crap shoot.
Since I can do a two currency transaction - dollars to local currency to euros - at independent exchange houses here for less than 1% total cost, why in the world would I want to use an ATM? I have also often found other currency rates at local exchange houses where their buying rates are not good buy their selling rates are close to interbank midmarket rates, so two currency transactions at local exchange houses are clearly the best bet for me. And fortunately, here in eastern Europe, commissions are not charged by most exchange houses, as they make their money entirely on the spread between buying and selling rates.
The problem for anyone getting off a plane from the US in a € using country of Europe is that the € has driven many exchange houses out of business, decreasing the competition and making it difficult to avoid bad rates and high commissions at exchange houses in those countries. Without competitive local exchange houses in those countries, the increasing cost of ATM's may still be better than the alternatives.
And if that is not bad enough, posts over at Flyer Talk indicate that a number of major US banks are increasing their foreign ATM transaction fees to $5 per transaction very shortly. If they get you for $5 on each end plus 2%, ATM transactions get expensive overseas.
First the banks nailed credit card users, and now they are going after the ATM users. To avoid unpleasant surprises, check the current policies of your bank before heading overseas.
All of this has gotten me to increase the portion of my salary I get paid to me in cash here in eastern Europe rather than deposited in a US account.
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