A few years ago, passing by a currency-exchange shop, I wondered how long it would take to lose all my money in commissions and fees by trading cash back and forth between different countries’ bills and coins. I was curious, but not curious enough to lose my own money. Last summer, though, I persuaded my bosses to give me $100 to try it, and my colleague Christine Laskowski persuaded the manager of a New York City currency-exchange shop to let us film the experiment.
On a warm August afternoon, we headed to Best Value Currency near Times Square to spend a few hours and a crisp $100 bill with Viran Patel. We left cash-poor but rich in knowledge of what currencies around the world look like, what kinds of trades cost the most money and how many trades it would take to complete our money-losing mission. You can see how it turned out in the video above and the table below.
| CURRENCY EXCHANGE | |||||
|---|---|---|---|---|---|
| STEP | FROM | TO | COMMISSION | LOSS | REMAINING MONEY |
| Start | $100.00 | ||||
| 1 | U.S. | U.K. | 2.41% | -$2.22 | 97.78 |
| 2 | U.K. | U.S. | 4.77 | -4.20 | 93.58 |
| 3 | U.S. | EU | 3.01 | -2.73 | 90.85 |
| 4 | EU | U.S. | 4.15 | -3.60 | 87.25 |
| 5 | U.S. | Bangladesh | 5.07 | -4.01 | 83.24 |
| 6 | Bangladesh | U.S. | 11.08 | -7.89 | 75.35 |
| 7 | U.S. | Brazil | 12.08 | -8.07 | 67.28 |
| 8 | Brazil | U.S. | 13.56 | -7.98 | 59.30 |
| 9 | U.S. | China | 4.89 | -2.21 | 57.09 |
| 10 | China | U.S. | 22.08 | -8.17 | 48.92 |
| 11 | U.S. | Mexico | 5.52 | -2.10 | 46.82 |
| 12 | Mexico | U.S. | 21.33 | -6.69 | 40.13 |
| 13 | U.S. | Morocco | 4.98 | -1.03 | 39.10 |
| 14 | Morocco | U.S. | 11.13 | -2.07 | 37.03 |
| 15 | U.S. | Japan | 4.89 | -1.47 | 35.56 |
| 16 | Japan | U.S. | 13.82 | -3.63 | 31.93 |
| 17 | U.S. | Saudi Arabia | 5.01 | -1.47 | 30.46 |
| 18 | Saudi Arabia | U.S. | 17.63 | -4.40 | 26.06 |
| 19 | U.S. | Colombia | 7.86 | -1.89 | 24.17 |
| 20 | Colombia | U.S. | 31.94 | -5.81 | 18.36 |
| 21 | U.S. | South Africa | 9.68 | -1.55 | 16.81 |
| 22 | South Africa | U.S. | 7.03 | -1.04 | 15.77 |
| 23 | U.S. | Canada | 0.59 | -0.09 | 15.68 |
| 24 | Canada | U.S. | 6.60 | -0.96 | 14.72 |
| 25 | U.S. | UAE | 4.99 | -0.68 | 14.04 |
| 26 | UAE | U.S. | 21.95 | -2.45 | 11.59 |
| 27 | U.S. | Hong Kong | 5.00 | -0.32 | 11.27 |
| 28 | Hong Kong | U.S. | 28.21 | -1.42 | 9.85 |
| 29 | U.S. | Thailand | 4.74 | -0.05 | 9.80 |
| 30 | Thailand | U.S. | 8.98 | -0.10 | 9.70 |
| 31 | U.S. | Eastern Caribbean* | 5.01 | -0.19 | 9.51 |
| 32 | Eastern Caribbean | U.S. | 5.25 | -0.18 | 9.33 |
| 33 | U.S. | Kenya | 5.01 | -0.25 | 9.08 |
| Final | Kenya | U.S. | 21.95 | -0.88 | 8.20 |
We managed to buy and sell 17 currencies from Europe, Asia, North America, South America, Africa, the Middle East and the Caribbean. We ended up with $8.20, not enough to buy any other currencies but enough to buy a pizza at a 99-cent-slice place around the corner. The other $91.80 went to Patel, but never in a flat fee. Instead, he made money — about $38 per hour just from us over the two hours and 26 minutes from first trade to last — in commissions.1 That’s the gap between the value of the money we gave him in each transaction and the value we got back in the currency we were buying. And it turns out, the size of those commissions varies a lot among currencies.
Like many stores, Patel’s doesn’t let customers trade between two foreign currencies. That means that after each purchase of a non-U.S. currency, we had to sell it back for dollars in order to move to the next currency. We took our biggest losses when we were buying dollars, particularly with less-popular currencies, because those transactions left Patel with cash that he might be stuck with for a while. Buying Canadian dollars cost us a commission of less than 1 percent, but we took a haircut of over 31 percent when selling Colombian pesos.
One factor that slowed us down: Patel didn’t have exact change in any currency. So, for instance, we bought 70 British pounds with $100 and got $5.53 in change because he didn’t have the equivalent amount in U.K. currency. How much he had of each currency, and in what units, determined the remainders left after the trades.
To learn more about exchanging currency, we also read about currency exchanges and talked to financial experts. They said Best Value probably doesn’t offer the best value — a credit card with no foreign-transaction fee has a better rate — but it certainly doesn’t have the worst, either. It’s in an area rich with both customers (tourists) and competitors, factors that encourage high trading volume and keep prices relatively low, according to Greg McBride, chief financial analyst with the financial publisher Bankrate.com. And when you just want a little cash, “mom-and-pop stores in city centers” can be much better than ATMs that charge a flat rate, McBride said.
“The rule of thumb is, the less competition that exists, the more you will be taken advantage of,” said Odysseas Papadimitriou, CEO of WalletHub, a financial advisory website.
If you want to go to Best Value yourself, you won’t find it in Times Square. Shortly after our experiment, the business moved to a location near Penn Station, a few blocks to the south. The move was driven by a different kind of market: New York’s unforgiving rental market. Patel said business was strong but not strong enough to cover a rent increase at the Times Square location, so he was moving to a much smaller one.
Video featuring Carl Bialik and Viran Patel. Camera and edit by Tony Chow, produced by Christine Laskowski.