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Be Aware of Exchange Rates When Traveling

Written by Nickel - 7 Comments

As I sit here in the airport waiting for my flight, I wanted to share a tip for international travelers… A few weeks ago, I talked about the best credit cards for international travel. Today, I want to talk about currency exchange.

For starters, I’ll just say that credit cards are a great way to get a good foreign exchange rate — especially if you can find one without a foreign exchange fee. But even if you have a great card, you’re likely to want at least a bit of foreign currency when traveling.

While in Argentina on a recent trip, I noticed that there were numerous currency exchange booths in the luggage claim area. As I walked past them, I noted the exchange rate — roughly 3.25 pesos per dollar. The actual exchange rate at the time? Close to 4.35 pesos per dollar.

As it turns out, there was also a bank in the airport, just outside of the secured area. Instead of changing my money at the first opportunity, I did it at the bank and got the going rate. Had I been unaware of the prevailing exchange rate, and jumped at the first chance to change my money, I would’ve lost a whopping 25%.

In fact, if I hadn’t exchanged money at all I still would’ve come out ahead as most local merchants would take US dollars at a 4:1 rate — not the going rate, but far better than 3.25 per dollar.

So if you’re traveling overseas I recommend checking the exchange rates before you travel and then making sure you’re not getting totally ripped off when you got to make the transaction.

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Published on March 28th, 2012
Modified on April 1st, 2012 - 7 Comments
Filed under: Credit Cards, Travel

About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

7 Responses to “Be Aware of Exchange Rates When Traveling”

1
J Marie Says:
March 28th, 2012 at 7:51 am
I agree, you should always be aware of the going exchange rate. On our first trip to the Caribbean, we visited Jamaica. We exchanged out money at the hotel (huge mistake), only to find out that most local stores accepted american dollars. In fact, they preferred dollars, and gave a great exchange rate when you were purchasing from them.
2
Tyler S. Says:
March 28th, 2012 at 8:31 am
Getting help from a knowledgeable and trustworthy local or frequent traveler is huge in these kinds of situations. I have avoided these kinds of scams by sticking with friends who knew what they were doing.
3
Modest Money Says:
March 28th, 2012 at 1:48 pm
Yes those currency exchange booths can be a money grab, especially when they are in expensive locations like an airport. Banks are usually the safest bet. I’m the same way that I usually try to use my credit card for the best exchange rate, but these days most of them seem to charge the foreign exchange fee.
4
Financial Advice for Young Professionals Says:
March 28th, 2012 at 1:52 pm
Always use an ATM/credit card for the best exchange rates, but as Modest Money mentioned, you need to watch out for the foreign exchange fee.

Most ATM cards don’t have this fee if I’m not mistaken.
5
Steve Says:
March 28th, 2012 at 3:14 pm
Exchange booths are quite unlikely to offer the best rates. Even banks can be hit and miss – it depends on the country. On the other hand, I’ve never found an ATM that didn’t give me a pure exchange rate. And that way you don’t to carry overly much cash around.
6
Maximus Says:
March 29th, 2012 at 1:31 pm
I (American) travel internationally quite a bit

My thoughts:

- Check with your bank on ATM fees in foreign countries. For e.g., I know Bank of America charges $5 flat fee + 3% of whatever you take out.
- Check with your credit card. Most charge 3% fee.
- Capital One credit card does not charge a foreign transaction fee!. I carry one when I travel internationally.

- Carry enough dollars to get you by for the duration of your travel.
- Exchange VERY small amount of money at the foreign airport. This will get you by if you need taxi, food, etc.
- After that, use your credit card to charge all items.
- If you cannot charge, go to a BANK to exchange money.
- Look into international banks like HSBC, Citi Bank, etc. These banks have ATM branches in foreign countries. Some banks even have partners. For e.g., Bank of America is a partner with Deutsche Bank. When I was in Germany, I used my bank of america debt card, at a Deutsche bank with NO FEES!!!

Finally, at the airport, review the bid/ask rate.
Bid = how much the market (booth) will give you for each $1 (exchange 1$ for foreign currency)
Ask = how much the market (booth) will give you for each $foreign currency (exchange foreign currency for $1)
7
Long Says:
March 30th, 2012 at 9:50 am
You’re right. Airport exchange kiosks are notorious for their terrible exchange rates. I’ve found that credit cards/debit cards give the best exchange rates because the bank is always hedging foreign currency to get the best exchange rate anyway. You will usually get better than market rates this way.

@Maximus You bring up a very good point. Travelers should check to see who their bank have alliances with as to avoid fees. Another great way to save money on fees is to do business with a bank like USAA. They refund ATM fees (up to a limit) no matter where in the world you are.

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