Jazmin Li
When travelling abroad, it is advisable to order foreign currency from your bank before your trip to secure better exchange rates and reduce stress upon arrival. Airport currency exchange services are often the most expensive way to obtain foreign currency, with subpar exchange rates and additional fees. However, if you absolutely must exchange money at the airport, use a reputable company like Travelex, which offers fair exchange rates and low markups. Ordering currency in advance or using a credit card with no foreign transaction fees are better alternatives to airport money exchange, allowing you to get the most out of your money during your travels.
| Characteristics | Values |
|---|---|
| Convenience | Airport currency exchange is convenient for immediate expenses such as taxis and tips, and to skip long lines at the airport. |
| Cost | Airport currency exchange typically has poor exchange rates and may charge additional fees on top of the exchange rate. |
| Alternatives | Ordering foreign currency from a bank before departure, using a credit card with no foreign transaction fees, or withdrawing from an ATM are often cheaper alternatives. |
| Risk of unused currency | There may be restrictions or poor rates when returning or exchanging unused currency. |
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What You'll Learn
Ordering foreign currency before travelling is cheaper
Ordering foreign currency before travelling is a cheaper alternative to exchanging money at the airport. Airport currency exchange counters generally offer the worst exchange rates. It is not uncommon for airport exchanges to charge 14% more than the current International Monetary Fund (IMF) exchange rate, with some premiums exceeding 17%. They may also charge additional fees on top of the poor exchange rate.
Ordering currency from your bank before you travel is almost always better. Most major banks allow you to order foreign currencies online, by phone, or via their mobile app. You can typically pick up the currency at a local branch before your trip, and some banks will even ship the currencies to you, sometimes without charging extra for postage. Bank of America, for example, offered exchange rates in January 2024 that were roughly 6% more than the IMF rates and less than half of what airport currency exchanges were charging.
Ordering foreign currency before your trip can also save you time. Airport currency exchange counters often have long lines that cut into precious time abroad. By ordering your currency beforehand, you can skip these lines and head straight to your destination.
However, it is important to note that you may not need much cash during your trip. Many countries have largely shifted to cashless transactions, with most purchases being made via credit or debit cards. If you do need cash, it is generally recommended to use a credit card with no foreign transaction fees, or withdraw cash from a local ATM when you arrive at your destination.
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Airport exchanges often have poor exchange rates
Airport exchanges are often located where travellers need last-minute currency, such as just before they depart or as soon as they land. They know that options are limited at the airport, so they can charge higher exchange rates and fees. This is also due to the high cost of maintaining a physical presence at the airport, with kiosks and currency exchange counters paying steep rents and additional operational costs.
While airport exchanges are convenient, they are often not the best option for getting a good exchange rate. It is usually better to exchange currency before you arrive at the airport. For example, you could order foreign currency from your bank, which often provides a good exchange rate. Major banks also usually have branches abroad or partnerships with other banks, so using those ATMs can provide a decent exchange rate and eliminate out-of-network ATM fees.
If you are unable to get foreign currency before your trip, there are other options besides airport exchanges. You could use your debit or credit card to withdraw cash from a local ATM when you arrive at your destination. Alternatively, you could use your card to make purchases, as long as it does not charge foreign transaction fees.
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Use a credit card with no foreign transaction fee
Using a credit card with no foreign transaction fees is a great way to save money when travelling. Foreign transaction fees typically range from 1% to 3% of the purchase amount, with 3% being common. This might not seem significant, but these fees can quickly add up, especially for larger purchases. For example, if you spent $3000 at a hotel, you could be charged an extra $90.
There are several credit cards that do not charge foreign transaction fees, including some offered by Bank of America and Chase. These cards can provide significant benefits when travelling, such as bonus points, rewards programmes, and no annual fees. It is important to carefully review the terms and conditions of each card to find the one that best suits your needs.
