The Best Place To Exchange Currency
Looking to jet off abroad? Navigating the maze of currency exchange options can be as tricky as choosing your next destination. Finding the best place to exchange currency is crucial for savvy travellers.
In this article, we will explore the top destinations for currency exchange, from local banks to online services, to ensure your financial transactions abroad are as seamless and cost-effective as possible.
Join us as we uncover the key to optimizing your currency exchange experience.
Table of Contents
How does currency exchange work?
Thinking about currency exchange rates is akin to shopping for items at a grocery store.
For instance, imagine you purchase a gallon of milk for $3.00 today, but next week, you can acquire the same gallon for $2.00. The strength of your dollar increases when milk costs $2.00 and weakens when you have to pay $3.00.
Currency exchange rates represent the value of one country’s currency compared to another, similar to fluctuating item prices.
The value of the U.S. dollar and other currencies fluctuates concerning foreign currencies like the French, Canadian, and Mexican ones. Exchange rates can change by the minute, with most banks updating them once daily.
Aim for the best exchange rate and minimize fees to maximize the foreign currency you receive for your currency.
Places where you can exchange currency?
There are several avenues where you can exchange money and obtain foreign currency before your travels. Here are the primary choices available for exchanging your money:
Consider visiting your bank or credit union before your trip. Most major banks offer foreign currency without charging an additional fee, depending on your travel destination.
You can obtain foreign currency in person at your local bank branch or order it online or by phone for home delivery.
Some currencies may be available for same-day exchange, while less common ones may require several days’ notice. The availability depends on your bank and location.
Overseas ATM of your bank
After arriving, you can obtain local currency using either your home bank’s international ATM or one from a foreign bank with your credit card or ATM card.
However, ensure that your home bank partners with local banks and notify your bank before travelling to avoid additional foreign exchange fees and out-of-network ATM charges.
Also, when using an ATM abroad, opt for local currency charges for a fairer rate and avoid undisclosed exchange rates and extra fees.
Traveler’s checks and prepaid debit cards
Travellers’ checks and prepaid debit cards are two options when exchanging currency for travel.
Travellers’ checks provide security but can be less convenient, while prepaid debit cards are convenient for daily expenses but may have fees and less security. Your choice depends on your preferences and travel style.
Online foreign exchange services
Many online specialized currency exchange providers and online money transfer services exist. Some of these providers allow you to buy currency and have it delivered to your home or another preferred location before your travels.
Others offer an online reservation service where you can collect the currency from their retail outlet before leaving your country.
Currency exchange kiosks at airports
Acquiring foreign currency at an airport kiosk or hotel may seem convenient. However, these places are commonly known for poor exchange rates and high fees.
For example, if your bank provides an exchange rate of CAD 1.30 per USD 1 for your trip to the USA, the airport kiosk might only give you CAD 1.20 per USD 1. It causes extra costs, as you receive fewer Canadian dollars for your U.S. dollars.
Navigating spending while travelling can be quite the juggle. From a foreign currency exchange rate to payment methods and hidden fees, managing your expenses abroad demands attention to detail.
Therefore, here are the main ways to spend your money in a foreign country if you do not want to deal with cash.
Credit or debit card for foreign purchases
While travelling internationally, it is crucial to carry some cash. However, credit cards should be one of your primary payment methods.
Credit card companies like Visa, Mastercard, or Amex offer exchange rates close to those of the bank, surpassing rates for cash at banks or currency exchange offices.
However, using credit cards comes with a significant caveat. Your card issuer usually charges an additional fee for foreign currency purchases.
On the other hand, debit cards are not as suitable for overseas purchases. They often impose transaction fees and lack the travel benefits provided by travel credit cards.
However, it is advisable to have a debit card for ATM withdrawals. Still, always inquire if a foreign vendor accepts credit cards before resorting to cash.
Also, avoid using your credit card for cash advances to obtain foreign currency, as it incurs cash advance fees and high immediate interest charges.
Technology advancements have made card usage widespread globally, but exceptions exist. It is wise to confirm if your destination accepts debit or specific cards before embarking on your trip.
International financial service apps
Using international financial services apps such as SwissMoney or Revolut for frequent international travellers can streamline money management. These apps enable you to hold multiple currencies and facilitate money transfers to accounts in various nations.
With a multiple-currency account, you can keep funds in different currencies. It is advantageous if, for instance, you frequently travel to Japan or Australia or if you enjoy annual vacations in Greece.
It helps mitigate the impact of currency exchange rate fluctuations, ensuring you always have money on hand for your next journey.
Things to keep in mind
There are some crucial things you need to know before you exchange currency or withdraw cash:
Withdrawing cash at foreign ATMs: Costs and limits
If you want to withdraw cash when you are already in a foreign country, you can try using an ATM. However, it may result in added costs.
It includes ATM provider fees and potential foreign exchange, conversion, or out-of-network ATM fees. Only foreign ATM and network access fees can reach $5.
Check your bank’s fees and daily withdrawal limits before using a foreign ATM. Also, request a limit increase if needed, and be aware of potential out-of-network ATM fees and lower withdrawal limits. Plan to ensure sufficient cash during your trip.
Foreign transaction fees
Using your credit card as the primary source for travel funds can be a great way to save, but be cautious about cards that charge foreign transaction fees. These fees typically add 2.5% to 3% to any purchase made in a non-local currency.
How it works? For example, if you spend $5,000 on your trip using your debit or credit card and incur a 3% foreign transaction fee for each purchase, you will end up with $150 in additional charges, which is not an ideal use of your money.
Review the terms on your bank’s or credit card’s website before your trip to avoid these hidden fees.
If you have time before your trip, consider applying for a credit card that doesn’t charge foreign transaction fees. Major credit card issuers like Chase, Bank of America, and Capital One offer cards without transaction fees.
For added security, carry a no-foreign-fee debit card and a no-foreign-transaction-fee credit card.
Dynamic currency conversion
In some foreign stores and restaurants, you may have the option of paying in the local currency, known as dynamic conversion.
Opting for the local currency is the better choice, as it avoids high conversion rates and extra fees when the overseas merchant converts the charge to the local currency.
However, don’t be fooled by the term dynamic conversion. Although it may seem a convenient way to avoid foreign transaction fees, it often offers a worse exchange rate than the credit card’s foreign transaction fee and may involve undisclosed charges.
Be aware of zero-fee services. Services that claim ‘no commission’ frequently provide poor exchange rates, which do not accurately mirror the mid-market rate. It results in them earning hidden profits.
Where do you get the best exchange rates?
When preparing for international travel, it’s generally advisable to turn to banks and credit unions for currency exchange. They typically offer competitive exchange rates and minimal fees, making them the preferred choice.
Where is the cheapest place to exchange foreign currency?
Local banks and credit unions typically provide the most favourable rates. Major banks like Chase or Bank of America often offer the additional advantage of overseas ATMs.
Online bureaus and currency conversion services, such as Travelex, offer convenient options for foreign exchange.