Roberta Aguirre
When travelling abroad, it is important to have local currency. While airport currency exchange kiosks are convenient, they often have poor exchange rates and high fees. It is recommended to use a credit card with no foreign transaction fees or withdraw cash from a local ATM when abroad. Before your trip, it is a good idea to research exchange rates and fees to make an informed decision. Some travellers suggest exchanging small amounts at the airport for convenience, but it is generally more cost-effective to use other methods for larger sums.
| Characteristics | Values |
|---|---|
| Convenience | Exchanging money at the airport is convenient, especially if you need cash upon arrival. |
| Cost | Airport currency exchanges typically offer poor exchange rates and may charge additional fees, making them a costly option. |
| Alternatives | Ordering currency from your bank before travelling, using a no-foreign-transaction-fee credit card, or withdrawing cash from a local ATM when abroad are often more cost-effective alternatives. |
| Research | It is important to research exchange rates and fees before deciding where to exchange currency. |
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What You'll Learn
Ordering currency from your bank before travelling is better than airport exchanges
Ordering currency from your bank before travelling is a more cost-effective option than exchanging money at the airport. Airport currency exchanges are often the most expensive way to obtain foreign currency, with unfavourable exchange rates and hidden fees.
Firstly, ordering currency from your bank guarantees the best, legal exchange rate. Exchange rates at airport kiosks are typically much less favourable than those offered by your bank. For example, Bank of America's exchange rates in January 2024 averaged roughly 6% more than the IMF rates, whereas airport currency exchanges charge double that amount. By ordering currency from your bank, you can avoid these poor exchange rates and save money.
Secondly, ordering currency in advance allows you to avoid the long airport lines when exchanging currency upon arrival. This saves you time and provides peace of mind, as you won't have to worry about finding ATMs or foreign banks in a new place. You can also get familiar with the local currency before you land, making it easier to manage your budget.
Thirdly, by ordering currency from your bank, you can ensure that you have received the correct amount and that the money is authentic. This reduces the risk of receiving counterfeit notes, which could cause issues when trying to spend the money abroad.
Finally, ordering currency from your bank allows you to take advantage of your bank's international partners. Many major banks have branches abroad or partner with other banks to create a network. Using these ATMs can provide a decent exchange rate while eliminating out-of-network ATM fees.
In summary, ordering currency from your bank before travelling is a more financially prudent and convenient option than exchanging money at the airport. You can secure a better exchange rate, save time, and have peace of mind that your money is authentic and readily available for use upon arrival.
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Airport exchanges are costly and have poor exchange rates
Airport currency exchanges are convenient, especially for last-minute travellers. However, they are costly and have poor exchange rates. This is due to several factors, including the high cost of maintaining a physical presence at an airport. Airport kiosks and currency exchange counters pay steep rents, staff salaries, and maintenance fees, which are passed on to consumers through higher exchange fees. These expenses can result in rates that are 10-12% higher than market rates, with some premiums exceeding 17%.
Airport exchange desks set their own rates, which are usually higher than those found elsewhere. They also charge additional fees, sometimes a fixed amount and sometimes a percentage of the amount exchanged. These fees can include operational costs and service fees, as well as commissions. Airports often charge higher exchange rates because they are one of the last stops for travellers needing local currency, so they can take advantage of the convenience and set higher rates and fees.
To avoid these poor exchange rates and higher fees, it is recommended to plan ahead and compare exchange rates online. Ordering currency from your bank before you travel is almost always better, as banks offer competitive exchange rates and lower fees than airports. Credit cards that don't charge foreign transaction fees are also a good option, as you get the day-to-day exchange rate without extra costs. Using a local ATM to withdraw cash in the local currency is another alternative, though it's important to check if your bank charges fees for international withdrawals.
In summary, while airport currency exchanges offer convenience, they come at a cost. With their poor exchange rates and high fees, travellers can end up paying much more than necessary. By planning ahead and exploring other options, such as banks, credit cards, and ATMs, travellers can avoid these costly exchange rates and save money on their trips.
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Use a credit card with no foreign transaction fees
When travelling, it is always a good idea to carry a credit card with no foreign transaction fees. Foreign transaction fees, also known as FX fees, are surcharges levied when you make a purchase with your credit card in a foreign currency or through a foreign bank, including online purchases. These fees can quickly add up and increase your travel expenses.
There are several credit cards that do not charge foreign transaction fees. Some of the recommended cards include the Bank of America® credit card, Capital One Savor One, WF Autograph, and the U.S. Bank Altitude® Go Visa Signature® Card. These cards can be used for purchases and ATM withdrawals without incurring additional fees.
