To avoid paying a usurious interest rate to a money changer, it is recommended that those who convert foreign currency should do one of two things. Either:
Ask your overseas bank to set up the ability to send wire and/or ACH transfers so that you can wire or transfer money to your money changer instead of writing a check to them. ACH (Automated Clearing House) transfers are similar to wire transfers but are less expensive. ACH transfers are processed like a physical check but are done so electronically.
Setting this up with your bank may require a physical trip to the overseas bank, but more often than not, it can be arranged online. By wiring or transferring foreign currency via an ACH transfer to your money changer instead of presenting to your money changer a physical check, you can avoid the 1% or bigger fee the money changer will charge you.
The money changer will not have to advance any money to you against your check and he will bear a lower cost in the processing of your check. That means greater savings for you. Of course when you do this, be wary of the exchange rate your money changer is offering you. Money changers like to make a certain amount of money on each transaction whether it be in check processing fees or in the exchange rate itself.
Don’t be misled to think that you are saving money on the check processing fee when you are in fact losing money on the exchange rate. Be a well informed consumer and compare the exchange rates of different money changers.
You may want to negotiate with the money changer for a better rate by telling him that you do not need immediate cash in return for your checks.
Tell your money changer that you are willing to wait for your foreign currency check to clear and be processed before coming to pick up your shekels. Don’t be scared of the wait time. A money changer clears foreign checks much quicker than banks do, and you should not have to wait that long (generally no more than 3-5 business days) for your check to clear.
If your money changer is a reasonable businessman, he should be happy to lower the fee he charges you to process your check if you agree to wait for your check to clear.
A money changer who advances immediate cash to his customers in return for their checks takes the risk that his customers’ checks may bounce, bears the costs of advancing his customers money prior to their check clearing, and pays additional processing costs in order to advance cash to his customers. The money changer charges his customers a check processing fee for bearing these risks and costs.
If the consumer is causing the money changer to avoid risk and save money, the money changer should be more than happy to reciprocate and lower his check processing fee. If the money changer is unreasonable and refuses to do so, perhaps you should consider taking your business elsewhere.
Develop the Mindset that Checks Take Time to Clear
In my opinion, consumers need to get out of the mind-set that they need immediate cash for their overseas checks. No consumer demands this from an institutional bank and accepts the fact that checks take time to clear. Why should money changers profit by charging ridiculously high interest rates to consumers who don’t know that they can expect and demand better? It is a shame that tons of money is being wasted by customers just for a matter of days that it takes to clear a foreign currency check.
The banking industry is fairly sophisticated nowadays with money moving fairly quickly. Israeli banks are slower than other western banks in processing international wires, but waiting several more business days may be worth it if you can avoid voluntarily paying a rate of 52% per annum.