Written by 22:06 Travel Tips

Foreign currency travel tips

Before you leave on your trip, here are some foreign currency travel tips that can help save you money and avoid unnecessary fees.  Foreign currency doesn’t need to cost you an arm and a leg, if you plan well. With a little research, you can use the money you save in fees and charges for your vacation, instead of giving it to foreign currency exchange offices.

There a lot of different options to get foreign currency before you leave home and after you arrive at your destination.  It’s a good idea to have at least some local currency with you when you get off the plane.  We make sure we have enough to last us until we can get to our first hotel.  Beyond that,  you’re probably better off trying to get to an ATM as soon as you can.  Remember through, that you never know when you’ll be able to get to an ATM that works with your ATM network.  Some ATMs in foreign countries do not connect to international networks.  And, even if they do, they may not be “online” with your home country bank.    

Rates, rates, rates

The key to know if you’re paying a fair rate for foreign currency is to check the base exchange rate.  Don’t trust the exchange services themselves, check the true rate.  You can do that easily by going to Yahoo Finance or just about any other financial news site.  XE gives you live, up to the minute conversion rates.

Once you know what the “real” rate is, then start looking at the different foreign currency sites, like American Express, Travelex, etc., to see what their exchange rates are.  The difference between the two, or the “spread” is part of the premium your paying for the right to buy the currency (think of that as just one piece of the exchange services profit).  The smaller the difference between the two, the better off you are.

Fees, fees and more fees

The “spread” in the rate is just one part of the profit companies make on foreign currency.  Next will be the transaction fees.  Make sure that you pay little or no transaction fees on your foreign currency transaction.  Remember, they’re already making money on the spread.  Make sure to add these “transaction fees” in to your total cost of buying your foreign currency.  Also, if you’re having your currency shipped to you, make sure you’re paying reasonable rates for shipping.

IAH TIP: Don’t forget to check foreign exchange rates at your local bank or local American Express travel office (in larger cities).  Sometimes, their rates can be competitive, plus you can pick up the currency yourself, avoiding overnight shipping fees.  Remember though, that these local offices probably only carry the major foreign currencies (British Pound, Euro, Canadian Dollars, etc.).   Other foreign currencies may need to be special ordered, so make sure you allow enough time.

Calculate and compare

So, now that you have all the ammunition you need to, calculate exactly what that foreign currency is going to cost.

Amount of currency multiplied by “exchange services rate”, plus the fees (transaction and shipping) DIVIDED by Amount of currency

Now compare that result to the “base exchange rate” from the financial services websites (XE, Yahoo, etc.)  That’s what your real rate of exchange is.

IAH TIP: If you’re going to get foreign currency before you leave, it’s probably better to get a reasonable amount.  You certainly don’t want to spend $10 in fees to get $100 in currency at a high rate.  On the rare occasions we get currency before we leave we usually get between $500-$1000.  You should determine how much you feel comfortable carrying, what your willing to lose (pickpockets, stolen from hotel room safe, lost, etc) and what you reasonably need to have for at least the first part of your trip.

Leftover foreign currency

Whether you took too much foreign currency with you on your trip or just come home with some, think twice about exchanging in back to your home currency.  What you learned above works in reverse.  When you “sell” your foreign currency back, you’ll be given a lower rate than what the “real” exchange rate is.  Remember, you probably paid MORE than the exchange rate and now you’re going to get LESS than the exchange rate.  That’s a wide spread.  Plus again, you may be charged a fee in addition to the lower rate.  It’s get’s expensive, fast, even on small amounts.

IAH TIP: If we know we’ll eventually be headed back to a foreign destination eventually, we just keep the extra currency (assuming it’s a reasonable amount).  That way, when we go back, we don’t even worry about getting money before we leave and we’ll already have some in our pockets to get us through the first day or so of our trip without needing to exchange money or find an ATM.

Travelers Cheques: the alternative

The big advantage with travelers cheques is that if they are lost or stolen, you can get them replaced quickly.  While it is a pain to keep track of each one as you spend them, it’s still safer than cash. The biggest name in travelers cheques is still American Express, Thomas Cook and Visa/Mastercard.  American Express travelers cheques are available at any American Express Travel Office, banks, your local AAA office or online directly from American Express.  Thomas Cook cheques are available online and some banks, while Visa/Mastercard cheques are available online, at some banks or your local Citicorp branch.

 IAH TIP:  Make sure to leave a list of your travelers cheque numbers at home with someone you can reach.  That way if they’re lost or stolen, you can have the information handy to have them replaced.

Travelers cheques fees & the exchange rate

Travelers cheques certainly aren’t free.  Usually you’ll pay a percentage fee based upon the dollar value of the cheques you purchase.  You may qualify for reduced or fee free travelers cheques if you’re an American Express card member or member of AAA Motor Clubs.

When you take cheques overseas that have are in US Dollars, you’ll be at the mercy of the place where you use them to give you a fair exchange rate.  And, you can almost bet it will not be “fair” or near the true exchange rate.  The good news is cheques are also available in popular foreign currencies as well, such as British Pounds or Euro.  While you want be at the mercy of the merchant cashing your cheque when it’s in the local currency,  you will pay the issuing companies exchange rate, which will probably be more than the real exchange rate, but less than what a merchant may charge you.

 Many places will charge you to cash your cheque, if you’re not using it for merchandise or a hotel stay. With American Express or Thomas Cook, you can go to one of their local offices and cash your cheques with no additional fees.  If they are in the local currency, you also won’t be jilted by an unfair exchange rate.  You’ll find Thomas Cook or American Express Travel offices in most major US and foreign cities.  Banks will also usually cash travelers cheques and may or may not charge a fee.

IAH TIP:  Remember foreign banks have much different hours than most US banks.  There are many different bank holidays when banks are closed and banks in some countries have very short daily business hours or may be closed in the middle of the day.




Last modified: December 30, 2013