Jazmin Li
Exchanging currency is an essential part of international travel, and it is important to understand how currency exchange works to get the most value for your money. Airport kiosks and currency exchange counters may be convenient, but they typically offer poor exchange rates and high fees, which can be a costly mistake for travellers. It is recommended to plan ahead and order foreign currency from your bank before travelling, as they often provide better rates and lower fees. However, some sources suggest that exchanging money at the airport is the best option due to competitive rates and low fees.
| Characteristics | Values |
|---|---|
| Convenience | Airport kiosks are convenient for travellers who need foreign currency at the last minute. |
| Exchange rates | Airport currency exchange counters generally offer poor exchange rates |
| Fees | Airport kiosks may charge higher fees, which are sometimes hidden within poorer exchange rates. |
| Alternatives | Ordering foreign currency from your bank before travelling is a better alternative. Credit cards are also a popular option for travelling overseas. |
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What You'll Learn
Airport exchange rates are often unfavourable
Airport currency exchange counters are known to offer poor exchange rates, with some sources stating that they are among the worst you'll find. These exchange desks set their own rates, which are usually higher than what you'd find elsewhere. They take advantage of their location and the fact that travellers may need local currency at the last minute, charging higher rates and fees. For example, it is not uncommon for airport exchanges to charge around 14% more than the current International Monetary Fund (IMF) exchange rate, with some premiums exceeding 17%.
Additionally, airport exchanges may charge extra fees on top of their already poor exchange rates. These fees can be a fixed amount or a percentage of the total amount exchanged. As a result, travellers may end up paying significantly more than expected due to the combination of poor exchange rates and hidden fees.
To get a better deal, it is recommended to plan ahead and explore other options before arriving at the airport. Ordering foreign currency from your bank before travelling is often a better choice, as banks typically offer more competitive exchange rates and lower fees. Major banks often have branches abroad or partnerships with foreign banks, allowing for better exchange rates when using their ATMs overseas.
If you need cash immediately upon arrival, consider ordering foreign currency online to be delivered to your home or picking it up from a local branch before your trip. This way, you can secure a better exchange rate and avoid the long lines at airport currency exchange counters, which can cut into your precious time abroad.
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Ordering foreign currency from your bank
Most banks allow you to order foreign currency online, via their website or mobile app, or by phone. You can usually specify the currency you need, the amount, and the pickup method. Some banks may require you to place the order in person at a branch, where you will need to provide valid identification. It's a good idea to check your bank's exchange rate against a trusted source, such as Reuters or the International Monetary Fund, to ensure you're getting a fair deal.
For example, let's say you're travelling to the United Kingdom and your bank is offering an exchange rate of £72 per $100. At an airport kiosk, you might only get £67 per $100, costing you extra money. Bank of America, for instance, offers exchange rates that are roughly 6% more than IMF rates and less than half of what airport currency exchanges are charging. If you're a Bank of America Preferred Rewards client, you may even get a discount of up to 2% off the published exchange rate.
Ordering currency from your bank before you travel is a great way to save money and avoid the hassle of long lines at airport currency exchanges. It's a simple process that can be done from the comfort of your home, and you can pick up the cash at a local branch before your trip. So, if you're planning international travel, be sure to order your foreign currency from your bank in advance.
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Using credit cards overseas
Using a credit card overseas can simplify your spending while travelling, as cash can be clunky, conversion rates tricky, and cash is prone to loss or theft. If a credit card is stolen, it can be suspended and replaced quickly. However, it is important to understand your card's international fees and restrictions.
Firstly, make sure to alert your card issuer of your travel plans in advance so they don't assume that your card has been stolen and used without your consent. Many credit card issuers charge fees for purchases made overseas with a foreign merchant. These foreign transaction fees typically range from 1% to 5% of the purchase amount. As a result, you can pay significantly more than the listed price of your purchases overseas, which can really add up throughout a trip.
Secondly, when using your card outside your home country, whether in a shop or a restaurant, you may be charged an extra fee for not paying in the local currency. If you have the choice between paying in your home currency or the local currency, consider choosing the local currency. That way, you avoid dynamic currency conversion fees (when conversion fees are processed in your home currency) and in most cases, get a better exchange rate.
Thirdly, some countries use the less sophisticated magnetic stripe system, so merchants may not accept your credit card if you don't have proper identification. As long as you carry your passport, you should be fine. Merchants simply want to be able to verify that the person using a credit card is authorised to do so.
Finally, it is a good idea to check your contact details are up to date before you travel. This way, your bank can get in touch with you if they need to. If you need to, you can update your contact details. It is also worth taking another type of payment card with you as a backup – so take a debit card or another credit card too.
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Foreign transaction fees
It is important to note that foreign transaction fees are separate from currency conversion fees, which are hidden" fees charged when you choose to have your transactions presented in your home currency instead of the local currency. Currency conversion fees typically amount to about 1% of the purchase price. While some cards charge both types of fees, others may waive one or both. For example, MasterCard offers credit cards with no foreign transaction fees from issuers like Citibank and Capital One. Discover, Charles Schwab Checking, and Capital One 360 are other examples of financial institutions that do not charge foreign transaction fees for debit or credit card purchases.
To avoid paying foreign transaction fees, it is recommended to use a credit or debit card that does not charge these fees. If you are planning a trip abroad and your existing cards incur foreign transaction fees, consider applying for a new account with a card that waives these fees a few months in advance. Additionally, ordering foreign currency from your bank before travelling is generally advised over exchanging money at airport kiosks, as the latter often offer unfavourable exchange rates and may charge additional fees. By ordering currency through your bank, you can ensure you receive authentic money at the best legal rate.
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Currency exchange kiosks
For example, if your bank offered you an exchange rate of £72 per $100, the airport kiosk may give you only £67 per $100. Some sources claim that airport exchanges can charge up to 14% more than the current International Monetary Fund (IMF) exchange rate, with some premiums exceeding 17%.
Therefore, it is advisable to plan ahead and exchange your currency before reaching the airport. Ordering currency from your bank before you travel is almost always a better option. You can also use your bank's smartphone app to order currency, which you can then pick up in person at your local branch.
If you are unable to exchange currency at your bank, you can try a currency exchange store or kiosk, but you are still unlikely to get the best rate.
ATMs are another option for exchanging currency. However, it is important to note that not all ATMs accept foreign currency, and those located in tourist areas may offer less favourable rates. It is recommended to use an ATM from a local bank or credit union, as they often provide competitive exchange rates and low fees.
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Frequently asked questions
Airport exchange rates are often among the worst you'll find. They are usually much less favourable than your bank at home and may charge additional fees on top of the poor exchange rate.
Airport exchange kiosks offer convenience, but they take advantage of the fact that you're likely to need foreign currency in a hurry. If you can, it's always better to exchange your money at your bank before you travel.
If you're travelling on short notice and need foreign currency in cash at the airport, it could be worth paying the extra cost for the sake of convenience. However, you may be able to withdraw cash from an ATM at a better rate than the airport exchange.
Exchange rates change due to a variety of factors, including economic performance, interest rates, political stability, and supply and demand. To get the best rate, it's a good idea to shop around and compare exchange rates from different providers. You can also use a credit card with no foreign transaction fees to get the most accurate exchange rate possible.
