A money changer is a business that converts one currency into another for a fee. If you’ve ever traveled internationally and needed to swap dollars for euros, pounds, or yen, you’ve likely used one. Money changers operate as storefronts near tourist areas, as kiosks inside airports, and increasingly as online services. They exist because most everyday transactions abroad require local currency, and not every traveler has easy access to a bank that handles foreign exchange.
How Money Changers Work
The core transaction is simple: you hand over one currency and receive another. What makes it a business is the exchange rate the money changer offers you, which is never the same as the “mid-market” or “interbank” rate you’d see on Google or a financial news site. That interbank rate is what large banks charge each other when trading currencies in bulk. A money changer buys currency from you at a lower price and sells it to you at a higher price, pocketing the gap.
This gap is called the spread. Say the interbank rate for U.S. dollars to euros is 1.00 to 0.92. A money changer might sell you euros at 0.89 per dollar and buy euros from you at 0.95 per dollar. That difference on both sides is where the profit comes from. Some money changers also layer a flat service fee or commission on top of the spread, which means you’re paying twice: once through a worse exchange rate and again through an explicit charge.
Larger exchange services update their rates multiple times per day to stay aligned with shifting currency markets. Holding foreign currency carries risk for the business. If a money changer stockpiles a currency that drops in value overnight, it loses money, so the spread also serves as a cushion against that volatility.
Where You’ll Find Them
Money changers show up wherever travelers need cash, but the location you choose has a real impact on how much currency you actually get.
- Banks and credit unions: Typically the best deal. A bank’s exchange rate usually includes a markup of about 2 to 3 percent over the interbank rate, and many waive service fees for account holders. Some banks let you order foreign currency in advance and lock in the rate, protecting you if the market moves before your trip.
- Dedicated storefronts: Independent money changers in city centers or commercial districts can offer competitive rates, especially in areas with high competition. Legitimate ones display current exchange rates prominently and provide detailed receipts. They operate from permanent locations rather than temporary stands.
- Airport kiosks: The most convenient option and almost always the most expensive. Airport exchange counters commonly mark up rates by 8 to 10 percent or more above the interbank rate. On a $1,000 exchange, that could mean receiving only $820 worth of foreign currency at an airport kiosk compared to roughly $920 at a bank. Many advertise “no fees” but compensate with inflated exchange rates.
- Hotel desks and tourist-area stands: Similar to airports in terms of cost. The rates tend to be poor because these locations serve a captive audience of travelers who prioritize convenience over price.
- Online currency services: Companies like Travelex let you order foreign cash online for home delivery or airport pickup. Rates are generally better than airport kiosks but not as favorable as a bank, and delivery charges apply.
The Real Cost of Exchanging Money
The sticker price of an exchange is rarely just the posted rate. To understand what you’re actually paying, compare the rate you’re offered to the current interbank rate, which you can look up on any financial website or currency converter app. The percentage difference is your true cost.
For example, if the interbank rate gives you 920 euros for $1,000 and a money changer gives you 880 euros, you’re effectively paying $40 in hidden costs, or about 4.3 percent. Banks typically keep this markup in the 2 to 3 percent range. Airport kiosks and tourist-area exchanges routinely push it past 8 percent, and some tack on a separate commission that further shrinks your total. Bankrate estimates that banks beat airport rates by 5 percent or more on the same transaction.
Before exchanging, always ask two questions: what is the exchange rate, and is there an additional fee or commission? If a money changer advertises a rate that seems dramatically better than competitors, treat it as a red flag rather than a bargain.
Regulations and Licensing
In the United States, money changers are classified as money services businesses (MSBs) under federal law. Any business that exchanges currency in amounts greater than $1,000 per person per day must register with the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Treasury Department. Registration must be renewed every two years.
These businesses are also subject to the Bank Secrecy Act, which requires them to file reports on suspicious activity as part of the government’s efforts to combat money laundering and financial crime. MSBs must maintain a list of their agents and update it annually, including details like transaction volumes and banking relationships. Failing to register can trigger civil penalties of $5,000 per day of violation and potential criminal prosecution.
Most states impose their own licensing requirements on top of the federal rules. When you walk into a money changer, look for a posted license or registration number. A legitimate operation will have one displayed. If you don’t see any credentials and the business operates from a temporary setup or offers rates that seem too good to be true, find another option.
Tips for Getting a Better Rate
Your local bank or credit union is almost always the cheapest place to exchange currency if you plan ahead. Order the foreign cash a few days before your trip, and you’ll avoid the desperation markup of airport kiosks entirely. Many banks stock common currencies like euros, British pounds, and Canadian dollars and can have less common ones ready within a few business days.
If you’re already abroad and need to exchange cash, look for money changers in commercial districts rather than directly outside tourist attractions. Competition between nearby exchange shops tends to push rates closer to fair value. Compare at least two or three posted rates before committing, and always confirm whether a commission applies on top of the quoted rate.
Using an ATM abroad with a debit card that charges low or no foreign transaction fees is another practical alternative. You’ll typically get a rate close to the interbank rate, though your bank may charge a flat ATM withdrawal fee. For many travelers, a combination of ordering some cash before the trip and using ATMs on arrival covers most situations at a lower total cost than relying on airport or tourist-area money changers.