5 Currency Exchange Rate Myths

5 Currency Exchange Rate Myths

You Believe You Can Foresee Currency Drops.

That is, of course, not true. There is always an increase in price at a particular time of year. During vacations, it often refers to gasoline prices. Intuitively, this also holds for foreign exchange. Why wouldn’t currency exchange in Surrey raise their rates during peak tourist season to make more money?

The fact is that banks and other financial organizations add their profit margins to currency conversion rates based on the spot rate of a currency (its true worth in the financial world). Throughout the day, this number fluctuates a lot. Constant, rapid change is possible at any time of day or night. It is practically impossible to foretell how currency prices will move during the day. 

When You Exchange, You Fear You May Suffer A Loss.

It’s a common misconception that doing business always results in a financial loss. However, remember that you are not exchanging cash for this item. To have your currency swapped costs you money. The fact that money is readily available raises awareness of its true worth, yet it nevertheless follows the same rules as any other commodity. Consider the $125 cost of a store-bought table as an illustration.

The shop should have paid $125 for this table to resell it for that amount. They’ll add a margin and use that extra $25 to keep the business afloat. In a similar vein, money exchanges are not immune to these problems. We cannot provide our service if we acquire and sell currencies at the same rate as the spot market.

Currency exchange rates are affected by several variables, including but not limited to the location of the exchange office, the strength of the competition, the exchange’s standing in the community, and the company’s overall reputation. The airport is the best spot to exchange currencies because of how easy and accessible it is.

Because you can complete the exchange at the terminal before boarding the plane, you may relax and focus on other aspects of your trip preparation. Naturally, the most convenient services will cost more. A better deal could be found in a mall or street where currency exchange businesses compete for customers. 

You Believe Credit Cards Provide Better Rates.

Most consumers believe a credit card trade offers better terms than a cash trade. You likely use your credit card often and make a monthly payment. Most major credit card issuers also have excellent loyalty programs that give cash back, points, and other benefits for continued use. But did you realize that foreign exchange doesn’t function like that?

This is not the case at all; rather, the reverse. When you “purchase” cash, the transaction is treated the same as a cash withdrawal or cash advance. All purchases made with a credit card incur interest charges from when the card is used to when the balance is paid in full.

You Believe A Bank Should Provide You With The Online Rate.

False…We constantly consult Google to find information. You have probably already looked up the value of your currency in another currency and assumed that this would be the price you would have to pay.

Then, while entering the bank, you see that the selling price of the currency is more than the one you saw online and need clarification as to why. You could have written off the discrepancy to the bank’s commission charge. The reality is that the value of a currency on the market may be seen by checking the Internet.

You Assume That The “Higher” The Value Of A Currency, The More Expensive Its Purchases Will Be.

LIE… There are two interpretations of exchange rates. Either in the local currency or the foreign currency. In a Canadian bank, we may see 1.30 CAD for 1 USD, whereas in an American bank, we would see 0.70 USD for 1 CAD. There is no difference between the two rates other than the values expressed.

Many individuals will incorrectly assume that exchanging $1 Canadian for $1 US means losing 30 cents. The opposite is true. Prices in US dollars are often the same or even cheaper than those in Canadian dollars, as many of us are used to thinking. For instance, a popular video game system will cost CAD 599.99 in Canada but just USD 499.99 in the United States.

Because of the exchange rate of 1.20 Canadian dollars to 1 US dollar, there is a price differential of $100. When we include the ups and downs of international markets and the profit margins of financial institutions, we approach close to the initial purchase price. It would be the same with any other foreign money.

A loaf of bread that costs one pound sterling in the United Kingdom will set you back two dollars and fifty cents in Canada (which is almost equivalent). The buying power of one currency might differ significantly from that of another. You could believe you’re paying a premium for a currency, but then you remember that even though you came away with less money than you left with, everything still seemed cheaper in that nation.

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