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.

Location Matters
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.

Commission Counts
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.)

Related Articles
  1. Mutual Funds & ETFs

    The 3 Best T. Rowe Price Funds for Value Investors in 2016

    Read analyses of the top three T. Rowe Price value funds open to new investors, and learn about their investment objectives and historical performances.
  2. Active Trading Fundamentals

    4 Stocks With Bullish Head and Shoulders Patterns for 2016 (PG, ETR)

    Discover analyses of the top four stocks with bullish head and shoulders patterns forming in 2016, and learn the prices at which they should be considered.
  3. Investing

    3 Healthy Financial Habits for 2016

    ”Winning” investors don't just set it and forget it. They consistently take steps to adapt their investment plan in the face of changing markets.
  4. Fundamental Analysis

    3 Reasons To Not Sell After a Market Downturn

    Find out the reasons that it is not a good idea to sell after a market downturn. There are lessons to be learned from the last major market downturn.
  5. Fundamental Analysis

    HF Performance Report: Did Hedge Funds Earn Their Fee in 2015?

    Find out whether hedge funds, which have come under tremendous pressure to improve their performance, managed to earn their fee in 2015.
  6. Sectors

    2016's Most Promising Asset Classes

    Find out which asset classes are considered to be the most promising for generating portfolio returns and reducing volatility in 2016.
  7. Mutual Funds & ETFs

    3 Morgan Stanley Funds Rated 5 Stars by Morningstar

    Discover the three best mutual funds administered and managed by Morgan Stanley that received five-star overall ratings from Morningstar.
  8. Your Clients

    How to Construct an Annual Review for Clients

    One of the best things that advisors can provide to clients is an annual review of their financial situation. Here are some guidelines.
  9. Mutual Funds & ETFs

    3 AllianceBernstein Funds that Are Rated 5 Stars by Morningstar

    Discover the top three mutual funds administered and managed by AllianceBernstein that have received five-star overall ratings from Morningstar.
  10. Retirement

    Is it Safe for Retirees to Invest in Technology?

    Tech stocks are volatile creatures, but there are ways even risk-adverse retirees can reap rewards from them. Here are some strategies.
RELATED FAQS
  1. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  2. How liquid are Vanguard mutual funds?

    The Vanguard mutual fund family is one of the largest and most well-recognized fund family in the financial industry. Its ... Read Full Answer >>
  3. Do financial advisors charge VATs?

    The Personal Finance Society (PFS) and with Her Majesty's Revenue and Customs (HMRC) have outlined when a value-added tax ... Read Full Answer >>
  4. How do mutual funds work in India?

    Mutual funds in India work in much the same way as mutual funds in the United States. Like their American counterparts, Indian ... Read Full Answer >>
  5. Are UTMA accounts escheatable?

    Like most financial assets held by institutions such as banks and investment firms, UTMA accounts can be escheated by state ... Read Full Answer >>
  6. What are the dormancy and escheatment rules for stock accounts?

    While the specific dormancy and escheatment rules for stock accounts vary by state, all states provide for the escheatment ... Read Full Answer >>
Hot Definitions
  1. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  2. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  3. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  4. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  5. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
Trading Center