How did this currency exchange work?
I recently was given some Japanese yen as a gift from family. I found myself in an United States airport with some extra time, so I went over to a currency exchange booth to exchange the yen to USD. A quick Google search showed me that my 50,000 yen was worth about $450. I expected after their exchange rates and fees, I might get $400 or so. I was surprised to see that I was given much more - about $540. The $10 service fee ended up giving me more money, not less.
How did this work and why did this happen?
Best Answer
Airport changers are rarely offer good value but this time they did. In order to make money they have a BUY and SELL rate. The difference between these two is called the SPREAD and the real exchange rate is in between the two values, commonly but not necessarily in the middle.
What happened is that they gave you the SELL rate which means that the transaction is setup to give you Yens in exchange for US Dollars. That rate is computed to be lower than the exchange rate, so that they end up with some profit from your transaction. Had they given you the BUY rate, you would have gotten less and it would have worked in their favor, but it didn't since you got the wrong rate.
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