Which bank is better for you as the traveller to:
1. exchange home currency H$ to a foreign currency F$, or
2. exchange F$ back to H$ ?
1) Bank 1 rate:
Sell 1.6021 (1.5821)
Buy 1.4954 (1.5039)
2) Bank 2 rate:
Sell 1.5642 (1.5525)
Buy 1.5218 (1.5234)
Transact in home currency H$,
Sell: the shop sells F$ to you
Buy: the shop buys F$ from you
In Bracket means (Travel Cheque exchange rate)
Calculate diff% = (sell – buy) / avg %
avg= (sell + buy)/2
If diff% < 3% => bank rate reasonable.
1/2 diff% = means one-way transaction fee
(either buy or sell) that you will lose in exchange
Bank 1: diff%=6.88% > 3%
=> 1/2.diff% = 3.44%
Every $100 (from H to F or vice versa) lose 3.44.
If buy F then convert back to H immediately (double conversions) => lose 3.44 x 2 = $6.88.
Bank2: diff% = 2.78% < 3%
=> good exchange rate.
Note: Traveller check Buy rate always higher than cash Buy rate,
because bank does not have to hold the actual cash. It is costly for
the bank to ship out the cash when a large amount has been collected.