Exchanging currency can be confusing. It can also get expensive for travelers who are not aware of exchange rates and currency conversion options. If you’re concerned about foreign currency, know there’s nothing to fear. You can prepare for your journey abroad and learn the best ways to exchange currency before you depart. With a little preparation and planning, you’ll feel in charge of your money, and you’ll know what mistakes to avoid.
In this post, we’ll show you the best places to exchange foreign currency and ways to plan. Exchanging currency can be a simple process and a lot less expensive than you might think.
What You Should Know About Exchanging Currency
Perhaps the most important thing to know about currency conversion is the exchange rate. The exchange rate is how much it costs to buy a foreign currency with your home currency. So, if you live in the United States and you plan to travel to Europe, the exchange rate will tell you how many U.S. dollars you need to buy a certain amount of euros. For example, it might cost $1.10 to buy one euro.
If you know how much it costs to convert your money to the currency of your destination, you’ll know what to expect, and you can plan your budget better. You’ll also see if you’re being charged too much by a currency exchange service.
Keep in mind that exchange rates constantly fluctuate. Currency traders on the foreign exchange market consider supply and demand and determine exchange rates based on their predictions. In most countries, the government does not regulate exchange rates and can only indirectly influence rates.
Before you exchange money, you can look up the most accurate and up-to-date market exchange rate using an online currency converter. You can even download an app to monitor exchange rates easily from your phone. That way, if you’re in a European country, for example, and someone offers to sell you one euro for $5, you’ll know you’re getting cheated. You can figure out what you should be paying before using a currency conversion service.
Generally, the more convenient a money-exchanging service, the more they will charge for their service. For this reason, you’ll typically want to avoid using currency exchange kiosks in airports. Airport kiosks and currency exchange booths usually charge a much higher exchange rate than other options. For example, while the market exchange rate might be $1 to buy 0.89 euro, you might only get 0.80 euro with $1. Although this may not seem like a lot, it can add up quickly. There are plenty of less expensive ways to exchange currency.
Best Ways to Exchange Currency
If you plan to exchange currency, the exchange rate is inevitable. However, you can keep fees to a minimum and avoid overpriced currency exchange services. Here are the best ways to exchange currency for the most savings.
1. Visit Your Bank Before You Depart
If you’re wondering where you can exchange currency for free, you might consider your bank. Your bank may not charge customers a fee to exchange currency. Your bank will also likely offer a better exchange rate than a stand-alone foreign currency business or airport currency exchange. For example, currency exchange stations in airports usually charge rates as high as 15 percent. However, expect a higher rate if you exchange currency before you depart than if you use an ATM when you arrive at your destination. If you are getting a good deal, your bank’s exchange rate will not be much higher than the market exchange rate.
Call or visit your bank and find out if they charge a fee for currency exchange services. Also, find out what their exchange rate is. Make sure to contact your bank at least a week before your departure date to ask questions and order the currency. Your bank may not have the currency you need on hand, and it could take a few days to come in. Once your bank has the foreign currency, you’ll be able to pick it up or ask them to mail it to you.
Should you exchange currency before you travel? It’s probably not necessary. There should be ATMs available at the airport, so you do not have to use a currency exchange booth or kiosk. With that said, it may be a good idea if you feel more comfortable obtaining foreign currency before you depart, or if you’re worried your debit or credit card will decline while you’re traveling. Overall, you’ll want to get most of your foreign currency while you’re abroad.
If you choose to visit your bank before you travel, find out if you can exchange the currency when you return. If not, you can exchange the currency at an airport exchange booth, but you will likely not get the best rate.
2. Use Your Debit Card at a Foreign ATM
The best way to get foreign cash is to use an ATM once you arrive. Generally, ATMs offer the lowest exchange rates. Before you leave for your trip, find out if your bank has ATMs in your destination or partners with any providers to provide fee-free ATM usage. You might be able to use your bank’s ATM or their partner’s ATM in another country and skip paying an out-of-network ATM fee. You can save a lot if you stick with your bank while abroad.
You will still pay a foreign transaction fee when you use an ATM, whether it’s in your bank’s network or not. The foreign transaction fee covers the exchange rate. If you use an ATM outside of Europe or Mexico, you may also be charged a convenience fee. Lastly, if you use a credit card rather than a debit card to withdrawal cash, you may be charged a cash advance fee by your credit card issuer.
As a general rule, it’s best to minimize cash withdrawals as much as possible to avoid fees. Plan to carry $50 to $100 worth of local currency on you each day and use other forms of payment, such as a credit card, for large purchases. If you plan withdrawals well, you won’t have to stop at an ATM too often, and you also will not have too much foreign currency left unused.
