a buck, a yen, a mark, or a pound


Hungary is a developing economy.  The favorite Hungarian national sport (after football) is arbitrage.  And most of the world’s hedge funds appear to think that it is good exercise to try to break the Hungarian economy (sort of the way a boxer squeezes a small rubber ball absent-mindedly).  As a result, there are banks pretty much everywhere, of every national origin, even Hungarian.  The former Hungarian national bank (OTP), in general, has the best exchange rates and the least entrepreneurial approach to banking.  This is their home, they don’t think it’s the Wild West, and they aren't trying to break the bank and run...the are the bank. 

They also speak very little English, but even I can get by.

Still, unless you absolutely need a local bank, all banks are best avoided, and the ATM is the means of choice to convert funds.  I am most familiar with conversion among dollars, HUF (Forints, the Hungarian currency, not to be confused with Florins, the Italian currency popularized by Shakespeare), and Euros.  There is a good deal of fluctuation in the value of the three currencies, in part because the dollar and Euro have been maneuvering around each other for the past several years (which is a euphemism for saying that the dollar’s been in a nosedive) and in part because the Forint is simultaneously subject to a good bit of inflation and to caps on how much it can vary from the Euro if Hungary is to have any hope of converting entirely to the Euro in 2010 (which it probably doesn’t even despite its relative stability against the Euro).

Having said that, converting dollars or Euros outside Hungary, especially to relatively unusual currencies like HUF, can be a challenge.  Starting with dollars, banks in the USA charge ridiculous rates even to exchange to Euros.  Citibank charges about 10% in New York, for instance.  The exchange booths at airports are even worse.  In NYC, when the Euro midpoint was $1.30, the exchange booths were charging $1.65/Euro.  In Budapest the exchange booth was charging about 10% to exchange dollars into HUF.  American banks won't even consider exchanging anything into Forints.

There are many small exchange bureaux on the streets of Budapest and they all post their current rates; it pays to shop around for the one with the best rates, they can vary a good deal.  They all post buying and selling rates with the unstated midpoint in the middle.  A quick way to pick the best exchange rate is to find the one with the smallest difference between the Buy and the Sell price for the currency you want to exchange. 

Alternatively, when converting into HUF, calculate the midpoint by adding the Buy and Sell prices and dividing by 2 (you only need to do this once, it will not vary appreciably from bureau to bureau) and then look for the price closest to the midpoint among the various bureaux you pass. 

Banks in Hungary charge exorbitant rates for cash conversions (they charge much less for transfers within the bank if you have an account, but that’s not usually an option). 

The guidebooks talk about scam artists who sidle up to people on the tourist streets and offer to exchange funds at miraculous rates; I have never seen this and doubt the game still exists, but if someone should make you an offer of that sort you’d be wise to decline.  The exchange bureaux are reliable and fair, and offer better rates for larger sums.  They are, of course (hah! I say  'of course' but it took me decades to figure this out), not simply collecting the spread between their buy and sell rates, they’re speculating in funds, holding on to currencies they think are on the rise and selling off currencies they think are tanking.  So there’s often a fair amount of play among them in their posted rates.

Using ATMs for the conversion is often your best way to convert funds into HUF.  The cash machines in Budapest all operate by exchanging at the midpoint and adding no surcharge locally.  But your home bank will almost certainly add a surcharge at its end. 

All American banks that I am aware of now charge a surcharge for using their ATM cards internationally.  My bank, Citibank, charges 3%, but offers an incredible deal if you are a Citibank customer and use the ATMs in the Budapest Citibank branches (there are only two), where they charge nothing at all and exchange at the midpoint.

Check with your bank about their current practice before you travel.  It pays to do so every time you travel…they change every couple of years and sometimes more frequently.

Using credit cards places you at the mercy of the whims of your credit card companies.  They vary a lot from company to company; with the exception of CapitalOne, all of mine (including American Express) are presently quite bad deals.  You should check with your card company or companies.  At the time I write this, CapitalOne offers a credit card that exchanges at the midpoint with no extra charges.

Major international corporations (like car rental companies) have figured out a way to steal this sub rosa profit from the credit card companies: they bill your card in dollars, but impose a surcharge themselves for the conversion; when we rented a car from Avis recently, the mandatory surcharge was 8% and was never mentioned…a conversion rate was simply quoted in fine print in the contract and when I did the math it turned out to be just over 8% above the midpoint.

Take a look at: http://www.travelandleisure.com/articles/reaping-the-ripest-rates if the topic interests you.  The system is described in detail and with clarity, but their raw data is very out of date.  For the data, go to: http://flyerguide.com/wiki/index.php/Credit/Debit/ATM_Cards_and_Foreign_Exchange

Forints come in many denominations.  Do try to avoid mixing up the 1000 HUF note with the 10000 HUF note, or the 2000 with the 20000.  It’s a mistake I make constantly.  People are very kind and point it out.  They are not so kind that they don’t chuckle at me patronizingly when they do so.  And I am not so stupid as to believe that every time I’ve done it someone has pointed it out to me…those other times I just lost the money.

If you find the exegesis here tiresome and confusing, check out the far more detailed (and perhaps more current) source noted above:



Converting currency, especially to relatively unusual currencies like HUF, can be a challenge.  Starting with dollars, banks in the USA charge ridiculous rates even to exchange to Euros.  Citibank charges about 10% in New York, for instance.  The exchange booths at airports are even worse.  In Budapest the airport exchange booth was charges about 10% to exchange into HUF. The ATMs are by far the best deal, unless your home bank adds a whopping surcharge.