Owais Crawford
When it comes to exchanging currency at the airport, it's important to consider the potential drawbacks. Airport currency exchange rates are often unfavourable, with some exchanges charging up to 17% more than the current International Monetary Fund (IMF) rate. Additionally, there may be additional fees on top of the poor exchange rate. As a result, exchanging a large amount of money at the airport may not be the best option. However, if you're travelling on short notice and need foreign currency, the convenience of airport exchange services may outweigh the extra cost. It's recommended to plan ahead and order foreign currency from your bank before travelling, as banks typically offer better exchange rates and can provide the currency at a local branch or by shipping it to you.
| Characteristics | Values |
|---|---|
| Convenience | Currency exchange at the airport is convenient for travellers who are short on time or need cash upon arrival to pay for transportation or tips. |
| Cost | Airport currency exchange rates are typically unfavourable and can charge up to 17% more than the current International Monetary Fund (IMF) exchange rate. Additional fees may also be incurred on top of the poor exchange rate. |
| Alternatives | Ordering currency from your bank before travelling is recommended as a more cost-effective option. Using a credit or debit card for purchases while travelling can also reduce the need for cash exchanges, but foreign transaction fees may apply. |
| Amount | Exchanging smaller amounts may not be significantly impacted by the unfavourable exchange rate, and having some local currency can be useful for transportation or tips upon arrival. |
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What You'll Learn
Airport currency exchange rates are unfavourable
When travelling abroad, it is advisable to avoid exchanging currency at the airport due to unfavourable exchange rates. Airport currency exchange rates are often significantly higher than the current International Monetary Fund (IMF) rates, with some exchanges charging up to 14% more, and additional fees may also apply. For example, one traveller exchanging €155 at an airport received only $136, whereas, according to Google, they should have received $163.
It is recommended to plan ahead and order foreign currency from your bank before travelling, as banks typically offer better exchange rates than airport booths. Major banks often have branches abroad or partner with foreign banks, allowing travellers to withdraw cash from ATMs without additional fees and with a decent exchange rate. Ordering currency in advance ensures travellers can take advantage of their bank's exchange rate for that day, rather than the potentially inflated rates offered at airport booths.
If you are unable to order currency in advance, there are alternative options to avoid unfavourable airport exchange rates. One strategy is to use a credit card for expenses while travelling, as this eliminates the need for currency exchange altogether. Another option is to use a travel-friendly debit card, such as the Charles Schwab checking account, which rebates all ATM fees, allowing you to withdraw cash at your destination without incurring additional charges.
Additionally, travellers can consider exchanging smaller amounts of cash at a time, such as $100 USD, to avoid being charged excessive fees on large sums. It is also worth noting that some countries have more ATMs per capita, making it easier to access cash and potentially find better exchange rates. For example, Macau, Uruguay, Canada, and Austria are known for having a high number of ATMs available.
By being mindful of exchange rates and planning ahead, travellers can avoid the unfavourable rates often associated with airport currency exchanges and make the most of their money while abroad.
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Plan ahead to avoid airport exchanges
Airport currency exchange services are convenient, but they are usually one of the most expensive places to buy foreign currency. The exchange rates are often poor, with high fees that are either upfront or hidden in the exchange rates. Airports take advantage of the fact that they are one of the last stops for travellers needing local currency, so they charge more for the convenience.
- Include currency planning in your standard travel checklist. Set up a banking relationship that supports international travel before you need it. Many banks offer travel-friendly accounts with reduced international fees and better exchange rates for customers who plan ahead.
- Compare rates online and pre-order currency from services like Manor FX, CurrencyFair, or XE Money to secure the best rates and have the currency delivered to your home or office before departure.
- If you travel frequently or for extended periods, consider opening a borderless account from Wise, which allows you to hold money in various currencies and use a linked debit card to make purchases and withdrawals from ATMs.
- Use a credit, debit, or specialist travel money card, which typically offers fair exchange rates and eliminates the need to carry large amounts of cash.
- If you prefer to carry cash, exchange only what you need to avoid paying currency exchange fees twice.
By planning ahead and exploring alternative options, you can secure more favourable rates and save money during your travels.
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Understand how currency exchange works
Currency exchange at the airport is convenient, but the exchange rates are typically much less favourable than those at your bank. For example, Bank of America's exchange rates in January 2024 averaged roughly 6% more than the IMF rates and were less than half of what airport currency exchanges were charging.
If you need cash urgently upon arrival, it may be worth paying the extra cost for the sake of convenience. However, if you can plan ahead, it is best to avoid airport kiosks and exchange counters.
Ordering currency from your bank before you travel is almost always better value than exchanging currency at the airport. You can also check your bank's exchange rate to ensure it's optimal before initiating the transaction. While the exact process varies by bank, most major banks make it easy to order online. Typically, you can access the currency exchange webpage through your bank's website or mobile app, or by phone.
