Bank Account or Currency Exchange

Are you paying $107 a year to use a currency exchange? Would using a bank be cheaper? Or would it cost even more?

Let's say that you cash a $500 check each month. At a currency exchange, that would cost nearly $7. Buying 4 money orders will cost another $2. In one year, you would spend more than $100.

What if you have a checking account? And what if you are not careful with your account? You could be paying $330 a year.

A bounced check costs about $22. Banks will charge you an average of $5 for monthly service fees. You need to buy checks. They cost around $18 for 200 checks.

That all costs you about $28 a month. Or $330 a year. And that is if you bounce just one check each month.

If you bounce checks, having a checking account can be big trouble in your finances. You would be better off to use a currency exchange or a savings account than to bounce checks.

There is a way to cut those fees. Are you careful enough to avoid bouncing checks? Then you may want to have a checking account. If there is no bounced check, you would pay only about $6 a month. That includes the monthly charge and 8 checks you write. It would only cost $72 a year.

Suppose you have a savings account instead of a checking account. You buy four money orders from your bank and have a monthly fee. You would pay around $13 a month. That is $156 a year.

Shop around. You may find a bank that does free money orders with a savings account. That way you only pay about $5 a month. Can you keep the minimum balance in your savings account? Then you may not have to pay anything. And you may earn interest.

Here is some information you can use if you want to compare currency exchanges and banks on their fees and services.

Bank services are different from currency exchanges.

  • Your account may have a minimum monthly balance. If you drop below the minimum balance, you will pay higher fees.

  • If you close your account soon after opening, you have to pay about $16.

  • With the account, the bank may give you a banking card to use an ATM. There may be no charge if you use your bank's teller machine.

  • Banks also do money orders and wire transfers. Usually, customers pay about $2 for a money order. They pay around $20 for wire transfers. Non-customers pay twice as much as customers.
The main services currency exchanges provide are money orders, check cashing, and wire transfers.
  • If you buy a money order for less than $500, the average cost is 60 cents. They also pay your utility bills for the same cost.

  • You will pay about $1 to cash a check less than $25. Cashing a $100 check will cost about $2.

  • In most places, wire transfers are done by two companies: Western Union and Money Gram. Their prices are standard everywhere. To send less than $500, it would be smart to check out the prices of both companies. It costs about 5% of the total amount.
The right choice will save you money and time. Using this information will help you choose the right one for you.

Prepared by Soo Jung Lee, Intern, University of Illinois Extension.

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