4 Tips On How To Get The Best Rates On Foreign Currency Exchange

On June 8, 2013 by travelogueblog

100 PesosBefore we left for Mexico, my mother insisted that the last time she was there, she was able to use US dollars everywhere she went, and that the locals preferred dollars over pesos because they’re more valuable. No need to worry about the local currency!

Apparently, however, things have changed since she visited CANCUN IN THE 1980S! At the airport, some shops took dollars and gave pesos as change, but they had to use a calculator and I’m not sure we got back the right amount. In town, most places did not accept dollars because it’s not their currency (duh!). Even in very touristy areas, it was widely seen as a hassle to accept dollars, and everything cost more if you did use them. Turns out, the greenback is not so strong that locals jump at the chance to hike to the bank and exchange dollars for pesos at a rate that hurts their bottom line.

We were stuck for awhile with too much US cash in our pockets, but you don’t have to make the same mistake. Here are some tips for getting local money when you’re in a foreign place.

ATMs Spit Out Local Currency

Like ATMs in America, these magical machines will read your debit card and give you money which local businesses accept as payment for products and services rendered. This is your best option for several reasons. Similar to the US, a foreign ATM charges a fee up front, your bank charges you, too, and then it spits out the correct amount of local cash at the daily exchange rate (debited from your account in dollars). In other words, depending on your bank, you’re probably not paying much of a percentage on the amount of money you take out – just a flat rate. It can get pricey since you’re being charged from two ends (both the ATM and your bank), but basically, if you take out a lot of cash, then you ended up saving. If you keep going back to the ATM, then you ended up paying more. Try to strike a balance between having too much cash on you at once, and wasting money on excess fees. If you use Bank of America, by the way, then you might be further in luck. They’re part of the Global ATM alliance and don’t charge fees at certain ATMs in other countries. Check out the list to see if you can save some dollars: Global ATM Alliance

Credit Cards are a Strong Option

If you’re like me, then you hate carrying cash and would rather pay for everything with some kind of plastic. Don’t get me wrong – I’m not in debt. I pay off my balance before the end of the month. I just hate carrying cash and not remembering where it all went once my wallet empties. Thoughtless spending is a hassle in daily life, but it’s an actual problem on vacation. You shouldn’t come back wondering why you’re broke.

If you’re a planner, do your homework and find a good travel card. Regular credit cards are expensive to use overseas, but there are some specifically designed for travelers. For instance, MileagePlus Explorer from Chase has a high annual fee, but it earns United miles on every dollar spent, has a free bag check on the plane (there’s your annual fee), and, the best new feature: no foreign transaction fees. The rest of the world isn’t as caught up with America in terms of accepting cards everyplace you shop, and sometimes when they do, the process is clumsy. You will definitely need cash. But if the place you’re shopping does accept credit cards, use one with no foreign transaction fees – it’s going to save you a bunch of money in the end. Plus, when you go over your statement, you’ll remember all of the fun times you had! That’s pretty much the only time looking at a statement will be fun, so enjoy it.

Currency Exchanges Are Not Always the Devil

So you listened to your mother and you showed up with a wad of dollars. What are you going to do now? Hopefully you have some idea of the current exchange rate. If you have access to the Internet, that knowledge is just a Google query away, but if not, you’re going to have to do some shopping. Where there’s one currency exchange, there are many currency exchanges. To some degree, they’re probably in cahoots with one another, but not necessarily. Many are fair. Look around. See what the best deal is. It can be hard to do this kind of math in your head, but just remember that you want the highest amount of local money for the least amount of your money. Take your time and figure out what you’re paying. You don’t have to treat currency exchange like a routine transaction, even if that’s what the guy behind the counter thinks it is. You may even want to step into a bank or two to see what their fees are. In the end, you’re paying someone to trade you money that’s actually useful. Try not to overpay.

Be Wary of Ordering Currency Before You Go

I’m giving my mom a hard time in this post, but honestly, she inadvertently ended up saving me some money. I considered ordering a lot of currency from my local bank before I left when she convinced me that I wouldn’t need it at all. I bought a lot less than I might have otherwise. As it turns out, these were some of the worst exchange rates. It was nice having a few pesos in my pocket when I got there for tips and transportation, but I’m glad I didn’t plan on paying for the whole trip before I arrived. I saved a lot more by going to the ATM, using my credit card, and exchanging my dollars when I got there.

What do you think?

Do you have any currency exchange horror stories?

What credit card do you use overseas?

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