It is important to note that some cards with no foreign transaction fees may have other costs, such as annual fees. Additionally, certain card networks, like American Express and Discover, have lower acceptance rates internationally compared to Visa and Mastercard. Therefore, it is advisable to carry backup cards and cash when travelling abroad.
Before your trip, it is recommended to ask your card issuer about the exchange rate they are offering and compare it with the market rate using currency comparison websites. Visa and Mastercard also provide online foreign exchange calculators to help you understand the total purchase price before making a transaction.
Using a credit card with no foreign transaction fees can be a convenient and cost-effective way to manage your finances while travelling abroad, providing benefits such as trip cancellation insurance, free checked luggage, and rental car perks.
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Withdraw cash from a local ATM when abroad
When travelling abroad, it is always a good idea to have some local currency on hand. While you can exchange money at the airport, this may not be the best option due to unfavourable exchange rates. Instead, you can use your debit or credit card to withdraw cash from a local ATM when you arrive at your destination.
Before your trip, it is important to do some research and prepare. Check with your bank or card issuer about any fees or restrictions regarding the use of your card overseas. Some banks may charge a fee for using an out-of-network ATM, while others offer cards with no foreign transaction fees. It may be worth considering getting a card that reimburses withdrawal fees at ATMs abroad. Additionally, let your bank know where and when you'll be travelling to avoid a possible freeze on your card for suspected fraud.
When you need to withdraw cash, look for ATMs in public spaces where you feel safe and secure. Avoid "independent" ATMs, such as Travelex, Euronet, and Cashzone, as these often have high fees and may be less secure. Instead, opt for bank-run ATMs located just outside a bank, ideally during the bank's opening hours so you can go inside for help if needed. Visa and Mastercard have foreign exchange calculators online, so you can check what your total purchase price will be before withdrawing.
When using the ATM, always be aware of your surroundings and check the card reader for any signs of tampering, such as card skimmers. If the ATM withholds your card, report it immediately to the local helpline number displayed at the ATM or contact the nearest bank branch. If you receive an incorrect amount from the ATM, inform your bank as soon as possible. To avoid excessive per-transaction fees, you can try making several smaller withdrawals instead of one large withdrawal.
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Compare your card's exchange rate with the market rate
When travelling abroad, it is important to be aware of the exchange rates offered by your card provider and the mid-market exchange rate. This will allow you to make informed decisions about exchanging money at the airport or using your card abroad.
Firstly, ask your card issuer what rate it is using. You can then compare this rate with the mid-market rate using a currency comparison website or app, such as x-rates.com or Wise. These tools will help you determine if the rate offered by your card provider is fair and transparent, or if there are better options available.
It is worth noting that the exchange rate used by your card provider may not always be the one that they advertise. For example, if you use your Mastercard in an ATM abroad or to buy goods or services, the exchange rate applied may be determined by the merchant or ATM operator. Additionally, the exchange rate used by your card provider could change between the time you make a transaction and the time it is processed. Therefore, it is important to regularly check the exchange rate offered by your card provider and compare it with the mid-market rate to ensure you are getting a fair deal.
Visa and Mastercard both provide foreign exchange calculators on their websites, allowing you to see the total purchase price in your card's currency before making a purchase. This can be a useful tool to help you understand the exchange rate applied by your card provider and compare it with the mid-market rate.
By comparing your card's exchange rate with the market rate, you can make informed decisions about exchanging money at the airport or using your card abroad. This can help you optimise your spending and avoid unnecessary fees.
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Frequently asked questions
Yes, you can use your card at the airport currency exchange counter to withdraw cash in the local currency. However, airport exchange rates are often poor and come with additional fees.
Exchanging money at the airport is convenient, especially if you need cash upon arrival.
Yes, you can order foreign currency from your bank before your trip. You can usually do this online, by phone, or in-person at a local branch. Banks often provide good exchange rates and may not charge extra for postage. Alternatively, you can use a no-foreign-transaction-fee credit/debit card for larger purchases and withdraw cash from local ATMs when abroad.
Using a credit/debit card can provide a better exchange rate than airport kiosks. Credit cards also offer fraud protection and allow you to earn rewards.
Before your trip, ask your card issuer what exchange rate it is using and compare it with the market rate. Visa and Mastercard have foreign exchange calculators online, so you can see the total purchase price before swiping your card. Additionally, let your bank know where and when you'll be travelling to avoid a possible freeze on your card for suspected fraud.
