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. Ordering currency from your bank can also help lower the cost of exchanging money and maximize the amount you get in return. Most banks allow you to order foreign currency, which you can typically pick up at a local branch before your trip. Some banks may even ship the currency to you. However, if you need to exchange currency at the airport, it is recommended to use a reputable company like Travelex, which is known for fair exchange rates and low markups.
| Characteristics | Values |
|---|---|
| Is it advisable to exchange currency at the airport? | No, it is not advisable due to poor exchange rates and high fees. |
| What are the alternatives to exchanging currency at the airport? | Ordering foreign currency from your bank before travelling, using a credit or debit card, or exchanging currency at a local branch of a reputable company like Travelex. |
| What are the benefits of ordering foreign currency in advance? | Better exchange rates, lower fees, and reduced stress upon arrival. |
| What are the risks of ordering foreign currency in advance? | Unused currency may result in losses due to restrictions on returning or exchanging it, reliance on cash, and budgeting issues. |
| How can I get the best exchange rates? | Compare rates with various dealers, on different portals, and on different dates. Use a trusted source like Reuters or the International Monetary Fund to find current exchange rates. |
| What are the considerations for using credit or debit cards abroad? | Foreign transaction fees, which can range up to 3% of each purchase, and limited acceptance in certain destinations. |
| How can I avoid ATM fees abroad? | Use ATMs inside banks or businesses, and consider a travel-specific ATM card with access to only the funds needed for the trip. |
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What You'll Learn
Ordering foreign currency before arriving at the airport
Benefits of Ordering Foreign Currency in Advance:
- Convenience and Time Savings: Ordering foreign currency before your trip ensures that you have cash on hand for immediate expenses, such as taxis and tips. You can avoid waiting in potentially long lines at airport currency exchange counters, saving precious time during your travels.
- Better Exchange Rates: By ordering in advance, you can lock in a more favourable exchange rate compared to airport exchanges or local exchanges at your destination. Airport currency exchange services often offer the least favourable rates and can charge additional fees on top of poor exchange rates.
- Peace of Mind: With foreign currency already in your possession, you won't need to worry about finding ATMs or foreign bank branches in a new place. Having local currency before you land can also help you familiarise yourself with the currency and its denominations.
Considerations:
- Risk of Unused Currency: There is a possibility that you may not use all the foreign currency you ordered. Returning or exchanging unused currency may come with restrictions and unfavourable rates.
- Reliance on Cash: Some travellers prefer to minimise carrying large amounts of cash due to security concerns or the lack of rewards associated with cash transactions compared to credit card purchases.
- Budgeting: Managing cash expenses while travelling can be challenging, and you may find yourself tempted to spend more to use up extra foreign cash.
How to Order Foreign Currency:
You can typically order foreign currency from your bank before your trip. Most banks allow customers to order foreign currency in person, by phone, or online. Here are some key considerations:
- Account Requirements: You will usually need to have an account with the bank to utilise this service.
- Processing Time: Ordering foreign currency from a bank typically takes three days or less, and sometimes it can be ready for same-day pickup or delivery. However, it's important to confirm the timeline with your bank.
- Pickup and Delivery Options: Many banks offer the option to pick up the foreign currency at a local branch before your trip. Some banks also provide home delivery for a small fee, but you'll need to factor in additional time for shipping.
- Minimum and Maximum Amounts: Banks usually have minimum and maximum limits for foreign currency orders. For example, a common minimum amount is $100 to $200, and a typical maximum is $10,000 within a 30-day period.
- Fees: Understand all the fees involved, including service fees, shipping fees, and currency conversion fees. These fees can vary depending on the bank and your account status. For instance, some banks waive fees for premium account holders.
- Exchange Rate Comparison: Use trusted sources, such as Reuters or the International Monetary Fund, to find current exchange rates and ensure you're getting a fair deal.
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Using a credit or debit card instead of cash
While travelling, you may want to carry a mix of payment methods, including some pre-ordered foreign currency, a credit card, and a debit card. Credit cards are convenient and can be used for larger purchases such as plane tickets, accommodation, transportation, car rentals, and expensive meals. They also offer benefits such as travel insurance, trip cancellation insurance, and lost baggage insurance. Additionally, you may benefit from insurance coverage on purchased items. However, using a credit card when travelling can lead to overspending, and you may be charged interest if you don't pay off your bill on time. Some credit cards also charge foreign transaction fees, which can add up significantly. Therefore, it is essential to check with your credit card company about any applicable fees and benefits before your trip.
