I first came to Colombia 11 months ago, and $1 equaled about 2,000 pesos. Now $1 equals about 3,000 pesos. Since inflation has been low in the period, everything is about a third cheaper for me.

In the international baggage claim at Bogota’s airport, I saw a money exchange. As everyone should know, money exchangers make their profits from the difference between the prices at which they buy and sell currencies. Airport money exchangers usually have a huge spread between the two. Suckers change their moneys at airports. Pros use no-fee-worldwide ATM cards to get cash out at a much better exchange rate or a no-foreign-transcaction-fee credit card..

In the past, when free cellular data wasn’t so widely available, I would occasionally arrive in a country without knowing the fair exchange rate. In those cases, I would decide whether to use a money changer based on its posted buy/sell prices. In a developing country, the spread might be as little as 1% (I saw 0.3% spreads this summer in Serbia for exchanging euros), and in a rich country, the spread might be 3%.

Getting back to the Bogota airport, the spread was a hefty 9+% as the offers were 2,600 pesos for a dollar and 2,800 pesos to buy a dollar. But the scam was that they almost certainly wouldn’t have given you a dollar for 2,800 pesos as a dollar is currently worth 3,076 pesos. If I had had more than 75,000 pesos in my pocket, I would have tried to buy all the dollars they had for 2,800 pesos each. I’ll bet you a lot more than 2,800 pesos that I would have been turned away.

Bottom Line

If for some reason you can’t get free data from T-Mobile, and you’ve forgotten to look up the exchange rate before entering a country, just checking a money changer’s spread is usually a good plan. However some exchange houses that know that they will only get customers on one side of the transaction may post fake prices on the other side of the transaction. Caveat exchanger.

 

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