Double exchange means you do not buy the local currency directly. You first buy a major currency such as US dollars at home, then exchange those dollars into local currency at your destination. You pay fees twice, yet it is sometimes cheaper.
Why two exchanges can cost less than one
Exchange fees (the spread) depend heavily on how widely a currency is traded. At home, banks usually offer good rates on major currencies like the dollar, euro or yen, especially with app discounts. Less-traded currencies such as the Vietnamese dong or Philippine peso often carry much higher fees.
In many Southeast Asian countries, however, US dollars are traded everywhere, so local exchange shops convert dollars at small margins. "Cheap dollars at home + cheap conversion abroad" can beat "one expensive direct exchange at home".
A simple example
These numbers are illustrative. If buying the local currency directly at home costs 7%, you lose about $70 on $1,000. If buying dollars costs 0.2% and converting them abroad costs 1%, the total is about 1.2%, or roughly $12.
When double exchange loses
- For currencies that are already cheap to buy at home, such as the euro or yen, a direct exchange is usually better.
- If the destination does not give good rates for dollars, the second exchange eats the savings.
- On small amounts the difference may be tiny, and hunting for a good exchange shop may not be worth it.
Tips
- In Southeast Asia, many shops pay better rates for clean, new $100 bills.
- City exchange shops usually beat the airport. Change only taxi money at the airport.