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If you’re about to jet off on a vacation to another country, you’re likely envisioning a relaxing trip filled with exotic cocktails and time spent on the beach or steaming hot chocolates after skiing down snow filled mountains. Whatever your destination, you will need to exchange money so that you can pay for all those margaritas or cozy meals at the chalet.
But when it comes to exchanging money for a trip, many people wait and do it at the exchange kiosks that they find in the airport or at their hotel. Big mistake. Exchange rates at those types of money exchange businesses tend to be costly and they also often charge a service fee on top of that.
So, what can you do to avoid expensive fees when exchanging currency for your trip? Here are some tips for how to get the best exchange rate.
9 Tips on How to Exchange Currency and Avoid Expensive Fees
1. Don’t Count on Using U.S. Dollars
Many people wonder if they actually need to exchange money before they travel since many locations around the world accept American dollars. But while this is true for many destinations – it’s not true for all.
Also, you are likely to be charged an exchange rate on your U.S. dollars that is much higher than you would pay if you exchanged your money and used the local currency. Some places also charge fees if you want to use U.S. currency. So, rather than pay through the nose, it’s important that you prepare ahead in order to make sure that you get the best rate.
2. Avoid Using Currency Exchange Kiosks
Currency exchange kioks at airports or in tourist areas offer to exchange your currency and are very convenient since you are likely to be passing their locations anyways. But if your plane lands at an odd time, the location might be closed and you could be left scrambling trying to find another place to exchange your cash.
More importantly, they charge you a much higher exchange, as well as a service fee to exchange your money. Cardhub estimates that you pay 10.17% more by exchanging your dough at an airport kiosk like Travelex than you would by using other methods such as a no fee travel credit card. Depending on how much money you plan on exchanging and using, that can add up quickly.
3. Know the Rate
Where it comes to converting currencies, exchange rates change so quickly that it’s hard to know what’s a good rate and what isn’t. In order to stay up-to-date, many travel experts suggest you download a currency app that allows you to monitor what the current bank exchange rate is. That way you can take advantage of a great rate when you find one and avoid bad rates. Two great apps to consider are XE Currency and GlobeConvert.
4. Use Your Credit Card
When it comes to traveling, one of the best ways to save on currency conversion is to use a travel credit card that does not charge foreign exchange fees to pay for your expenses. While the best travel credit cards generally will offer you no foreign transaction fees and great exchange rates, not all travel cards waive the fees so make sure to read the fine print before assuming your card won’t hit you with the typical 2% to 3% in foreign transaction fees that most credit cards charge. The last thing you want to do is to arrive home after a restful vacation to find an unexpectedly large credit card bill. Travel credit cards generally give you great exchange rates as well.
Not only is using your credit card the most secure option because you don’t have to carry around as much cash, but its also the easiest as you don’t have to spend as much time running around to exchange a huge amount of money.
Your credit card is perfect when paying for your big vacation purchases such as your hotel, car rental, restaurant meals, and any tours or excursions you take. This is particularly useful since many travel cards also offer purchase protection, travel insurance, and car rental insurance so it helps protect you in case you have to cancel your trip or cut it short, and it could save you money on your car rental since you might not need to buy additional rental insurance.
5. Use Your Debit Card at Foreign ATMs
Some experts suggest that you could get a better conversion rate at your destination then you can at home at your home bank. For that reason, you might consider using an international ATM to take out some local currency. If you need to withdraw or convert extra money in the event you use the cash you bring with you, this is also a great way to do so.
It’s important to note though that most banks will charge you a fee for making a withdrawal at a foreign ATM of anywhere from $3 to $5 dollars and some banks will also charge an additional 1% to 3% in foreign transaction fees. There are also some fees that the local ATM network or bank that you use could charge you as well.
However, if you have a Citibank or Bank of America account, you might be able to use the ATM machines of one of their international partners and not pay some of those fees. If you bank with Capital One, they also do not charge out-of-network ATM fees.
So, while you will save money on your conversion, the extra fees could make using an ATM to exchange cash expensive. For that reason, limit the amount of withdrawals you make to reduce your transaction fees and maximize your savings.
6. Contact Your Bank
One of the best places to convert your cash before a trip is at your local bank. They often offer some of the best rates and it is also more convenient for you to exchange your money before your trip. Depending on what currency you are looking to exchange, the amount you want, and the size of your local bank branch, you might have to call ahead and order the money to ensure that there is enough cash available for you.
In many cases, you can opt to pick up the money at your local branch or you can potentially get it sent to your house. However, there can be delivery fees for your currency if they have to order it in so be sure to ask about the costs before you order. If there is a delivery fee, ask if they would be willing to waive it as sometimes banks will do so.
7. Beware of Purchasing Cash Online
There are websites where you can exchange money online such on Travelex’s website or via International Currency Express. They will ship your converted currency to your home usually within a few days. But these websites are often expensive. There could be fees involved or the rate they offer you might not be good. Be sure to read all the fine print before you commit to exchanging your money through an online service.
8. Consider Travelers’ Checks Carefully
Another way some people try to save on expensive fees is to take traveller’s checks with them. You can take these checks to exchange money at currency exchange kiosks, local banks or your hotel, but you’ll likely have to pay a high rate and fees to exchange currency in this manner. However, travelers’ checks are especially beneficial for those who are traveling to China where exchange rates are kept low and travelers’ checks are a relatively safe option to bring money into the country.
9. Be Wary of Prepaid Travel Cards
If you are concerned about your credit card or cash being stolen, you might want to load small amounts on to prepaid travel exchange cards. Companies like Travelex offer cards that you can put a set amount of certain currencies on.
If this card is lost you only lose the balance on your card and you won’t have to worry about having to cancel your credit card or losing all your cash. The downside is that there are a number fees involved with prepaid cards and once you factor them in you’ll likely find that prepaid cards are one of the more expensive currency exchange options.
Before You Go
Before you set off enroute to your destination, make sure you have a plan for how you’re going to exchange your currency. You might decide to use a variety of these methods rather than just one. Perhaps you’ll decide to primarily use your travel credit card to pay for your trip expenses, but bring cash that you exchanged at your bank before the trip and your debit card with the intention of taking more money out at a foreign ATM. Whatever you end up doing, you’ll feel better knowing that you’re getting the best exchange rates and reducing your foreign exchange fees during your trip.
Author: Jeff Gitlen