Between commissions, credit card surcharges, ATM fees and goodness knows what else, you'll almost always have to pay a little extra for the privilege of exchanging one currency for another. But how can you minimize these expenses and get the best exchange rate when traveling in a foreign country? (To help you get a better grasp of exchange rates, read 6 Factors That Influence Exchange Rates.)
TUTORIAL: Credit Cards
You want to make every dollar count and have probably shopped around for the best-priced airfare, hotel deals and packages, so why throw away money on exorbitant commission charges and poor exchange rates? Read on for our top tips for exchanging money and find out how to stretch your money further on your next international trip.
Know the Exchange Rate
This is the most obvious point, but it is so often overlooked. How often do you have absolutely no idea what a good deal would even be? Do your homework and make sure that you know approximately what the exchange rate is. This is easily done on a currency conversion site such as XE.com. Keep in mind that any posted exchange rates will always be lower than those listed at a money exchanger or bank. The exchange rates posted online do not include commissions or fees and are usually exchanged in extremely high volumes. If you're taking an extended trip, check the rate periodically to stay abreast of any major changes.
Remember that all exchange booths are not equal. It is wise to avoid currency exchange booths in popular tourist destinations like airports and train stations because they rarely offer good exchange rates. Instead, favor local banks. There are of course always exceptions, so the best tool you can have is the ability to calculate for yourself if the rate advertised is good or bad.
Often our instinct is to avoid the exchange booths that have a commission charge. But don't assume that a sign saying "commission free" automatically means you're going to get a great rate. It can often be a better deal to pay the commission charge in exchange for a better exchange rate. The only way you can tell this is by doing the calculation yourself. Most smartphones have a calculator built in, so it is quick and easy to check if you're getting a fair price. Our tip is not to rule out establishments that do charge commission, as their rates may in fact be more competitive. (To help you identify the best time to exchange money, check out When Your Money Is Worth The Most.)
Credit Card Use
Be sure to contact your bank or credit card provider before you head overseas and start using your card. Their fraud teams may spot the card being used abroad and diligently freeze the account - thinking it to be suspicious activity. Although this is rectifiable, it can be an inconvenience you could do without, so avoid it by letting them know your travel plans. Also, be sure to check what charges you will face for using the card abroad. They may charge a couple of percent for an international transaction and additional currency conversion fees. You will likely have one card that offers you a more favorable deal, so by identifying this you can save yourself those extra dollars.
Using Your Dollars Overseas
In many countries, U.S. dollars are widely accepted, and sometimes even preferred over the local currency. U.S. dollars may be accepted as readily as the local currency in certain countries. For example, the currencies in Barbados, the Bahamas and other Caribbean nations are linked to the dollar at fixed rates, making it easy to pay for your purchases in either dollars or the local currency. If you are traveling to a place where the exchange rate is fixed, you might be better off paying in dollars so that you don't lose money on commissions or credit card fees.
However, just keep in mind that it is not always the best idea to pay in dollars, even if you are able to. In countries where the exchange rate is variable, the price that is listed in dollars may not be a good deal. Often the hotelier or shop owner will be charging you extra for the convenience of paying in your own currency. Use that cell phone to do the calculation and check the real price.
Getting a Good Deal
So, by following these simple tips you can save money on your currency exchange and get the best deal possible. Arm yourself with the information - the most basic of which being what the approximate exchange rate is.
Be sure not to leave your exchange to the last minute. The very worst place to change your money is at the airport. Airports are notorious for charging high commissions and offering poor exchange rates because they have a captive customer base of last minute exchangers.
Poor planning could literally see you wasting tens or hundreds of dollars, so plan ahead, shop around and make your dollars go even further overseas. (For more, read The Cheapest Ways To Get Your Currency Exchanged.)