Make sure to inform your bank you’ll be traveling abroad before you leave. You don’t want your bank or credit card issuer to freeze your accounts when they see an international charge.
3. Use a Credit Card for Purchases
Using a credit card is the best way to exchange currency when cash is not needed. On average, you’ll face the lowest exchange rate possible with a credit card — better than banks or credit unions. For example, if you use a credit card with no foreign transaction fee, you can save almost seven percent over using a bank or credit union.
Before you depart, call your credit card company and ask if they charge a foreign transaction fee. If so, consider applying for a fee-free card before your trip if you have time. The average foreign transaction fee for a credit card is 1.60 percent but may be as high as three percent.
Although most cards charge a foreign transaction fee, there are plenty of fee-free credit cards available. Why not save two or three percent on purchases while traveling if it’s possible?
Also, be aware that your credit card will use its own exchange rate. Therefore, you’ll also want to find out what your credit card company charges for converting your foreign transaction to U.S. dollars. Compare their exchange rate to the market rate. That way, you can see if you feel comfortable with their exchange rate, and you’ll know what to expect when you use your credit card abroad.
Be aware that if you pay with a credit card, some merchants may ask if you want to pay in U.S. dollars or the local currency. If this happens, always choose the local currency. The merchant can choose whatever exchange rate they wish to convert your U.S. dollars to their currency. However, if you choose to pay in the local currency, your credit card issuer will determine the exchange rate. Chances are, your credit card’s rate will be a much better deal.
Aim to use a credit card as much as possible for bigger purchases so you can avoid having to withdraw cash. If you lose your credit card or if it gets stolen, all you’ll need to do is call your credit card issuer and explain what happened to resolve the problem. On the other hand, if you lose cash, it’ll be gone forever.
The above methods are the best ways to exchange currency, but they aren’t your only options. Here are a few other methods to consider that may suit your circumstances better.
1. Traveler’s Checks
In the past, travelers commonly used traveler’s checks to make foreign purchases. Now, with ATMs more readily available all over the world, traveler’s checks are no longer a popular choice. However, they still offer a few advantages.
One benefit of traveler’s checks is you can get a refund if they are lost or stolen. When you buy traveler’s checks, you’ll register them with the company you buy them from. If something happens to the check, you can get them replaced usually within a day no matter where you are traveling and cancel the lost or stolen checks. You might want to bring a few backup traveler’s checks with you if you plan to travel to remote areas that may not have many ATMs.
You can order traveler’s checks through most banks and credit unions. It may be easiest to get traveler’s checks from your bank to avoid being charged a non-customer fee. However, you’ll likely have to pay a fee to purchase traveler’s checks whether you belong to the bank or not. Traveler’s checks are sold in different denominations and currencies. You can use them like cash wherever they are accepted.
Another benefit of using traveler’s checks is they never expire. Therefore, if you have some left over from your trip, you can save them until you travel again or cash them once you get home for a fee.
2. Order Currency Online
Instead of heading to a bank to buy foreign currency, you can shop for foreign currency online. To get the best deal, you’ll need to research what’s out there and compare different rates to the current market rate. If you order a large amount of currency, you may be able to avoid a shipping fee.
You might choose to order currency online if you need a foreign currency faster than a bank can deliver, or if you simply do not want to deal with the hassle of going to a bank — some currency providers offer free next-day delivery or standard two-day delivery if you order over a certain amount of currency. While ordering currency online could be your most convenient option and the vendor you choose may or may not charge an ordering fee, that vendor also might not offer the best exchange rate. Or you might be charged rate and shipping fees for orders less than a certain amount.
Ultimately, you might consider this currency option if you plan to travel with a group and want to purchase currency in bulk. No matter where you choose to order currency online, beware of hidden fees before you make a purchase, compare exchange rates and consider shipping costs.
Plan Your Trip With Windstar Cruises
As long as you’re aware of current exchange rates and prepare ahead of time, you should not have any issue getting the best exchange rates possible. Call your bank and credit card issuers to let them know you’ll be traveling and ask what fees you can expect when you make purchases or withdraw cash abroad. If you are not satisfied with your current credit card issuer, consider applying for a credit card that offers great deals for travelers.
Now that you know more about currency exchange, you’re ready to start planning an exciting voyage. At Windstar Cruises, we can take you to the most stunning destinations around the globe, from secluded beaches to bustling ports. Contact us to book your next adventure today!