Friday, 10 September 2010

Rake-off or Commission

Rake-off or Commission?

When buying foreign currency no-one charges 'commission' these days, but everyone charges something for which there is currently no name, so let us call it 'rake-off'.

If you buy £100  worth of foreign currency at Thomas Cook and sell it back again you end with £81.13. I.e. you lose £18.86, or approximately 9.5% lost on buying and the same again on selling. Let us call that a 9.5% 'rake-off'  (Or 8.5% on buying and 11.3% on selling — see below.)

At The Post Office the same operation would leave you with £84.07. So you would lose £15.93, or approximately 8% both on buying and selling.

At Marks & Spencers they rake-off about 7% when you buy foreign currency, but if you take back to them the unused foreign notes they refund with no rake-off; i.e. at the same rate at which you bought from them (I had to telephone 0800 363 484 to confirm that this is the case, as their web-site is not clear.)

To make this even more clear, take Turkish Lira on a day when the international exchange rate fluctuates around 2. 35 to the GB pound:

Rake-off Rake-off
---Sell--- Buy-back Sell Buy-back
Thomas Cook 2.15 2.65 8.5% 11.3%
Post Office 2.173 2.585 7.5% 9.2
Marks & Spencer 2.188 2.188 6.9% 0 %

The high-street currency traders insist they take no 'commission'. I think they are dishonest. They make it quite difficult for the general public to spot what is going on, and as a result the 'rake-off' (or commission, to use the English term) is rising to absurd levels.

How stupid are we supposed to be?

Occidentis, MORPETH, UK.