Travel exchange rates are a moveable feast and something that every traveler would do well to have an understanding of before they set off on their journey. You’ve finally saved up for that dream holiday, you’ve got the time off work, your bags are packed and you’re looking forward to kicking back on a beach with a Mai Tai.
There’s just one thing you haven’t done yet: purchased your foreign money. How you go about doing this is a big decision. Tourists can find themselves taking hits of ten or fifteen percent if they choose to exchange their travel funds at the wrong place. That means your holiday budget could have its wings clipped rather significantly if you’re not wise to the ways of how to get the best possible exchange rate when you’re traveling.
Tip One: Make sure you arrive at your destination with some local currency.
The biggest enemy to getting the best possible exchange rate for your foreign currency is urgency. You don’t want to find yourself at an airport having to exchange a few hundred dollars because you need to pay for a taxi. In fact, if you can avoid it (and you can with a bit of planning) you don’t want to exchange funds at an airport at all. The difference between an exchange conducted at a city bank and at an airport exchange booth can easily be 3 or 4 percent. That means that your lack of planning could cost you $15 or $20 on a $500 currency conversion if you neglect to properly compare the exchange rates.
Tip Two: Under no circumstances use your hotel’s foreign exchange counter.
Hotels are not financial service providers – they have to hold foreign currency on site until they can take it to their bank to exchange it for local money. In order to protect themselves against major currency fluctuations, they load their rates to cover this risk. It is standard practice for a hotel to increase their rates by up to ten percent. So if you make it through the airport and exchange a thousand dollars at the hotel front desk – you’re giving away a hundred bucks.
Tip Three: Use your ATM cards overseas, but use them wisely.
You will often find that the exchange rates that banks charge for an interbank international withdrawal are quite reasonable, but you’ve got to be prepared to pay two sets of fixed fees – one to the local bank and one to your bank at home. As an example, if you’re using a New Zealand ATM card in the Philippines, you can expect to pay a fee in New Zealand of around $7 NZD and a fee at the receiving ATM of 200 Philippine Pesos (that’s about four dollars). That sounds like quite a lot, but as long as you’re taking out a reasonably large sum it may work out cheaper than some of other currency exchange options.
Tip Four: If you’ve got a credit card, use it to pay for things.
Unlike ATM withdrawals, using your credit card to settle your hotel bill does not usually come with a fixed fee. You will of course be at the mercy of the exchange rates, but using your card as much as you can will often save you money in the long run. Of course, be careful, depending on what country you’re in it may not be safe to use your card outside of major hotels or retail settings. You’re obviously going to need some cash on your journey, but this can be a way to avoid getting stung on some of your bigger ticket foreign currency purchases while you’re abroad.
Tip Five: Use a foreign exchange company.
No matter if you’re changing your money before you leave or after you arrive, you will generally find the best tourist exchange rates are found at either specialist foreign exchange companies or local banks. Shop around, be sure to compare the exchange rates and depending on where you are, don’t be afraid to haggle a bit if you know the rates are over the odds.