If You Own Iraqi Dinar Currency, Selling It Won't Be Easy

If you are among the thousands of people who have bought Iraqi Dinar currency in hopes of scoring a big profit, you may now be wondering what options there are for liquidating your Dinar holdings.

The Iraqi Dinar investment dream has been around for nearly a decade now. The dream is promoted by a slew of websites that sell Iraqi currency - that is, actual physical bundles of currency - to "investors" through mail order. The websites' sales pitch goes like this: "Before the 1990's Gulf War 1 million Dinar was worth $3,200,000 USD; today you can buy 1 million Dinar for just $1,150.00 USD". As the Iraq economy improves the Dinar will likely be revalued. If the revalue is at a level approaching it's pre-war exchange rate, today's small cash outlay could return millions for those savvy enough to get in now. Iraq's vast oil resources, well-educated population and guaranteed rebuilding aid from the US make buying Iraqi dinar almost a sure bet."

This rationale has proven compelling for thousands of people who've taken the plunge and bought Iraqi currency.

But people who buy Iraqi dinar are not buying a liquid, actively traded investment; rather they are buying a numismatic "collectible" that has very high transaction costs. For example, today you can expect to pay about $1,150 USD for 1,000,000 of Iraqi Dinar (IQD) currency from on-line dealers. The same 1,000,000 IQD has an official exchange rate value of just $854 USD - a hefty 30% markup. Dealers justify this margin by noting the high costs of transporting and safekeeping foreign currency bundles.

Similarly, if you are a holder of Iraqi currency and have decided to convert your Dinar back into US dollars, your options are limited and costly. One Dinar website makes the following noteworthy disclosure in its fine print Q&A page: Until markets develop for the resale of Iraqi Dinars, it may be difficult for you to liquidate your Iraqi Dinars or exchange them for US Dollars.

One option is to sell the currency back to a Dinar dealer. Typically, online Dinar dealers who advertise 1,000,000 IQD for sale for $1,110 are willing to pay $800 to buy back the same 1,000,000 IQD. In other words, when you drive the Dinar off the lot, it's instantly worth 32% less in the eyes of the dealer that just sold it to you! Selling Dinar back to a dealer is the option having the highest transaction cost but least amount of hassle.

A second option is to sell your holdings on eBay. With eBay, transaction costs should be 10% or less (meaning you might pocket $1,000 if your 1,000,000 IQD can fetch $1,100). (This eBay fee calculator will give you a good idea of your transaction costs.) However, for the newcomer, eBay can be intimidating and entail a substantial learning curve. You should be aware too that eBay has a very active community of Iraqi dinar dealers who you will be directly competing with.

A third option is to sell your Dinar holdings on Craigslist. Craigslist is free, easy to use and very effective for selling items. However, the audience is primarily local and the number of listings for IQD is relatively small - even in the larger Craigslist communities.

The Iraqi Dinar dream may someday become reality for those investors willing to buy and hold dinar for the long-term. But people looking to liquidate their Dinar holdings today will likely take a significant loss on their "investment".

Tim Paul is a financial management executive with more than 30 years experience. His websites focus on personal finance issues including 401k Planning and whether investing in Iraqi Dinar currency is a sensible choice.

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Pricing Iraqi Dinar

If you are considering buying the Iraq Dinar in hopes of making a lot of money from a modest outlay of cash, you're not alone. This get-rich-quick idea has been circulating on the internet for about eight years now and shows no signs of going away.

Websites pitching the sale of Iraqi currency tell you that, before the 1990's Gulf War, 1 million Iraqi Dinar (IQD) was worth $3,200,000 USD. Today you can buy 1 million Iraqi Dinar for about $1,200! If the Iraqi economy improves as expected, and the Dinar is revalued at anything approaching the prewar exchange rate, a modest cash outlay today could turn into millions of dollars of profit. Iraq's vast oil resources, well-educated population and guaranteed rebuilding support from the United States are cited as further reasons the Iraqi Dinar is prudent investment. The websites' sales pitch is intuitive, straightforward and, to many, very appealing.

Sensible arguments (both for and against buying Iraqi Dinar) can be made. The purpose of this article is not to take one side or the other. Rather, our focus is on pointing out to potential buyers the enormous variation in Dinar pricing that exists.

Unlike actively traded stocks or bonds, there exists no formal market for pricing Iraqi Dinar transactions. When you buy Iraqi Dinar you will receive actual physical bundles of currency from a retailer, not an electronic entry on your brokerage account statement. Several factors impact the amount you pay for Dinar:

Dealer pricing - There can be wide variation in how much dealers charge for identical packages of Iraqi Dinar. For example, a recent spot check of pricing for 1 million IQD, uncirculated, in 25,000 denomination IQD notes (40 notes total) found prices ranging from $999 to $1,249 - a 25% spread. (On the same day, the official Central Bank of Iraq exchange rate was 1,000,000 IQD = $854.70USD).
Denomination - Large denomination notes will generally cost less than the same amount of smaller denomination notes. For example, one internet dealer recently was selling 1,000,000 IQD in 25,000 denominated notes for $1,160.00. The same purchase of 1,000,000 IQD in 1,000 denominated notes cost $1,500. This equates to a 29% spread for the same amount of currency.
Circulated or Uncirculated - You will pay a slight premium for never before used IQD notes. The same dealer selling 1,000,000 IQD in 25,000 denominated uncirculated notes for $1,160.00 was selling the 1,000,000 IQD package of circulated notes for $1,150.00.
Shipping and Handling - Expect to pay $20.00 to $40.00 shipping costs for a 1,000,000 IQD purchase. Some retailers tout free shipping but generally charge a higher base price for the currency.

For people willing to take the risk, a purchase of Iraqi currency may well prove to be a fortuitous decision. However, you should know that most experts do not recommend buying Iraqi Dinar. Only time will tell who is right. If you do decide to purchase Iraqi Dinar, be certain to shop and compare carefully to find the best deal. The Dinar marketplace is unregulated. It is particularly important that buyers beware in this arena.

Tim Paul is a financial management executive with more than 30 years experience. His websites focus on personal finance issues including 401k Planning and the pros and cons of buying Iraqi Dinar.

View the original article here