Banknote rates, also referred to as cash rates, are typically used by Swiss banks for physical currency exchanges in which banknotes and coins are exchanged. Swiss banks apply banknote rates to currency exchanges performed at the till by both customers and non-customers. Many banks also apply banknote rates to withdrawals at in-network automated teller machines (ATMs) when customers withdraw foreign currency from Swiss franc accounts. Currency withdrawals at out-of-network ATMs (operated by other financial services providers), on the other hand, are transacted at forex rates by many (but not all) Swiss banks. When Swiss franc account holders use debit cards or ATM cards to withdraw euros at ATMs operated by their bank, the banknote rate is typically used for the transaction.
Banknote rates are made up of a bid price and an ask price. When a bank sells foreign currency to a customer, the banknote rate’s ask price (sell price) for that currency is used. When a bank purchases foreign currency from a customer, the banknote rate’s bid price (buy price) is used.
Banknote rates typically have a wider spread between the bid price and the ask price than forex rates. That makes transactions performed at banknote rates more expensive for bank customers than transactions performed at forex rates. Banks justify the poorer rate by citing the higher administrative costs of transporting and storing physical money as opposed to scriptural money.
In Switzerland, the banknote rate is referred to as the Notenkurs or Sortenkurs in German and as the cours billets in French. In some other countries, banks advertise a single set of currency exchange rates but then charge a “cash fee” for cash exchanges as a percentage of the amount exchanged – sometimes as a hidden charge. The use of separate banknote rates and forex rates by Swiss banks allows for greater transparency.