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Check rates, banks before exchanging foreign currency for dollars

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By Thomas Olson
Thursday, April 30, 2009

Advice when wiring foreign currency into the United States to change into dollars: Caveat emptor. In English, let the buyer beware.

There is little or no regulation on fees attached to converting foreign money into dollars (or the other way around). And there is no regulation of the exchange rates quoted by different banks, experts say.

Joe Winklmann Jr. of the East End — not an expert — learned the hard way.

A plumbing and heating contractor, Winklmann recently inherited a chunk of money from a great uncle in Germany. The relative willed about 50,000 euros to Winklmann, and the same amount to his brother and four sisters.

The money was wired to the United States on the same day, April 8 — but the siblings did not each wind up with the same amount of dollars, said Winklmann. Each paid Germany a "debt duty tax" and a fee to the German bank, which left them with 44,680 euros coming to the states.

Winklmann and his sister in South Fayette, who each bank with PNC Bank, received $56,712. But a sister in Connecticut received $59,068, he said.

"Rates will differ from bank to bank, but it's usually a minor difference," said Rob Rowe, vice president and senior counsel for the American Bankers Association in Washington.

"I've been with PNC since about 1973, and I'm being treated like a $50 customer," said Winklmann, angered over the $2,356 difference. "Me and my sister are only two people, and PNC probably deals with hundreds of these things every week."

PNC Bank spokesman Fred Solomon said the bank cannot comment about specific customers.

"The rates PNC charges on foreign currency transactions are fair and customary," Solomon said. That includes PNC's $15 wire transfer fee.

About a week after Winklmann protested to PNC about receiving the less favorable rate despite being a longtime customer, the bank added $2,108 to his account and to his sister's account, he said.

"If you must exchange cash, it's good to check around to see what the rates are," said the ABA's Rowe.

"Most banks will build in a little bit of a cushion," said Rowe, referring to the spread between the retail rate and the wholesale rate.

The wholesale rate is the rate banks charge one another to exchange currencies. It fluctuates every day, and several times during the day, according to currency markets.

The wholesale rate is the rate published on Web sites, such as, and in many daily newspapers. The Tribune-Review, for instance, publishes foreign exchange rates for the major currencies each day except for Mondays.

But the retail rate is what the consumer receives, and it is set by each bank. The spread between the two rates represents the profit the bank earns for making currency exchanges.

Winklmann and his sister received $1.269 for each euro on April 9, for instance, while the published wholesale rate that day was $1.327.

"The published rates you read in the paper are never the rates a consumer gets," said Dennis Unkovic, a well-traveled corporate attorney Downtown. "Banks are trying to make money any way they can these days."

Rowe said banks might provide a more favorable rate for a customer who is converting a foreign currency into millions of dollars, rather than thousands. But the only check on banks charging too much is the marketplace, he said.

"If you have banks whose rates are way out of line, they are going to lose business," Rowe said.

Additional Information:

Advice for travelers

People preparing to travel overseas would do better to skip their local bank and exchange their dollars for foreign currency once they arrive overseas, experts say.

'We tell people, don't worry about getting travelers checks. Just take your cash and swap it over there,' said Arthur Deluth, president of DeluthTravel/American Express, a seasoned travel agent in Atlanta.

Foreign banks' exchange fees tend to be 20 percent to 30 percent lower than U.S. banks, he said. Plus, foreign banks usually use the most up-to-the-minute exchange rates, meaning you'll get the fairest rate available, he said.

The cheapest means of exchange is to use a major credit card and withdraw your foreign currency from an automated teller machine. Even with paying an ATM fee, you will come out ahead, said Deluth.

To be safe, experts advise taking at least $100 (U.S.) with you, so that you can make it to that ATM or foreign bank or currency exchange.

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