What is a Currency Exchange
A currency exchange is a business or financial institution that has the legal right to exchange one currency for another currency to its customers. A currency exchange may be a stand-alone business or may be part of the services offered by a bank or other financial institution. The currency exchange profits from its services either through adjusting the exchange rate or taking a commission.
Also referred to as a foreign exchange market and a bureau de change.
BREAKING DOWN Currency Exchange
The exchange rates that a currency exchange quotes are typically close to the spot rate, although the exchange will adjust this rate somewhat to ensure that it makes a profit on the transaction. Because the transaction is not conducted at the spot rate, and depending on the profit that the exchange wants to make, consumers may find that it is less expensive to incur ATM or credit card fees at the foreign destination, rather than use exchange services ahead of time.
Airports are a common place for currency exchanges where travelers purchase currency of their travel destination or exchange any excess money back to their local currency upon their return. Because airports are seen as the last port of call, the rates at airport exchanges will, in general, be more expensive than those at a bank in the city of departure.
Going cashless is becoming more common as some banks offer cards that can load multiple currencies on them with little or no fees. In addition, offshore ATM's are a viable option for those banking with a global bank. For example, HSBC ATM's are prevalent in New York, London, and most large Asian cities.
Tip: for those U.S. travelers to Cuba it is advantageous to exchange their U.S. dollars into euros or Canadian dollars before heading there because Cuba charges a 10 percent tax on tourists buying Cuban Convertible Peso (CUC) with U.S. dollars.