Debit cards are also a convenient option for travellers. They rarely carry surcharges or merchant fees, and you can easily track your spending through your financial institution's website or app. Additionally, you can link your debit card to various third-party payment apps. However, when using your debit card to withdraw cash from ATMs abroad, you may incur foreign transaction fees, typically ranging from $2 to $7 per cash withdrawal. To minimise these fees, it is advisable to withdraw larger amounts of cash at once. It is also important to note that some foreign merchants may not accept debit cards, so carrying some local currency is always recommended.
Compared to exchanging currency at the airport, ordering foreign currency from your bank before your trip can secure better exchange rates and reduce stress upon arrival. Banks typically offer competitive rates and lower fees for currency exchange. However, it is essential to understand all the fees involved, as some banks may charge service fees for transactions below a certain amount or shipping fees for delivering the foreign currency to you. Alternatively, you can pick up the foreign currency at a local branch before your trip to avoid shipping fees.
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Understanding currency exchange rates
An exchange rate is the value at which one currency can be traded for another. Exchange rates are always viewed in relation to another currency. For example, an exchange rate of 1.07 US dollars to euros means that one euro is worth $1.07. The US dollar is the most commonly used reference currency.
Exchange rates can be free-floating or fixed. A free-floating exchange rate changes due to supply and demand in the foreign exchange market. A fixed exchange rate is pegged to the value of another currency. For example, the Hong Kong dollar is pegged to the US dollar and will always fall within a certain range relative to it.
The exchange rate between two currencies is determined by interest rates, economic activity, gross domestic product, and the unemployment rate of the countries. Exchange rates can change daily or even hourly.
When exchanging currency, the sell rate is the rate at which a traveller sells foreign currency in exchange for the local currency. The buy rate is the rate at which travellers can buy foreign currency.
When exchanging currency, it is best to avoid airport exchanges as they tend to have poor exchange rates and additional fees. Ordering currency from your bank before travelling is usually a better option as it can provide better exchange rates and lower fees.
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Exchanging currency at the airport
However, airport currency exchange counters generally offer poor exchange rates and high fees. These higher rates can significantly reduce the foreign currency you receive, especially when converting large sums of money. For example, one source notes that airport exchanges offer to sell at 0.91 USD per CAD, while the wholesale rate is closer to 0.77, resulting in an 18% markup. In addition to higher exchange rates, many airport currency exchange services impose service fees or transaction charges, further eroding the value of your money.
Due to these high fees and poor exchange rates, it is often recommended to order foreign currency from your bank before travelling. Many banks offer currency exchange services that beat airport rates by 5% or more. Ordering currency in advance can also help you secure better exchange rates and reduce stress upon arrival. If it's too late to order foreign currency from your bank, consider using ATMs abroad, especially those from major banks or partner banks, as these often provide decent exchange rates while eliminating out-of-network ATM fees.
If you absolutely must exchange money at the airport, use a reputable company like Travelex, which is known for fair exchange rates and low markups.
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Foreign transaction fees
There are several ways to avoid foreign transaction fees when travelling:
- Get a credit or debit card without foreign transaction fees: Many banks offer credit and debit cards without foreign transaction fees. Capital One and Discover are unique in that they don't charge foreign transaction fees on any of their card products. Some no-annual-fee cards with no foreign transaction fees include the Bank of America Travel Rewards credit card and the Wells Fargo Autograph Card.
- Open a bank account without foreign transaction fees: Charles Schwab is a popular fee-free bank option.
- Order foreign currency before your trip: Ordering foreign currency from your bank before you travel can help you secure better exchange rates and lower fees.
- Use a reputable currency exchange company: If you must exchange money at the airport, use a company like Travelex, which is known for fair exchange rates and low markups.
- Use a mix of payment methods: Consider using a mix of pre-ordered cash and credit cards without foreign transaction fees for larger purchases.
- Use ATMs from your bank's partner network: If your bank has a foreign partner in the country you're travelling to, you can do business with them and avoid out-of-network ATM fees.
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Frequently asked questions
Yes, you can bring foreign currency to the airport. However, it is recommended to order foreign currency from your bank before travelling, as airport currency exchanges often have less favourable rates and higher fees.
Exchanging currency before arriving at the airport can help you secure better exchange rates and reduce stress upon arrival. It also allows you to compare rates and avoid unauthorized dealers who may trick you into unfavourable deals.
Some alternatives to exchanging currency at the airport include ordering foreign currency from your bank, using a credit or debit card with no foreign transaction fees, or exchanging currency at a local branch of a reputable company like Travelex, which offers fair exchange rates and low markups. Additionally, consider using ATMs from major banks with branches abroad to eliminate out-of-network ATM fees.
