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So you’ve renewed your passport, booked airfare and secured your hotel. The next item on your list? Getting local currency so you can experience the local life.
But chances are you won’t get the best deal on your currency exchange by using the airport cash desk. It may be convenient, but it could also mean extra fees and subpar exchange rates compared to other options.
We’ll break down your choices and arm you with info that can help you get the most for your dollar when exchanging currency on your next trip, so you can enjoy life abroad that much more!
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What kinds of fees do currency exchanges charge?
Currency exchanges both at home and abroad may charge you more than the real exchange rate. For example, Travelex — one of the world’s most popular exchanges — listed the exchange rate for the Euro at $0.7799 at the time of writing this article. The real exchange rate was about $0.8554 per $1 converted, according to XE Exchange.
This may sound like a small difference on paper, but the more money you convert, the more it can add up. For example, if you exchanged $1,000 at Travelex for the rate above, you’d pay a 75.50 euro fee because of the exchange rate.
FAST FACTS
How to know if you're getting a good exchange rate
To start, use a reputable exchange rate app or website like XE Exchange. This service uses information from more than 100 sources to find the most accurate exchange rate data. You can use its exchange rate when comparing rates to your currency exchange.
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The best alternatives to the airport currency exchange
Just because the airport currency exchange doesn’t give you the best deal doesn’t mean you’re stuck paying unnecessary fees to get local currency. Here are three ways you can get a better exchange rate when making purchases abroad.
Use your credit or debit card when possible
One of the best ways to get a good exchange rate abroad is by using your credit card to make purchases — as long as the card doesn’t charge foreign transaction fees.
Check your cardholder agreement — if your current card charges a foreign transaction fee, consider applying for a card from our list of cards with no foreign transaction fees.
Fees aside, using your credit or debit card is probably your safest bet for getting an exchange rate that’s closest to the market rate. But be aware that while your card’s issuer bases its exchange rate on market conditions, it does set its own exchange rate for transactions. This can be updated daily based on market rates.
Before your trip, ask your card issuer what rate it’s using, then compare it with the market rate using a currency-comparison website, like x-rates.com. And while you’re away, remember that Visa and Mastercard both have foreign exchange calculators posted online, so you can see what your total purchase price will be before swiping.
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Use a local ATM (with caution)
Another way to get currency abroad is by using your U.S. debit card at a local ATM.
But be cautious when doing so — some debit cards charge out-of-network transaction fees. Call your bank before your trip to see if your card charges these fees. If so, look for a debit card that doesn’t.
If you’re not sure if your U.S. debit card will work abroad, call and ask. It’s also a good idea to let your bank know where and when you’ll be traveling in advance, to avoid a possible freeze on your card for suspected fraud. If you’re already away, look at the processor logos posted on the front or side of the ATM to see if it supports your card’s payment network (Visa, Mastercard, etc.).
Also, some ATMs charge a nonbank usage fee or provide unfavorable exchange rates. We recommend using ATMs from local or international banks, versus tourist-focused ATM companies like Euronet, for a more likely shot at the best exchange rates.
Why is this? Some tourist-focused ATMs use dynamic foreign exchange rates. This means that the ATM will show you your withdrawal in both the local currency and your home currency, allowing you to pick which currency you’d like to process your withdrawal in. Processing the withdrawal in U.S. dollars could give you a less-than-favorable exchange rate.
If you do have to use a tourist-focused ATM, we recommend choosing the local currency for your transaction.
Order currency ahead of time
One of the best and most cost-effective ways to get local currency for your destination is by ordering it ahead of time from your bank. Bank of America, PNC and other U.S. banks will exchange currency for you in-branch. We recommend pulling up XE Exchange or another online currency converter to compare their rate to the market rate.
But beware of bank fees. Bank of America, for example, charges a $7.50 delivery fee for currency orders of less than $1,000. This fee is waived for customers ordering $1,000 or more.
You should also be sure to call your bank ahead of time when ordering currency. They may not have your currency of choice on hand or could charge a fee for expedited delivery. In the case of Bank of America, this fee is $20.
Bottom line
It pays to be prepared when traveling abroad. The airport currency exchange or those near tourist city centers may advertise no fees, but often have a less-than-stellar exchange rate.
Our advice? Use a credit card with no foreign transaction fee when possible. Or get your cash as local currency from a local ATM when abroad or from your bank before your trip. If you do decide to use a currency exchange, do your research and assess the exchange rate and other fees beforehand.
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About the author: Andrew Kunesh is a finance and technology writer from Chicago. He’s passionate about helping others maximize their money and purchases. When he’s not writing, you’ll find Andrew traveling the world in search of the pe… Read more.
I'm Andrew Kunesh, a finance and technology writer based in Chicago, and I'm passionate about helping individuals maximize their money and financial decisions. My expertise extends to various topics within the financial sector, including currency exchange, credit cards, and travel-related financial considerations. I've delved deep into the intricacies of currency exchange mechanisms, transaction fees, and optimal strategies for obtaining local currency during international travel.
Now, let's dissect the concepts presented in the article:
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Editorial Note: Intuit Credit Karma and Compensation Disclosure:
- The article begins with a disclaimer stating that Intuit Credit Karma receives compensation from third-party advertisers. This is a common practice in the financial industry and is crucial for readers to understand potential biases in the content.
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Currency Exchange Mechanisms:
- The article emphasizes that airport currency exchange desks may not offer the best rates. It highlights how popular exchanges, like Travelex, may list rates that deviate significantly from the real exchange rate. This is a fundamental concept in understanding the potential impact of fees and rates on currency conversion.
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Use of Reputable Exchange Rate Platforms:
- The article recommends using reputable exchange rate apps or websites such as XE Exchange to determine accurate exchange rate data. This underscores the importance of leveraging reliable sources when assessing currency exchange rates.
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Factors Affecting Exchange Rates:
- The piece discusses how fees and exchange rates can significantly impact the amount received during currency conversion. It uses a practical example involving Travelex to illustrate how even a seemingly small difference in the exchange rate can result in substantial fees for larger amounts.
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Alternatives to Airport Currency Exchange:
- The article suggests three alternatives to airport currency exchange:
- Using Credit or Debit Cards:
- Highlights the importance of using cards without foreign transaction fees and provides tips on comparing the card issuer's rate with the market rate.
- Using Local ATMs:
- Cautions about potential fees and unfavorable exchange rates associated with some ATMs, advising users to choose local or international bank ATMs for better rates.
- Ordering Currency Ahead of Time:
- Recommends ordering currency from banks before the trip, emphasizing the need to compare rates and be aware of potential fees.
- The article suggests three alternatives to airport currency exchange:
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Bank Fees and Considerations:
- The article warns about potential bank fees, such as delivery fees for currency orders, and advises readers to check with their banks for possible charges and to ensure currency availability.
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Author's Bottom Line:
- Encourages readers to be prepared when traveling abroad, advocating for credit cards with no foreign transaction fees or obtaining local currency through ATMs or pre-ordering from a bank. It stresses the importance of researching and assessing exchange rates and fees before making currency exchange decisions.
In conclusion, the article provides valuable insights for individuals looking to optimize currency exchange during international travel, combining practical tips with a thorough understanding of the financial mechanisms involved.
