Travelers lose over 5,000 bucks a lifetime to this pitfall…
If you’ve ever been to the airport, you’ve undoubtedly seen one of those big inviting currency desks, right in the middle of the action, and if you’ve been to one – you’ve almost undoubtedly been ripped off, losing out on money. Even with gigantic, comforting signs proclaiming “no fee, best rates or zero commission” travelers aren’t getting the real story when it comes to taking out foreign currency. Here’s how to ensure you always get the best rate for your currency exchanges, while avoiding all the most common travel pitfalls.
Telling customers “no fee exchange or 0% commission” is just a way to distract travelers from what really matters: the actual rate of exchange. For the most part, there are two different rates in the world: the commercial rate and the bank rate. These rates can differ by 10% or more, so whereas one will offer 1.25 dollars for every Euro you exchange, the other may only offer a mere 1.13. That’s more than 10 cents per dollar – wasted! Airport currency exchange desks and those found in major cities typically are the worst, offering a commercial rate of exchange with inferior conversion rates, compared to bank (market) rates of exchange. Yes, you read that right. The airport is often the very worst place to exchange money for foreign currency. Even though they say catchy things like “no fee” or “amazing rates”, they’re not.
Always do the math first. Using low fee debit cards abroad, such as Revolut can save substantial money versus an airport or high street money exchange desk. Virtually all debit card transactions offer competitive “bank rates” of exchange, so even if a withdrawal fee is charged to you, you’ll likely still save money, especially when making one large withdrawal. Just watch out for ATM’s abroad with low withdrawal limits, before making a transaction! Companies such as fx.com and transferwise.com offer free, brilliant guides to the best going rates for each currency – and also which bank offers the most competitive rates for customers. Good to know, right? Of course if you’re afraid of landing without any local currency, just go directly to your bank at least a week before travel to request foreign bills. And with the world going cashless, more and more credit cards offer no foreign transaction fees.
And if you want to take it to the next level, some banks offer better banking rates than others. While almost every bank rate of currency exchange is better than a commercial rate, some banks are far better than others. The BBC and Transferwise recently revealed that some banks will offer rates which can save over $40 per $1000 in foreign currency over competitors. You can view the currency best list here. Long story short: use fx.com, use transferwise.com and be sure to avoid most foreign currency businesses in airports and cities, since they’ll rip you off for as much as 10 cents on the dollar, even if they say there’s no fee. Hey, It’s your money…
If you can show me someone who will offer me 1.4 Euros per US dollar, I have a truckload of cash ready and waiting.
I signed up for a Fidelity checking account which comes with a no foreign transaction fee and they refund any ATM fee I get charged anywhere. I just go to an ATM at the airport and get cash. Since going to the ATM is free I don’t take out a big amount initially since cash is just for places that won’t take credit cards. I tell everyone i know that’s about to travel to avoid exchanging their money at the airport.
Banks also have small packs of money ready to go. You are charged the exchange rate of the day. No extra fees. Found that out yesterday while at ANZ in Australia.
Even in the era of credit cards, I still find I need a little foreign currency. Here’s what I know:
Vancouver, BC, Canada: VBCE Vancouver Bullion and Cash Exchange has branches in Richmond and Vancouver. They give good rates CAD-USD and decent CAD-Euro and GBP. Better than the airport, better than major banks and better CAD-USD than in the US.
GBP – Some currency exchanges near Victoria Station in London give better rates than banks and the airport.
South Korean won – some banks have better exchange rates for USD in the airport departure area than the same banks in the airport arrival at ICN. Strange.
I keep USD, CAD, GBP, Australian dollars, Singapore dollars, Japanese Yen, Euro, Swiss francs, Swedish krona and small amounts of Indian rupees. Beware that some countries demonitize currency. In other words, they are replaced with new versions and become worthless. GBP pounds are like this though you can go to the Bank of England to exchange them forever. This happened to Indian rupees (didn’t affect me because I only had a few small bills), Swedish krona, and eventually Swiss francs.
A trend I’ve noticed lately is a request at the ATM that goes something like this:
“Do you want us to deduct 20,000 yen or $190 From your account?”
Since 20,000¥ is converted as $184 at my bank it is best to choose the local currency rather than your home currency.
Many restaurants here in Japan also ask you to choose between currencies when you use a US credit card. It’s always best to have the transaction delineated in ¥ rather than $.
p.s. Thanks for your amazing fare-finding advice. You’re the best.
How does this happen? :
I send my wife to Quebec to stay with relatives, and visit her elderly father in a nursing home there. I give her my Discover card to buy gas and food, etc for the trip up, and back. Knowing Discover is not accepted in Canada, I give her $125.00 USD, which she exchanges at a bank in Quebec. Being the trusting, gullible, naive person she is, she trusts them. They give her $145.00 in Canadian money. I later Googled the exchange rate to find out that $125.00 in US currency equals $163.23 in Canadian currency. She claims Google is wrong. What gives? I feel i got ripped off.