(Dinar Recaps Note: This is an EXCELLENT post that we feel worthy of copying for future reference.) A Recaps repost from 12-24-11
DISCLAIMER: Like any other post on any Forum, this post is for informational purposes only. It is not legal, tax or investment advice. The only advice I can provide is that everyone do their own due diligence and seek advice from trustworthy licensed professionals to do with tax, legal, accounting and/or investment matters.
DEALING WITH A BANKER - The Exchange of Exotic Currencies into US Dollars - By ECOE OOMF Forum
Dear Dinar Enthusiasts,
Most everyone has heard the horror stories to do with the “Spread Fees” Banks charge to exchange (buy or sell) currencies, especially with what is known as ‘Exotic Currencies’ such as the IQD. So let’s get right to it...
Dealing with a Banker
- How to Get “Spread Fees” Waved From Exchange of Exotic Currencies into Dollars -- It’s no secret that Banks charge fees for services rendered...
- Like any Business it is simply one of the ways Banks make money.
Read More Link On Right
When it comes to foreign currencies, Bank Personnel will always tell you “We will not charge you a fee if you have an account with us” but that isn’t exactly the entire truth, because Banks actually have two (2) levels of fees they charge for services rendered.
These 2 fees are:
1) - Fees charged to the Public who do not have an account.
2) - Fees charged to their Customers who do have an account.
Customers do not have to pay the fees that the Public pay, whereas the Public have to pay both the Public fees and Customer fees.
Some of the fees Customers are accustom to not being charged are on services like obtaining a Bank-drafted Money Order or Cashier Check to pay someone via a method of securing funds for the recipient, free use of the Bank’s Notary to validate documents, cashing of a paycheck or government check, etc.
All of these ‘services’ have a fee to the general Public because they are not an account holder.
However, when it comes to something like exchanging currency from another Country into US Dollars, the Public is charged the Service Fee of around $15 as well as the Spread Fee on each unit of the currency exchanged.
When Bank Personnel tell you “We will not charge you a fee if you have an account with us” they are talking about that $15 service fee only.
What is a spread fee?
A spread fee is what a Bank will charge you to exchange another Country’s currency into the currency used in the Country to which you are located.
For these examples, we will use the US Dollar (USD) as the currency and USA as the Country in which you are located, and the Kuwaiti Dinar (KWD) as the foreign currency being exchanged for or into US Dollars at a US Bank.
The KWD is considered to be an “Exotic Currency” just as is the Iraqi Dinar (IQD), whereas currencies such as the Canadian Dollar (CAD) is not considered to be on the exotic list of currencies in the USA (and visa versa), the CAD is known as a “Popular Currency” and the spread fees reflect the difference on these two currency classifications greatly.
At the moment I wrote this, one CAD dollar (as listed at xe.com) was valued at $1.02015 USD, and the KWD was valued at $3.59712 USD.
Using the Wells Fargo Bank Web site currency chart at http://www.wellsfargo.com/foreignexchange (Click on “ORDER FOREIGN CURRENCY then click on the TODAY’S RATES Tab to access the rates page and charts) we can see that they will ‘sell to you’ CAD and KWD (Click on the ALL CURRENCIES Tab to see the KWD), and it is easy to calculate what the spread fees are using this page and comparing the rates to the actual value of the currencies shown at: http://www.xe.com
Again, at the moment I wrote this, one CAD dollar (as listed at xe.com) was valued at $1.02015 USD, and the KWD was valued at $3.59712 USD, and on the Wells Fargo chart these two currencies are listed at what they will sell them to you at; 1- CAD at $1.0232 USD and 1- KWD at $4.0846 USD
1- CAD at $1.0232 USD minus $1.02015 USD (actual value) = $0.00305 USD (Spread Fee)
1- KWD at $4.0846 USD minus $3.59712 USD (actual value) = $0.48748 USD (Spread Fee)
See the difference?
Wells Fargo will charge you $0.003 US-Cents (under 1/3 of a US-Cent) to buy 1-Canadian Dollar from them -- Wells Fargo will charge you $0.49 US-Cents to buy 1-Kuwait Dinar from them.