If you are unable to order currency from your bank before travelling, you can still avoid airport currency exchanges. Major banks usually have branches abroad or partner with other banks to create a network. Using those ATMs will often provide a decent exchange rate while eliminating out-of-network ATM fees. If you use a non-network ATM, you may be charged a fee, so consider withdrawing a larger sum of money to avoid multiple transactions.
Upon arrival, you may choose to conserve your foreign cash and pay with your credit or debit card as much as possible. However, be aware that your card might carry a foreign transaction fee of up to 3% on every purchase.
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Compare rates with various dealers
When it comes to exchanging currency, it's essential to understand the exchange rate and compare rates offered by different dealers to get the best value for your money. Here are some tips for comparing rates with various dealers:
Compare Rates Online
Use online currency converters to compare exchange rates offered by different providers. Websites like Wise and XE offer currency converters that allow you to check live exchange rates across various currencies. This helps you make an informed decision before exchanging your money.
Banks
Major international banks often provide currency exchange services. For example, Bank of America customers can exchange foreign currency for USD at their financial centers. Some banks may offer this service for free, especially for certain account types or above a certain transaction amount. Check with your bank to understand their specific policies and fees.
Airport Kiosks
Airport kiosks offer convenient last-minute currency exchange options, but they often charge higher fees or provide less favorable exchange rates. If you plan ahead, it's usually more cost-effective to avoid exchanging currency at the airport.
Credit and Debit Cards
Using credit or debit cards for purchases while traveling can help you avoid carrying large amounts of cash. However, be mindful of foreign transaction fees charged by card issuers, which can add up over time.
Local Money Changers
When you reach your destination, you can look for local money changers or exchange bureaus. These dealers often provide competitive exchange rates, but it's essential to compare rates at multiple locations to find the best deal.
Plan and Compare
The key to getting the most out of your currency exchange is to plan ahead. Check the exchange rates regularly leading up to your trip to understand the market value. By monitoring rates, you can take advantage of favorable fluctuations and exchange your currency when the rate is in your favor. Additionally, consider exchanging smaller amounts at multiple dealers to further reduce the impact of any potential fees or unfavorable rates.
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Use cards to manage finances better
When it comes to exchanging currency at the airport, it is generally advised to avoid doing so due to unfavourable exchange rates and fees. Instead, it is recommended to order foreign currency from your bank before travelling or use a credit card for purchases while abroad. This allows you to avoid the hassle of standing in line at the airport currency exchange and ensures you get a better exchange rate.
Using cards can be an effective way to manage your finances better. Here are some strategies to consider:
Choose the Right Card
Select a card that suits your financial goals and needs. For example, if you're looking to build your credit score, consider a card with a long introductory APR term, such as the U.S. Bank Visa Platinum, which offers cardholders an extended period to pay off their debt without accruing additional interest. This can help you improve your credit score and make you eligible for rewards-earning credit cards in the future.
Track Your Spending
Utilize credit cards as budgeting tools to track your monthly expenses. By swiping your card for everyday purchases, you can easily monitor your spending habits and identify areas where you may be overspending. Many cards also offer rewards, such as points, miles, or cashback, which can provide additional benefits like travel discounts or merchandise. However, it's important not to chase rewards and incur unnecessary spending.
Create a Workable Repayment Plan
If you carry a balance on your card, develop a repayment plan to minimize interest and reduce debt. Allocate more funds towards your payments to lower the principal amount and the accrued interest. This improves your credit utilization ratio and leads to a better credit score. If you're struggling, consider seeking professional help from a credit counselor who can assist in creating a personalized debt management plan.
Stick to Your Budget
Allocate your income towards essential expenses, credit card payments, and savings while allowing for some flexibility. Regularly review and adjust your budget as your financial situation changes. Cutting down on non-essential spending can help free up money to pay off debt faster.
Avoid Unnecessary Debt
When using credit cards, it's important to spend only what you can afford to pay off by the due date. Falling behind on payments can lead to penalty interest rates and negatively impact your credit score. Make sure to review your credit card statements for errors or unauthorized charges to identify any fraudulent activity early on.
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Frequently asked questions
There is no limit to how much USD you can exchange at the airport. However, it is not recommended due to the poor exchange rates and high fees.
Major international banks will accept USD and provide local currency in return. Bank of America, for example, offers exchange rates that are roughly 6% more than the IMF rates.
Using a credit or debit card is a safer alternative to carrying cash. Credit and debit cards offer fraud protection and safety features, such as the option to freeze them if misplaced.
Consider applying for a no foreign transaction fee credit or debit card. Additionally, using your bank's ATM network can provide competitive exchange rates and low fees, typically between 1% and 3%.