When using a credit card abroad, it is essential to notify your bank and credit card company about your travel plans. This will help prevent your account from being flagged for suspicious activity. Additionally, always check the cardholder agreement to ensure your card does not charge foreign transaction fees.
While using a credit card with no foreign transaction fees can be advantageous, it is worth noting that there may be instances where cash is necessary. Carrying some local currency can be useful for tipping, transportation, or purchasing from smaller vendors who may not accept card payments.
By combining the use of a credit card with no foreign transaction fees and carrying a small amount of local currency, you can optimise your spending and save money during your travels.
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ATM withdrawals can be a better option
While airport currency exchange is convenient, it is not the best option for exchanging money. Airport currency exchange counters may have long queues, and they usually offer poor exchange rates and charge additional fees. It is not uncommon for airport exchanges to charge up to 17% more than the current International Monetary Fund (IMF) exchange rate.
Accessibility and Convenience
ATMs are widely available in most countries, and you can find them everywhere, including airports. They are typically accessible 24/7, allowing you to withdraw cash whenever needed. This accessibility is especially useful if you require cash immediately upon arrival at your destination, such as for transportation or tipping.
Cost-Effectiveness
ATM withdrawals are often more cost-effective than airport currency exchange. Airport ATMs may charge higher fees, but they can still be a better option than the airport exchange counters. Additionally, by withdrawing from an ATM, you avoid the potential extra fees and poor exchange rates associated with airport exchange services.
Fair Exchange Rates
When you use your debit or credit card at an ATM, your home bank will be responsible for the currency conversion. Banks generally provide their customers with fair exchange rates on foreign transactions to maintain customer loyalty. Therefore, withdrawing cash from an ATM and choosing to pay in the local currency can result in a more favourable exchange rate than what you might get at an airport exchange.
Safety and Security
Using ATMs for cash withdrawals can be safer than carrying large amounts of cash with you when travelling. It reduces the risk of losing money or becoming a target for theft.
Flexibility
Withdrawing money from an ATM allows you to obtain funds in the local currency as needed, helping you avoid being stuck with excess foreign currency at the end of your trip.
In summary, while airport money exchange services provide convenience, ATM withdrawals often offer better exchange rates, lower fees, and greater flexibility. By doing some research beforehand, you can identify ATMs with favourable terms and make informed decisions about when and where to withdraw cash during your travels.
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Unused foreign currency may be hard to exchange
It is generally not recommended to use the airport currency exchange, as it could mean extra fees and poor exchange rates compared to other options. Airport exchanges often charge a significant percentage more than the current International Monetary Fund (IMF) exchange rate, as well as additional fees.
To avoid this, it is advisable to order foreign currency from your bank before travelling. Most banks allow you to order foreign currencies and pick them up at a local branch, and some even offer to ship the currencies to you. Alternatively, you can use your debit or credit card at a local ATM when abroad, as long as it does not charge foreign transaction fees.
It is worth noting that currency conversion rates differ between companies, as each company manipulates the interbank rate to make a profit. Therefore, it is essential to do your research and assess the exchange rate and other fees before choosing a currency exchange service.
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Frequently asked questions
It depends on the airport and the country. Some airports have facilities that allow you to convert leftover foreign coins into points, which can then be used to purchase goods and services. However, it is generally advised to avoid exchanging currency at the airport due to unfavourable exchange rates and fees.
Airport currency exchange rates are often among the worst available. Some exchanges charge up to 17% more than the current International Monetary Fund (IMF) exchange rate, in addition to extra fees.
Ordering foreign currency from your bank before travelling is usually a better option, as it can provide better exchange rates and lower fees. Using a credit card with no foreign transaction fees is also recommended, as it can offer exchange rates that are closer to the market rate.
It is recommended to calculate exchange rates before travelling to understand the purchasing power of your money. Ordering foreign currency ahead of time can help secure better rates and reduce stress upon arrival.
Exchanging currency before your trip can provide peace of mind, allowing you to skip long airport lines and get familiar with the local currency. It can also help lower costs and maximise the amount of money you receive.
