Travelling abroad is a fun and exciting way to learn about the world, its history, different cultures, and new foods.
Still, you can’t always use the U.S. dollar when you travel. Getting foreign currency is easy, but you need to be careful about where you exchange your dollars so you don’t get stuck with a bad exchange rate.
When you know where to exchange currency, you are much less likely to end up in the worst place.
KEY POINTS
- Airport shops and kiosks that sell foreign currency are not the best places to exchange currency.
- To get the best exchange rates, go to a local bank or an ATM at a bank.
- Check to see if your U.S. bank will reimburse you for foreign ATM fees if you use an ATM outside of the U.S.
- Not every place to exchange currency has the same rate.
- Some places will take advantage of tourists, so it’s best to look around for a fair price.
How to Exchange Currency
Currency exchange is the process of trading the currency of one country for that of another.
This is done through buy and sell transactions. The international spot rate, which is set by a group of banks that trade currencies, tells us how much one currency is worth in relation to another.
The global economy is open 24 hours a day, so foreign exchange rates change all the time.
As economies grow and shrink, inflation and deflation happen to currencies, and trade deficits grow and shrink.
Because of this, the value of one currency compared to another goes up and down.
The current market exchange rate between two currencies is determined by how often financial institutions, investors, and speculators buy and sell large amounts of currencies.
In general, currency exchange rates are given against the U.S. dollar, the pound sterling, the euro, and the Swiss franc, which are the most stable and widely used currencies for large business transactions.
When you go abroad and want to buy something with the local currency, you usually exchange a small amount of money and pay a higher exchange rate so the currency exchange can make a small profit.
Worst Places to Exchange Foreign Currency
Not all places that exchange currency charge the same rate, and some businesses in tourist areas take advantage of travellers who need money to make money.
The Airport
Almost all travellers’ first stop in a new country is the airport terminal, which is also the first place where they can exchange currency.
The exchange rate at the airport isn’t always the best. Why? Because currency exchange shops in airports know that you might need local currency to catch a bus, train, or taxi, they give you the worst exchange rate to make a lot of money.
If you can, you should get the money you need ahead of time from a local bank or an ATM or bank inside the airport.
Currency exchange Shops
When you leave the airport, you might end up in a market, bazaar, or a place where lots of tourists go.
Exchange shops try to be in places where tourists will need them and use them to make money.
You might get better exchange rates at a currency exchange than at the airport. But even though the rates are better, you probably won’t get a good deal.
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Good Places to Exchange Foreign Currency
ATMs and Local Banks
A local ATM or bank is the best place to exchange money. Many foreign banks are happy to exchange your dollars for local currency at a better rate than you can find elsewhere, or you can use an ATM to skip the line.
Many U.S. banks will refund your foreign ATM fees and won’t charge you to use a foreign ATM.
If you need cash, just pull out your debit card, find the nearest bank ATM (not an ATM kiosk in a mall or grocery store), and rest easy knowing you got the best rate for your dollars.
Which Is Changer to Exchange Foreign Currency, the Airport or the Bank?
The airport is a more expensive place to exchange money than a bank or ATM.
This is because stores and kiosks at airports that sell foreign currency mark up the exchange rate to make a profit.
They know that people who just got off a plane probably need money right away.
Banks and ATMs often charge fees, but those fees are usually lower than the markup at the airport.
Which Banks are the Best to Change Foreign Currency?
Most of the time, the best places to exchange money are local banks or credit unions.
Also, most major banks have a number of ATMs that can be used outside of the country. This makes them easy for travellers to use.
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Alternative to Changing Foreign Currency
A traveller can choose to pay for everything with a credit card, as long as that credit card is accepted everywhere they go in the country they are visiting.
Credit cards may not be accepted everywhere in some countries, smaller cities, or rural areas.
A tourist should be aware that if they use their card abroad, they will likely have to pay foreign transaction fees.
There are also traveler’s checks, but they aren’t used as much as they used to be because credit cards are so popular now.
Conclusion
If you look closely, you can find banks all over the central business district, in busy neighbourhoods, and even at the airport in most big cities.
Even if you have to pay a small ATM fee, the bad exchange rate you’ll get at the airport or a currency exchange store is easy to make up for if you get enough cash.
If you follow that plan, you can enjoy your trips and not worry about getting ripped off when exchanging money.
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