I think most of the travelers know the process of exchanging some of home currency into a foreign currency when they travel oversea, and then reversing the process when they’re back. Money changer is the one that provides currency exchange service. And, they will earn a significant amount in each trade by taking advantage of currency spreads.
The service fees are often masked by the exchange rates applied to currency transactions. We as a consumer can do some advance planning to ensure that we receive the best possible rate and pay less service fees for our money exchanges.
I have exchanged my home currency MYR500 into foreign currency SGD207.45 with the exchange rate of 2.41 two days ago. During that period, the money changer buying rate was 2.37 and I made some analysis on their charges for each trade. Based on my observation, I just can tell that the actual cost might be 2.39 in order to match their earning profit. So, basically the charges will be:
This also means that their service charge is about 0.5-1%. Do you know why? Let’s take my example below:
If we exchange MYR500 with the exchange rate of 2.41, we will get SGD207.45.
If we exchange MYR500 with the exchange rate of 2.39, we will get SGD209.20.
Thus, they might earn about SGD1.76 which equivalent to MYR4.xx. The percentage of charges would be MYR4 / MYR500 = 0.8%
However, I still do not know if we can exchange slightly better rate in Singapore Money Changer than in Malaysia. I need your opinions.