No. 187Money3 minviews 76
Published by GK Library Annex
Why is the exchange rate you get higher than the one in the news?
The rate in the news is a base value, and banks add a fee on top. Even a "90% preferential rate" only discounts that fee
When you buy US dollars at a bank in Korea, the rate you pay is a little higher than the one reported in the news. The news figure is the "base rate" (maemae gijunyul), an average of what banks traded at, and customers are charged that rate plus a currency exchange fee.
The news rate is a reference value
According to the Bank of Korea, the base rate is the dollar exchange rate traded through foreign exchange brokers on the previous trading day, averaged and weighted by trading volume. Each bank then adds or subtracts a set amount from this value to decide the rates it offers customers.
That is why a bank's rate board shows several numbers. The rate for "buying cash" is higher than the base rate, and the rate for "selling cash" is lower. These figures vary slightly from bank to bank.
That gap is the exchange fee
The Korea Federation of Banks' foreign exchange guide explains that the difference between the base rate and the "cash buying rate" is the exchange fee. In its example, if the base rate is 1,070 won and the cash buying rate is 1,088.73 won, you pay 18.73 won per dollar, or about 1.75%, as a fee.
The fee rate differs by currency. For money that circulates widely in Korea, like the dollar, it is around 2%, but for Southeast Asian currencies with smaller volumes it was 4–12% at one bank as of 2018. So for a trip to Southeast Asia, exchanging into dollars first and then into the local currency on arrival can sometimes work out better.
What "90% preferential rate" really means
A "90% preferential exchange rate" does not mean the rate is cut by 90%; it means only the fee portion is discounted. In the example above, a 50% preference means you pay half of the 18.73 won, buying at 1,079.37 won. Even with a 90% preference, you cannot buy below the base rate.
The Korea Federation of Banks says that applying online or through an app can get you up to a 90% preference on major currencies. Airport exchange counters may apply different fee rates because of high operating costs such as rent, so it is a good idea to compare before you leave.
Selling leftover money costs again
If you change leftover dollars back into won after a trip, this time the "selling cash" rate, which is lower than the base rate, applies. Even if the exchange rate has not moved in the meantime, a fee is taken once when you buy and once when you sell, so if both sides are 1.75%, the round trip shrinks your money by about 3.5%.
Some branches do not accept foreign coins, so check in advance. Exchange only what you will use, and if you are planning another trip, simply keeping the leftover foreign currency is also an option.
The rate you pay is the base rate plus a fee, and a "preferential rate" only discounts that fee portion.
Notes and references · Korea Federation of Banks, Foreign Exchange Guide "Online Exchange". Example of a 1,070-won base rate, 1,088.73-won cash buying rate (1.75%) and 1,079.37 won with a 50% preference, plus the up-to-90% online preference. Base-rate definition from the Bank of Korea FAQ; the 4–12% figures are from one bank in 2018 and may differ now
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