I was traveling to India recently and was buying a few hundred US dollars on my way as the money exchanges didn't have any Indian rupees with them. At the exchange counter, they didn't have 100 dollar bills and they asked me if I would like to check other exchange places for 100s saying I would get a lower rate when I buy Indian rupees selling my US dollars in India if they were 50s, 20s etc.

Back in the airport in India, I overheard a foreigner arguing with the exchange counter guys asking why he was given a lower rate for low valued notes. They replied saying different rates applies for different notes.

Why do they offer lower rates for low valued dollar bills (50, 20, 10, 5, 2, 1) and the displayed value is offered only for 100 dollar bills? Is there any economical aspect to this and does it happen everywhere with every other bill?

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    Given that situation, they should theoretically be happy to give you one hundred 1$ bills plus a few rupees in exchange for a 100$ bill. Which is strange to me as 1$ bills are so much favoured by tourists for small tipping worldwide (outside India, where 1$ is a small fortune) May 1, 2019 at 15:51
  • You got a good point :)
    – Padmal
    May 2, 2019 at 2:40

5 Answers 5


When dealing with currency exchanges, it's important to remember that only the local currency is "money", all the other currencies are just "things".

This is the reason behind the "buying"/"selling" terminology you often see. When you change foreign currency into local currency - in the view of the currency exchange - they are buying your strange pieces of paper with fancy writing on it for actual (local) money. And when you're changing local currency back into foreign currency, they are selling you fancy pieces of paper for real (local) money. (This viewpoint extends even for electronic transactions. It might not be a physical artifact, but it's still some "non-monetary" electronic claim, like a transferable airline e-ticket or shares of company stock.)

So to directly answer your question, the reason there's a different rate on different bills is because, as non-("real")-money objects, they're non-fungible. One US$100 bill and five US$20 bills may be very similar, but they're not the same, and can't be freely interconverted by someone in India.

It's similar to when you go into a grocery store and they sell a 2 kg package of rice for a different price than two 1 kg packages (and a different price again for 2 kg of rice from a bulk bin). It's the same amount of rice, but due to the economics of obtaining and storing the two 1 kg packages versus the one 2 kg package, as well as the different rate at which the 1 kg packages are bought versus the 2 kg packages, the store sets the price differently such that they maintain a decent profit while not having extra packages languishing on the shelves.

Likewise with the money exchangers. They have some non-("real")-money commodity (US$100 and US$20 bills), and even though five US$20 bills are the equivalent amount of "rice" as one US$100 bill, there's different economics in obtaining and storing a US$100 versus the US$20. There's also differences in the desirability of a US$100 versus five US$20s. As such, just like the grocers changing the price of the different packages of rice (or bulk rice), the money exchangers may change the price of US$100 versus US$20 (or electronic transfers).

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    On a related note, I found out that in Iran, and possibly other neighboring countries, there is also a difference in value between older and newer designs for the same denomination. Newer designs are more desirable and therefore have a higher value (I guess since they are considered more trustworthy). Apr 29, 2019 at 17:33
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    The explanation seems logical, but I've never seen such differences in Europe. (with the exception that fractions, like cents, are not accepted, but otherwise there is no difference between the rates of bills)
    – vsz
    Apr 30, 2019 at 8:03
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    It might be worth noting that in both the case of currency and the rice analogy the difference in price is not just due to the difference in supply cost but also the different demand because of the convenience factors involved with smaller denominations.
    – Will
    Apr 30, 2019 at 9:41
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    Banks gnerally have 2 prices for money exchange: Cash and non cash - i.e. if you take or leave notes, or if you cahnge on an account without handling physical money. And the cash rates often SUCK - here in poland you never use that, i.e. it is often cheaper to go to an independent money exchanger (or change larger amounts a LOT better than the published rates)
    – TomTom
    Apr 30, 2019 at 12:37
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    Good answer. The TL:DR takeaway from this is There's ... differences in the desirability of a US$100 versus five US$20s ... If I want your 100's more than I want 5 of your 20's then I'll offer you more for the 100's; it really doesn't matter why I feel that way about one bill versus the other.
    – CactusCake
    Apr 30, 2019 at 16:05

Because it is physical money. They need to handle it. And they may simply not be able to as easily and as efficiently offload 5 USD bills compared to 100 USD bills. Result is a different pricing structure.

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    There is also a different probability of getting counterfeit bills with different values. Apr 29, 2019 at 15:05
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    There also may be more demand for $100 bills than for smaller denominations, e.g. from people keeping them as a hedge against fluctuations in their local currency.
    – jamesqf
    Apr 29, 2019 at 15:24
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    Regardless. this may or may not be legal depending on local regulations for currency changers and how they are allowed to advertise
    – crasic
    Apr 29, 2019 at 19:58

It sounds like the money exchanger is making up a reason why you're not getting the advertised rate, independently of the notes that you actually have on you. So they're basically scamming you. That's not exactly unheard of, especially on airport locations.

It helps to shop beforehand to find the best rates. Some locations even offer to lock in the rate, if you contact them shortly before you leave and agree on the amount you'll exchange. That makes sense from a business perspective; you only need to offer competitive rates to customers which shop around for the best rate.

  • The OP said they were both told this by an exchange to USD in <other country> (who told them to go elsewhere to find 100USD notes!) and overheard it again in India. I don't see how this could possibly be a scam by the first exchange; if anything the exchange is giving OP good advice to their own detriment ("you'll get better rates elsewhere").
    – Bob
    May 1, 2019 at 1:51
  • Not true. The correct answer is given by @R.M. Your assuming that because dollar notes are fungible in the US, they're fungible everywhere. This is not necessarily the case: different denominations may have different utility (and hence price) to the money-changer. May 2, 2019 at 6:59

I can't say specifically for India, but in many countries (I have personal experience of this in Uganda), the official exchange rate for small bills is intentionally set lower, to discourage the use of US dollars in favour of the local currency.


Cash is king. And the king of cash is a 100 dollar bill minted by the US Federal Reserve, which is quite possibly the hardest currency note in the world to counterfeit.

It's not different rates for different denominations. It's more like: there's 100 dollar bills and there's not 100 dollar bills.

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