The Worst Places to Exchange Currency

Traveling abroad is a fun, exciting experience where you can take in history, new cultures, exotic cuisine, and learn about the world.

Nevertheless, when you travel, you often can’t use the U.S. dollar. Getting foreign currency can be easy, but you need to be careful about where you exchange your dollars, so you aren’t stuck with a bad exchange rate. Knowing the best place to exchange currency makes it far more likely you won't end up in the worst place.

Key Takeaways

  • Currency exchange shops and kiosks in airports are not the best places to exchange money.
  • For the best rates, try a local bank or a bank ATM to make your currency exchanges. 
  • Check to see if your U.S. bank offers foreign ATM fee refunds for using a foreign ATM.
  • Not all currency exchanges charge the same rate.
  • Tourists can get ripped off by some businesses, so it is advisable to shop around for a reasonable rate.

How Foreign Currency Exchange Works

The process of currency exchange involves swapping one country's currency for that of another by executing buy and sell transactions. The value of one currency relative to another is determined by the international spot rate — essentially a daily value established by a group of banks that trade currencies.

Foreign exchange rates are always fluctuating because the global economy is active 24 hours per day. As economies strengthen and weaken, currencies experience inflation and deflation, and trade deficits grow and shrink. As a result, the relative value between currencies moves up and down.

Financial institutions, investors, and speculators are constantly buying and selling large lots of currencies, which creates the current market exchange rate between two currencies. In general, currency exchange rates are quoted against the U.S. dollar, pound sterling, euro, and Swiss franc as those are the most stable and widely used currencies for large business transactions.

When you travel abroad and want to buy something in the local currency, you typically exchange a relatively small amount of currency and pay a higher exchange rate so the currency exchange can earn a small profit.

Not all currency exchanges charge the same rate, and some businesses take advantage of needy travelers in areas flush with tourists to turn a profit.

Exchange rates vary based on the day and on where you get your money. If you exchange your money at a currency exchange, you'll pay a premium on the international spot rate, as that's how the store makes a profit. If you exchange your money through a bank or by withdrawing the local currency from an ATM, you'll likely come out ahead, even if there are ATM or credit card fees.

Where to Get the Worst Rate: The Airport

The first place nearly all travelers arrive in a new country is the airport terminal, and that is the first place where you will have an opportunity to exchange currency. The airport currency exchange rate isn't always the best. Why? Because airport-based currency exchange shops know that you might need local currency to catch a bus, train, or taxi, so they make big profits offering you the worst exchange rate.

Avoid these currency exchanges if possible by getting currency in advance from a local bank or going to an in-airport bank or ATM.

Many credit cards do not charge an extra foreign exchange fee, and you will get your bank’s rate if you use your credit card for a purchase.

Where to Get Bad Rates: Currency Exchange Stores

Once you get out of the airport, you may find yourself in a market, bazaar or popular tourist area. Exchange shops try to operate where you will need them and take advantage of tourists to make a profit. You will probably find better rates than the airport at a dedicated currency exchange. However, even though the rates are better, you’re still likely to get a bad deal.

Where to Get Good Rates: ATMs and Local Banks

The best place to exchange money is a local ATM or a bank. Many foreign banks are happy to exchange your dollars for local currency for a better rate than you find elsewhere, or you can go to an ATM to skip the line.

Many U.S. banks offer foreign ATM fee refunds and charges no fees for using a foreign ATM, so if you need cash you just whip out your debit card, find the closest bank ATM—not an ATM kiosk in a mall or supermarket—and rest easy knowing you received the best rate for your dollars.

Is It Cheaper to Exchange Money at the Bank or Airport?

It is cheaper to exchange money at the bank (or by using an ATM) than the airport. That's because currency exchange stores and kiosks at the airports mark up the exchange rate to make a profit. They know that travelers who just got off a plane probably need money right away. Banks and ATMs often charge fees, but the fees will be less than the airport mark-up.

Which Banks are Best for Currency Exchange?

Generally, local banks or credit unions offer the best rates for currency exchange. Additionally, major banks typically have a number of overseas ATMs available for use, meaning they are an easily accessible option for travelers.

What Are Options If You Don't Want to Exchange Currency?

A traveler can choose to pay for everything with a credit card, assuming the credit card is accepted at all places in a country that they are visiting. In some countries, or in some smaller cities or rural areas, a credit card may not be accepted everywhere. A visitor should keep in mind that there will likely be foreign transaction fees accrued as a result of using the card overseas. There are also traveler's checks, but those have fallen out of favor in recent years, due to the popularity of credit cards. 

The Bottom Line

If you keep your eyes open, most major cities have banks all over the central business district, bustling neighborhoods, and even in the airport. Even if you have to pay a small ATM fee, you can easily make up for the bad exchange rate you’ll find at the airport or a currency exchange store if you get enough cash.

If you follow that plan, you can enjoy your travels and focus on the fun parts rather than stressing about getting ripped off on currency exchange.

Article Sources
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  1. University of Minnesota. "30.3 Exchange Rate Systems."

  2. International Monetary Fund. "The International Use of Currencies: The U.S. Dollar and the Euro."

  3. U.S. News & World Report. "Where Is the Best Place to Exchange Foreign Currency?"

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