The exchange of dollars and euros has long become a common thing for many. Many bank clients periodically sell, buy and convert foreign currencies, but at first some of them confuse the concepts of “buying rate” and “selling rate”.
To understand why selling currency is cheaper than buying it, you need to understand what the exchange rate is, and on what principles it is formed. It is customary to call the exchange rate the value of the national currency, expressed in any convertible foreign currency, at a certain point in time.
Types of courses
The so-called official rate of the national currency, which in our country is set daily by the Bank of Russia, is formed on the basis of the weighted average price at the exchange auctions. It is calculated every business day and comes into force on the next calendar day after its establishment.
Banks performing foreign exchange transactions set their own foreign exchange rates against the ruble. At the same time, they are guided not only by the official rate of the Central Bank, but also by the structure of supply and demand that has developed in the market, as well as by their own needs in a particular foreign currency. If the official rate is set once a day, then the commercial rates of banks can change several times within 1 hour.
Commercial banks establish:
- purchase rate - the price at which the bank is ready to redeem a unit of foreign currency from the client;
- selling rate - the price at which the bank sells a unit of foreign currency to its clients;
- cross rate or conversion rate - the ratio of the value of 2 foreign currencies relative to each other.
How different courses relate to each other
Any bank is an organization created for the purpose of making a profit. That is why transactions with foreign currency are subject to a certain commission. The way it is calculated is similar to the mechanism for pricing goods.
Suppose a commercial bank purchases foreign currency on the exchange at the official rate. It is clear that this operation entails quite specific financial costs. To cover them, as well as to get the planned profit from the resale of currency to its clients, a commercial bank is forced to increase the value of a unit of foreign currency by a certain amount. Therefore, the bank selling rate for dollars or euros will always be higher than the rate set by the Bank of Russia.
When a commercial bank buys foreign currency from customers, it also incurs certain costs, for example, on the wages of cashiers and on utility bills for the premises where the exchange office is located. Therefore, the purchase rate of any currency will always be lower than the official rate.
For a bank client, the situation looks exactly the opposite. He sells currency to the bank at a lower rate than the official one, and buys it at a higher rate than the rate of the Bank of Russia. That is why the sale of currency for citizens and companies is cheaper than buying it from a bank.