At smaller or State Only Banks, these Spread Fees are even greater; for example, when the First Convenience Banks in Texas were buying and selling the KWD currency the spread fee they were charging was about $0.60 US-Cents to both Buy and Sell the KWD through them, and the spread fee they were charging was about $0.06 US-Cents to both Buy and Sell the CAD through them.
This is part of the reason you want to deal with the Big-4 Banks instead of the smaller or State-only banks.
The Big-4 Banks are Bank of America (BOA), J.P. Morgan Chase (Chase), Wells Fargo (WF), and Citibank (Citi).
Upon revaluation of the IQD most expect the value will be close to the KWD, so let’s start doing some math with the Wells Fargo $0.48748 US-Cent Spread Fee and for example purposes let’s say that 1- IQD revalues at $3.60 USD...
If you have 100,000 IQD, to exchange that many IQD with a spread fee of $0.48748 US-Cents per 1-IQD you would be paying $48,748.00 to Wells Fargo to change your IQD into USD - That’s $487,480.00 in Spread Fees per 1-Million IQD!
100,000 X $3.60 = $360,000.00 (Nice Profit for You!)
100,000 X $0.48748 = $48,748.00 (Nasty Bank Fees!)
You receive $311,252.00 after paying the Bank’s Spread Fees...
- This is also the number you will be taxed on.
None of this is held as secret from the public, except when or if any one given Bank Manager decides to keep it a secret from you.
It is these ‘Spread Fees’ that you can get some Banks to forgive or cancel - But only if you ask them to forgive them.
NOTE: The United States Treasury (UST) also charges a spread fee on foreign currency exchanges done at all Banks, and Banks can NOT forgive or cancel that spread fee. The UST spread fees are between 1% and 1.4% - That equals between $0.036 cents and $0.0504 cents using the $3.60 IQD example above.
At $3.60 per 1-IQD, 100,000 IQD = $360,000.00 X $0.036 (1%) = $3,600.00 (UST Spread Fees)
At $3.60 per 1-IQD, 100,000 IQD = $360,000.00 X $0.0504 (1.4%) = $5,040.00 (UST Spread Fees)
Certainly a lot nicer than paying almost $50-Grand in Bank’s Spread Fees huh?
This is where we want to save - Taxes are inevitable, so do not look to reduce the taxes, look to reduce the spread fees that banks charge. This is where you will save money, and here’s how you do it...
When I spoke with my Banker friend about the IQD about 2-weeks ago, he was completely open and honest about everything, no reservations whatsoever.
He is a Bank Manager at one of the Big-4 Banks, and he has also invested in buying IQD.
He is a really nice guy that only wants to help people and be the best at serving his Customers that he can be - He even told me that the only word that’s ever come down from their Corporate Offices is to expect phone calls about the IQD, and to simply tell the truth to the callers and Customers in that their bank does not deal in the IQD right now.
Just the same as he said that he had no problem with me sharing this information with others, this Banker showed me every phase of the banking systems that his (one of the Big-4 banks) branches implement, from showing us the US Treasury Web site page they access to see the spread fees the UST charges Banks, the currency exchange spread fee screens his tellers have ((which showed about 65 to 70 currencies that the (one of the Big-4 banks) banks do buy and sell)), right down to the book the branches are given showing pictures and information about the currencies of the world, in which the 2011 edition showed the IQD for the first time.
The Banker also said that he has got quite a kick out of all the 3-screens and all 0.0000s talk and postings out there on the forums and blogs, when in fact he showed me first hand that (one of the Big-4 banks) buys and sells the 65 to 70 currencies they list and that he has never seen anything go to all zeros, there are no green, blue, red or purple lights, and the screens do not flicker at all.
All this talk going on out there with the rates showing as all zeros is all from the First National Bank, and its subsidiary branches of the First Convenience Bank that I have an account at here in Texas, where I have the same printouts showing at the zeros, which show the zeros simply because they no longer trade those currencies.
Quite simply put, my Banker friend said “All you need to do is look at xe.com and see that all the currencies are still listed and tradable, just the same as they are in Banks” - The truth is available to everyone; banks have the same information as what Forex sites do.
All bank systems simply update to the buy/sell rates and either list the currencies they trade or not, and at no time have any currencies shown these rumored zeros.
