# Any math majors out there ?



## Gatos (Aug 16, 2016)

I've had a minor revelation this morning and thought I would share it. Maybe someone can come to a different conclusion than I have.

Yesterday I walked up to an HSBC ATM (in Mexico) and used my Charles Schwab "Schwab One Brokerage" Visa debit card to withdraw 7000 pesos. Today I looked at the transaction online : I was reimbursed the 1.71 USD ATM fee charged by HSBC and my account was charged 361.46 USD. So those pesos cost me 359.75 USD.

Schwab has often said they impose no bank fees and reimburse ATM charges. That seems to be true.

When I visit the Visa exchange rate calculator and ask for yesterday's rate I get :

1 Mexican Peso = 0.051393 United States Dollar

Which jives with 7000 pesos * 0.051393 = 359.75

btw - the reciprocal of 0.051393 is 19.4579 (from a USD/MXN persepctive).

But here is the mistake I have been making for a long time. When I visit the Visa site I always enter the reciprocal transaction to see what the USD/MXN rate looked like. Now their website tells me :

1 United States Dollar = 19.609700 Mexican Peso

That isn't what I got yesterday...

What happened to that 0.1518 ( 19.6097 - 19.4579 ) ? As best as I can tell that is Visa's markup for the transaction - right around 0.75 %.

If you look at the Yahoo data for the 19th (it is this data that really contributes to the rate posted for the 20th) you see :

The open/close quote was 0.0511; the high was 0.0508 and the low was 0.0514. That is painfully close to the 0.051393 I received from the ATM !

This is all well and good for a simple $360 USD cash withdrawal - it only amounts to a $2.70 fee from Visa. But if you do that sort of thing often enough and it might add up. 

For larger transactions in the past I have always looked at the CURRENT interbank rate on Yahoo - then called Schwab directly and asked what they could give me. Not only do I get the benefit of their using the rate right then (which can't be any lower than the low for the day) - but they take a less than 0.75 % markup (depending).

Any thoughts - other than that I am a nut for dwelling on this ?


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## DiverSailor123 (Sep 17, 2016)

Your looking at bank to bank Electronic exchange rate transaction.. you are never going to get cash IN HAND at that rate.. Its a starting point..


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## Gatos (Aug 16, 2016)

DiverSailor123 said:


> Your looking at bank to bank Electronic exchange rate transaction.. you are never going to get cash IN HAND at that rate.. Its a starting point..


It is also known as the "mid market rate" or SPOT and it is midpoint between the BUY and SELL. It really is the only rate you and I (little people) have to work with. Now when I call Schwab to initiate a wire transfer the guy on the other end of the phone has the luxury of seeing the "spread" (as well as the depth of the book - if that is what it is called in the forex market) and is why he is smart enough to advise me - I'm going to put you on hold and see if we can do a little better for you 

BTW - apparently when expats have their SS monies wired to Mexico every 15th of the month (I think) they do BETTER than spot because the Bank of Mexico eats the difference (based on a recent conversation on a different thread).


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## DiverSailor123 (Sep 17, 2016)

Wow Gato you have been a fountain lately, and I mean that in a very positive way!



Gatos said:


> It is also known as the "mid market rate" or SPOT and it is midpoint between the BUY and SELL. It really is the only rate you and I (little people) have to work with. Now when I call Schwab to initiate a wire transfer the guy on the other end of the phone has the luxury of seeing the "spread" (as well as the depth of the book - if that is what it is called in the forex market) and is why he is smart enough to advise me - I'm going to put you on hold and see if we can do a little better for you
> 
> *BTW - apparently when expats have their SS monies wired to Mexico every 15th of the month (I think) they do BETTER than spot because the Bank of Mexico eats the difference (based on a recent conversation on a different thread*).


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## Gatos (Aug 16, 2016)

I can't confirm the SS exchange rates as we are not yet pulling from it - just going by the numbers someone recently posted here...

A little tidbit more - say you are planning on buying a house in Mexico. You might consider something like executing a forex trade to acquire pesos and having those pesos wired to your Mexican bank. If you are lucky there won't be any fees on either side. You can really save some big bucks...

Here is a link to Fidelity's fee schedule
https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/Brokerage_Commissions_Fee_Schedule.pdf

You will see that their markup ranges from 1 % to 0.20% (it would have to be a big house). Those markups are off the current spot we were discussing.

(I don't suggest using Fidelity - but it is an example). Schwab's rate structure is much simpler. Both institutions have advantages and disadvantages.


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