Back of Napkin Conversion Rates:
Lira to Dollar – .8x
Dollar to Lira – 1.2x
Euro to Dollar – 1.6x
Dollar to Euro – .63x
Euro to Lira – 1.8x
Lira to Euro – .55x
For you finance people, this back-of-napkin presents an arbitrage opporunity. For example, 1 Euro is 1.6 dollars, which is about 1.92 Lira. Converting from Euro to Lira directly gives 1.8 Lira. This means that everyone should be happy that our budget conversion table is not how international finance works, or else Gordon Gecko would be the presumptive Republican Nominee with a war chest of about $150 trillion dollars, or, as we in CT Inc. would calculate, 1.8 trillion Lira.
A debit card charge in Lira will be translated to dollars at the current rate of exchange. However, BofA charges a 3% service charge. Accordingly, a round of drinks costing 40 YTL – $32 dollars – actually costs $32.96 – 39.55 YTL. Wait….is that right? Frick!!!
The second option is to withdraw from an ATM. There is $5.00 charge plus a 1% transaction cost.
For this, I will use the PROPER conversion rate ($1 = 1.24 YTL). Accordingly, it will be cost effective if we withdraw in increments of more than $250. 1.03x equals (can’t find the equal sign on this computer!) 5 + 1.01x.
This is all fine and good if you are making your budget in one currency, say dollars. All you have to do is include the finance charge in the currency exchange, and remember the conversion rate when you withdrew your money. For example, the first $300 withdrawal was at an exchange rate of 1.22 with a 1% finance charge and a $5.00 fee. This makes the REAL converstion rate: 366/308 (300 plus 3 plus 5), 1.19 or .84. This can be repeated in YTL or Euro or whatever.
The problem starts when you start jumping around from country to country (I know, woe is us) becuase then you have to estimate how much money will be used. We didn’t and here is what happened: Withdraw in Euro – in Greece, then go to Turkey and spend Euro based on whatever currency rate the local vendor decides to give. At this point, to be exact in the budget, I would have to use the original converstion rate (dollar to Euro) and then then convert from the local vendor rate (Euro to Lira). For example, if I get 1.58 dollars for every Euro, and I get 1.8 Lira for a Euro, from THIS vendor, then an item that costs 34 YTL in REALITY costs 29.84 dollars. But, if I had estimated properly and gotten my CORRECT exchange rate, then the item would have only costed me 28.56 dollars.
If anyone is still with me, you’ll see my problem: Do I remember each vendor’s exchange rate, or just go with the napkin conversion? I went with with the napkin conversion, and went to a bar and used all my Euro as fast as possible.
So in the end, I guess it worked out…. 🙂