I requested that he show us the spread fees of the Kuwaiti Dinar, and he did, with the buy rate showing a 43-cent per 1-KWD spread fee at (one of the Big-4 banks), and he then brought up a Wells Fargo page that showed their spread fee and it was 3-cents more at almost 47-cents on the KWD.
Well, now you know that my Banker friend is a Manager at one of the other Big-3 Banks, and that Wells Fargo has higher fees than the Bank he Manages, and this is what is meant by “Shop around at the banks for the best rate before you cash-in.”
The Banker confirmed everything that Bear has told me has been bang on, and has proven to me that what he and OKIE have said about the zeros being horse pucks - Folks, I saw the truth with my own eyes while my Banker friend chuckled over it all.
As I stated above, the one thing that none of us can beat on any deal made with any Bank is the UST spread fees. He explained that as the Branch Manager he is in complete control of how his branch operates - Like every other Branch Manager, he is handed the keys to the bank with the statement “Here’s the business, now it’s up to you to make money with it.”
Every single Branch Manager is able to remove the spread fees up until the UST spread fees.
The UST spread fees of a currency’s value is hard coded into their systems - The only way to possibly get rid of that fee would to do your exchange directly with the UST, of which of course none of us can or will be doing.
Every Bank Branch Manager can do this - You only need to ask.
(Do this AFTER the r/v Folks - Don’t call or bother than Banks until then)
And if they say “no” you simply tell them “Thanks very much I’ll take my business to a different Bank and Branch Manager that will, thank you.” - They will make the deal with you Folks, you just have to ask them, and with knowing all this ‘Public Information’ you are empowered to talk with any and every Branch Manager - There are no secrets to any of this and it is all just that simple.
I’ve talked with a couple people in our group who have already spoken with their Bank Branch Managers who have said that they will match any deal made at any other Bank and/or Branch.
So there you have it Folks, you can simply use the (one of the Big-4 banks) Branch you already have your account setup at... no traveling needed, no grouping together of people needed, this is all that simple and simply available to us all.
I also asked what sort of ‘perks’ were available, to which my Banker friend said these kinds of things differ from bank to bank, but through the Bank he works for, any Customer with a cash balance greater $250K receive certain ‘services’ at no cost; services like investment advice and avenues, and a ‘Concierge Service’ that the $250K and above Customers have access to via a telephone number to arrange and setup near everything and anything for the Customer... short of picking up your laundry.
Things like “I need a rental car delivered to my hotel” which a hotel will do for you as well, or if you have an event like what we are going to setup for the Dallas meeting, the Concierge Service will make the arrangements for you with the hotel, and organize all the catering and whatever you need to get the meeting done - Real simple stuff that would take you time to get done or do yourself... just like having a personal assistant of sorts.
The only thing any Banker will want to see happen with your IQD exchange is that you keep your money in their Bank Branch to excuse the spread fees and provide you with the ‘Special Customer’ services, of which is all simply based upon a hand-shake so the branch can use the balance to increase their borrowing and lending power to make money from to make up for discounting of the spread fees for you.
This is really all there is to it and how simple it all is Folks.
Empowered with the knowledge of how all this works, I went to speak with another Branch Manager at another Bank where I have an account, explained what I wanted to do with the IQD exchange when the time came and that my other Banker said he wouldn’t charge me the Bank’s spread fees, and that Bank Branch Manager said “Yes, I can match that deal.”
My Banker friend even said that any new Customers that open an account that he personally obtains, he spreads the credit for these new accounts with his Branch employees to help them reach their year end quote too, as he feels he has already maximized his new Customer quota for the year to secure his personal annual bonus.
When the time comes Folks, we can all very easily exchange IQD for USD at each of our respective local Banks and not have to pay the Bank spread fees.
Those out there paying for a monthly membership at some supposed guru Web site to gain access to be a part of a group to get rid of these spread fees at a certain bank are simply throwing their money away - Everyone can do this on their own and at zero cost and near any and every Bank to which an account is held.
That’s all... no remaining stresses or worries about how we’re each going to get the exchange done, we know the truth about all the bank screen showing zeros talk being a bunch of hogwash, and all we all need do now is relax and wait for the r/v to finally kick in.
