This is a guest post written by business blogger Tamsen Cartwright. If you would like to write a guest post for Expat and the City, send an email to email@example.com.
Foreign exchange while traveling can cost you more than you realise. And some methods of currency exchange cost more than others. Here’s a quick lowdown on managing foreign currency exchange for your journey abroad.
Currency Exchange Basics
Currency exchange rates fluctuate all the time. If you’re savvy you could buy currency for your travels when the exchange rate is more favourable. But it’s difficult to do this effectively unless you have excellent financial knowledge.
You should, however, always check exchange rates right before you leave home or enter into a new country. Familiarising yourself with how much everything costs in your own currency’s terms will help you to avoid spending more than you intend.
Currency Exchange Options
Visit a Foreign Exchange Counter
Currency exchange shops and counters pop up everywhere you find tourists – hotels, the big sights, the airport. But they don’t always offer the best exchange rates and are best left for emergencies. If you do want to exchange your money in this way, shop around and ask about any additional fees (some charge up to 20%!) before handing over your cash.
Order Currency from your Bank
A good option if you want to have local currency in hand when you touch down in your destination is ordering currency from your bank. Again, the deal you get will depend upon your particular bank but banks get better rates on their currency which they can pass on to their customers. This means you’re likely to get more for your money than you would at a foreign exchange counter.
Use a Debit Card at an ATM
The fees you’re charged for using your debit card at an ATM will depend on who you bank with. You usually get a good exchange rate. But, to limit fees, take out as much cash as you’re comfortable with each time. Some machines ask if you want to withdraw money in your own currency or local currency. It’s always cheaper to go for the local option. The same goes for the next method of exchange too.
Pay With A Credit Card
Depending on where you’re travelling to and where you’re making your purchase, it may be possible to pay by credit card. Your card provider will often charge a currency conversion fee of 2 to 3 percent. But they’ll also provide a good exchange rate and better fees than you’d get at a foreign exchange counter. Just remember never to take cash out of an ATM with your credit card – as at home, there will be astronomical fees to pay.
Use Traveller’s Checks
Traveller’s checks are a good option if you’re worried about carrying lots of cash around with you and don’t want to use an ATM. They can be replaced if they’re lost or stolen, unlike a wallet full of banknotes. However, they’re not especially convenient as you need to find somewhere that will exchange them into currency when you want to use them. And these places often charge a fee so they aren’t particularly cost-effective either. Due to regulation on fees, however, they’re a really good choice if you’re travelling to China.
Paying in Dollars or Local Currency?
Some countries accept US dollars as well as their own local currency. Do a little research before you travel to get up-to-date advice on whether to use them or not. In countries like Argentina, where the dollar is in demand, some higher end restaurants and hotels will offer a good exchange rate when you pay in dollars. In other countries, such as Mexico, it’s a better idea to use local currency to make your money go further.
The way you choose to exchange currency while travelling will depend upon where you’re going and what you’re most happy with. However, the best deals are definitely to be found using your bank and credit cards.
How do you like to exchange your currency for your travels? Have any tips to suggest? Let me know in the comment section below!
About the Author
Tamsen Cartwright works at Learn to Trade UK. She’s a business blogger often writing about ways to achieve financial freedom. She might often be found sharing her suggestions about investing and trading online.