There seem to be many misconceptions when it comes to exchange rates, the most prevalent of them seems to be the myth of “no commission” foreign exchanges. In my book, commission is simply a synonym for service fee, transaction fee or even the spread between the “buy” and “sell” rates (ie. if there was really no commission, both rates would be the same). This is why I’m one of those travelers who opt to travel with cash rather than cards, in order to maximize the foreign conversion.
I’ve been doing it for most of the last 7 years and it’s worked for me. Of course, I still have debit cards and credit cards but I only use them for when I can’t find a good exchange rate. So I thought I’d share a few things I’ve learnt, to get the best exchange rate for your cash, while traveling.
1. Always check the rates on XE.com before changing money (if you have a smartphone, install the XE.com app). Also work out how much of the local currency you should expect to receive and always count your money when you receive it. Ask if there are any fees and check that the rate they are advertising is the rate they are offering for the amount you want to change. (In some countries, there are tiered rates)
2. Compare rates with a few banks, the post office and money changers. Don’t feel shy to walk away. In some countries, random strangers in markets will offer to change money for you. That’s a very bad idea. Choose a place that at least has an address.
3. Buying or changing obscure currencies overseas is both difficult and expensive. You are better off changing it locally.
4. It’s useful to carry at least two international recognized currencies with you just in case one is not accepted e.g. Euros and Dollars.
5. Avoid changing money in airports, bus stations, train stations or anywhere where disproportionate number of unsuspecting tourists congregate. If you must, just change enough until you can find a better place downtown.
6. Don’t change money from one foreign currency to another foreign one, as you’ll end up getting the “sell” rate of both. (ie. you’d be paying double commission.)
7. If you are using an ATM take out a larger sum, as you as you will often be paying withdrawal fees either to your home bank or partner bank.
8. Ask your bank about all their fees before traveling. Check whether your bank has transaction fees or service fees added to the foreign exchange. You may sometimes actually be better off doing multiple smaller debit transactions at Point-Of-Sale, than withdrawing cash in one lump sum, if debit transactions are free.
9. My rule of thumb is if it’s an expensive country, using a bank card may be a better option than finding a money changer with a good rate. Eg. if the advertised rates are much lower than the XE.com rate, don’t bother.
10. Paying in local currency nearly always gives you the best rate. Just be familiar with the denominations and always count your change. Note, that sometimes companies will offer the ability to charge your credit card in your home currency. Find out what rate they offer but it’s unlikely it’d be better than paying with local cash.
11. Remember that you can’t change foreign coins. Use them, donate them or change them to notes before you leave the country.
12. If you have accidentally saved a lot of foreign coins, one solution is to try to change money with other travelers locally, e.g. via Couchsurfing.org.
13. Bonus tip for the long-term traveler: Some banks have no account maintenance fees. These are great accounts to hang on to, so you have local money (and a local debit card) at your disposal when you’re next in town. E.g. I have bank accounts in Canada, New Zealand and UK. It’s cheaper for me to use my Canadian cards in USA than my other ones and it’s cheaper for me to use my UK card in EU than my non-EU bank cards.
What other money maximizing tips can you share?
Marvelous Monday Money is part of a series for the Yakezie Challenge, where I share money maximizing strategies I have successfully utilized whilst traveling. This is not necessarily sound advice. In fact, considering that in Business School, I dropped out of my Accounting major to do Marketing because there were more attractive girls in that class, I’m fairly sure it’s all poor advice. I’m excellent at Monopoly, however. Therefore, caveat emptor.