One last point to talk about when considering doing your IQD exchange, is that some IQD Dealers out there are saying that they will cash-in the IQD for us for a fee, PLUS what the Central Bank of Iraq (CBI) is going to show as their spread fees.
We do not yet know what the CBI is going to charge in the way of spread fees to change IQD into USD, but it is my conclusion that anyone cashing in their IQD through the Dealers will have a lot more to pay than the $150.00 per 1-million IQD than what meets the eye some Dealers are offering...
We all want to maximize our ROI (Return on Investment), and to do this I for one will be going to see my Banker post r/v.
(Also keep in mind what OKIE has always said... “BANKS BANKS BANKS -- NUFF SAID”)
While we’re at it...
- Let’s all try to clear up another bunch of fallacies we’re all hearing out there...
There is a lot of chatter going on out there about this IRS form 8938.
It is new from the IRS and is to be used to disclose foreign assets to the IRS so they can tax you on them.
Folks, your IQD notes are not foreign assets, they are a foreign currency, but unless you have them in a foreign Country, they are quite simply a domestic asset and this form 8938 does not apply.
Now if you had opened a Bank account in Iraq and have your IQD sitting in that account, then yes your IQD is a foreign asset and you would have to file the form 8938 with the IRS.
Folks are also talking about placing their IQD into a Trust (of any kind) with hopes of reducing the amount of taxes we’re all subject to paying.
I spoke with my Odd Attorney friend (See link at bottom of post to learn more) about this, and I asked him about these ‘Trust’ accounts, to which he stated that any type of Trust can be unraveled by the IRS and that there is no way around paying the taxes the IRS says you are going to have to pay - There are no loopholes.
He also said that when someone tries to put money into a Trust or company entity like an LLC for the obvious purpose of trying to delay or reduce taxes, it only just gives reason for the IRS to put you under a microscope and treat you like you are trying to hide something.
Folks, just pay your taxes and move on...
- Do not worry about all this tax avoidance or reduction stuff, worry about protecting the assets you end up with and growing your portfolio after the fact.
Something else to consider, with the new tax year being only 7-days away, if we see the r/v happen before year end waiting to do your exchange until next year would provide extra time to be able to use the tax monies to invest and make money and/or interest back on before having to submit payment to the IRS.
THAT is how we want to go about reducing the tax hit we’re all faced with, and these Municipal Bonds my Odd Attorney friend talked about are a pretty nice way to do that it would seem.
Another point to address is that the IQD is money, it is what Banks work with, and you don’t need any sort of documents, receipts, or letters of authentication like some of these Dealers say you’ll get on their Web sites - Those things are simply a sales gimmick and as worthless as the paper they are printed on.
Do you actually think that some piece of paper with “these currency notes are real” printed on it would have a Banker say “Oh okay, they must be real notes because that mass-printed piece of paper says so...” when you go to exchange them for USD?
When I was able to buy IQD and VND at our First Convenience Bank here in Texas, the Bank gave me a receipt for the transaction, and that’s it.
These so called ‘certificates’ are trash folks - A paper-joke!
- Bankers are going to look at and check the notes, and ask what garbage can you want to throw those so called certificates in.
If you have any of these paper-jokes, don’t embarrass yourself by handing them to your Banker... toss them into a recycling bin.
The only ‘paper’ you will need is the receipts you obtained from buying the IQD currency to show your CPA your costs put forth on your investment, which is used to offset your taxes, and that’s it - The fee your CPA charges you to file your taxes is an expense and write-off too.
The entire process is really, really simple...
1) - The r/v happens, and you go to your bank.
2) - You exchange your exotic currencies for US dollars.
3) - You take your receipts to your Accountant and file your taxes.
That’s it... it is as simple as 1, 2, 3...
- So just Relax and enjoy working with and investing your windfall when the time comes.
At the very least, I hope this post helps some Folks have a more restful and stress-free holidays.
Stay flying under the radar (meaning don’t boast to anyone about having IQD), and I wish you and yours a wonderful and very Merry Christmas.
Prosperous regards, ECOE
DISCLAIMER: Like any other post on any Forum, this post is for informational purposes only. It is not legal, tax or investment advice. The only advice I can provide is that everyone do their own due diligence and seek advice from trustworthy, certified or licensed Professionals to do with tax, legal, accounting and/or investment matters.