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How do I exchange Swiss francs or Euros for Hungarian forints the cheapest way and with what risk?

It's not just tourists who deal with this, everyone who discovers the topic of emigrating to Hungary or buying a house in Hungary and living there also asks themselves at some point, how do I exchange my local currency for forint and where is it cheapest.

As with any monetary matter, in the case of currency transactions, in addition to the exchange rate development and the pure costs, one should understand the risks associated with the transaction or custody.

Cash exchange in exchange offices

In principle, it is possible to exchange money at an exchange office. There are plenty of them in Budapest, Lake Balaton and most larger cities. The buying and selling rates are usually better than at banks in the home countries. Buying and selling rates vary from exchange office to exchange office, generally less favorable at the airport and at larger chains.

Here you can get your deposited cash back immediately in HUF. The risk is zero, assuming there are no counterfeit banknotes in circulation. However, the administrative costs or the purchase and sales margin may be worse than with other options. It's worth comparing the days.

Cash exchange in Hungarian banks

The second option would be to exchange cash at Hungarian banks, which usually offer worse rates than exchange offices and charge additional fees. Here, too, you receive the cash immediately in HUF, so the risk is zero.

Transfer, exchange and use through Hungarian banks

The third option would be bank transfers between a foreign bank and a Hungarian bank.

Two different modalities can be envisaged:
1) Transfer from a foreign CHF or EUR account to a Hungarian CHF or EUR account
2) Transfer from a foreign CHF or EUR account to a Hungarian HUF account

The transfer itself with SEPA is inexpensive.

With the first option, account management in EUR and CHF at Hungarian banks is often advertised as inexpensive or free. Unfortunately, this is not entirely the case if you then look at the follow-up costs.

In addition to the negligible costs of account management, transfers and payouts are also heavily impacted. Transfers in foreign currency are usually between 0.1 and 0.5% of the amount. Withdrawals from ATMs in foreign currency can be up to 1.5% depending on the bank, although a CHF withdrawal from an ATM is probably not possible and not every ATM has EUR available. If you withdraw your balances from foreign currency accounts in local currency, i.e. HUF, the exchange rates of the Hungarian banks as well as additional administrative costs must be taken into account. These can vary depending on the bank, and in particular bank-related buying and selling rates for currency exchange can be very different but are in any case higher than for online service providers or fintechs.

With the second option, direct transfer to a HUF account, you are dependent on the exchange rate position of the foreign bank, which, due to the rather rare currency HUF, is always worse in your own banking use than in Hungary, where banks often work in EUR and therefore the margin between buying and selling is usually smaller. Withdrawal and transfer costs also have to be paid depending on the bank, but are roughly similar for all banks. In my experience, I have not yet come across a particularly cheap bank in Hungary in this regard.

When it comes to security, Hungarian banks also pursue investor protection with regulation of credit institutions via the Hungarian Financial Supervisory Authority and deposit insurance. The National Deposit Insurance Fund (NDIF) has existed since 1993. Hungary's security borders comply with EU standards. 100% investor protection applies up to an amount of EUR 100,000.

Transfer, exchange and use via online service providers and fintechs

Online service providers or fintechs are often recommended as a low-cost alternative. Here is a brief presentation using the examples of Revolut as a fintech and Wise as a payment service provider.

With Revolut it is possible to process transactions in local currency, no matter in which country you have your home account. You can withdraw cash, make payments or transfer money to Hungary. Revolut advertises exchange rates with no markups, but uses an in-house exchange rate, not the mid-market exchange rate. Foreign payments have free limits depending on the type of account. In addition, fees apply.

Depending on which Revolut company you are registered with, deposit protection applies (customers of Revolut Bank UAB) or the deposits are held without deposit protection (customers of Revolut Ltd.). Revolut UAB has a European banking license in Lithuania and is regulated by the Central Bank of Lithuania. It has deposit insurance per customer of EUR 100,000 with a Lithuanian state insurance company. For Switzerland, Revolut does not have a Swiss banking license and is therefore not covered by the Swiss deposit insurance. In the event of a payment default, the customer will then have to deal with the Lithuanian insurance company if the account is through Revolut UAB.

This applies to many smartphone banks. Charlotte Jacquemart warns on SRF: “Most of these smartphone banks do not have their own banking license. This means they are not directly covered by deposit insurance. This kicks in if a bank goes bankrupt.”

Wise works similarly, but with a different fee structure and security too. This is certainly one of the cheapest options for exchanging money that you will use immediately. Wise operates at the mid-market exchange rate for exchanging currencies and then adds a moderate fee. Wise is therefore cheaper than banks and exchange offices.

But, you also have to read the small print. Wise does not act as a bank but as a payment service provider. Because Wise does not operate a lending business, the risk is lower, but not eliminated. Wise deposits are not subject to deposit insurance.

Although customer funds in Wise customer accounts are separated from Wise company accounts (so-called 'safe-guarding'), according to the Wise statement, 60% of customer money is invested in government bonds or money market funds, while 40% is held in cash.

Even if they are US Treasuries or sterling government bonds, this does not mean complete security. The valuation of short-term government bonds and money market funds is subject to fluctuations in value. In normal times these are very low. In turbulent times, such as during the banking crisis, money market funds can also become illiquid and therefore insolvent. Should the USA become insolvent or carry out a debt haircut, which we all hope will be avoided, these funds would also be largely devalued.

It is therefore advisable to know the risk and adjust the amount of medium and long-term funds in Wise accounts according to your own risk capacity and risk tolerance.

If you want to buy a house in Hungary, Wise may not necessarily be suitable. If possible, a SEPA transfer from a foreign bank to a CHF or EUR account of the seller would be the cheapest and safest.

When emigrating to Hungary and making monthly or occasional transfers of small to medium amounts for immediate consumption, Wise is also a cost-effective alternative from personal experience. Either you transfer CHF or EUR directly to a Wise account in HUF and pay with the Wise credit card or you transfer via the service provider Wise to a HUF account at a Hungarian bank and then use their service.

The bottom line is that the cheapest providers are not always the safest providers and everyone should personally evaluate the risk and relate it to the costs.

Author: Dr. Peik Langerwisch

After studying business administration with a degree in business administration and a magna cum laude doctorate in management theory, the author worked in global management consultancies and banks for twenty years and has now used his expertise as a real estate agent for real estate in Hungary for several years. He owns his own property in Hungary and spends a significant part of the year in the country serving clients and enjoying the country's beauty.

Brief overview of expertise and career

Sources (all in German language):
Tagesgeld.info: deposit insurance in Hungary
Revolut on account security
Revolut on deposit insurance
SRF Kassensturz on deposit insurance
Moneyland.ch Revolut Switzerland questions and answers
Wise: Paying with Revolut in foreign countries
Wise: How Wise is protecting your money