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If you’ve ever exchanged foreign currency while traveling in another country, you likely know how expensive it can be. Often, the most convenient places to change your money (such as the airport or hotel) can be the most costly.
Though you often have to pay fees to access foreign currency, it’s worthwhile to learn how to exchange your money for as little extra cost as possible. Here’s a look at some of the best — and worst — places to exchange foreign currency, plus tips for how to get the best conversion rates and save on fees.
Key Points
• Banks and credit unions generally offer the best currency exchange rates and charge low or no fees for customers.
• If your bank has an international network of ATMs, getting cash at a local ATM can also be a cost effective way to exchange money.
• Credit and debit cards can be a smart way to pay for travel expenses, provided your bank doesn’t charge foreign transaction fees.
• Notify your bank and credit card issuer of travel plans to avoid transaction denials.
• Airport and local kiosks tend to charge high fees and offer unfavorable exchange rates.
The Benefits of Exchanging Foreign Currency
Though many places will accept credit cards overseas, it can still be useful to convert some of your dollars to foreign currency. Here’s why:
• There may be places that only accept cash, such as when you buy food or souvenirs at markets or shop at small stores that don’t accept plastic for payment.
• Having some local currency in your wallet can be useful for tipping taxi drivers or porters at the airport.
• Having local currency may help you save money when paying cash. While some vendors will happily accept U.S. dollars, they may apply an unfavorable foreign exchange rate to the transaction.
• Having some cash can be a good backup form of payment in case you run across issues with your credit card.
• Cash can be a helpful way to stick to a budget while traveling. If you give yourself $75 a day for food, for example, having that cash in your pocket can help you avoid going overboard vs. swiping too much with a credit card.
Finding Places to Exchange Currency
Here’s a look at some of the best places to exchange foreign currency.
Banks and Credit Unions
Major commercial banks typically have foreign currency available to exchange, though this service may be restricted to existing customers. Some institutions may not charge fees, which can make this one of the most cost-effective ways to exchange currency. However, they typically add a margin to the exchange rate. You can check the current exchange rate online to calculate exactly how much your bank’s rate is marked up.
Your financial institution may offer several ways to request foreign currency — online, over the phone, or at your local branch. Keep in mind that not all banks keep every possible currency on hand; ordering less common currencies may take several business days.
Your bank can also be a good place to convert any leftover foreign currency back to U.S. dollars when you get home.
Online Currency Conversion
Another way to change your money before you leave town is to use an online currency exchange service. Services like Currency Exchange International (CXI) and US First Exchange allow you to buy foreign cash online before you travel using your debit card or an electronic bank transfer, and they will deliver the physical currency directly to your home via secure shipping.
Some online currency services may have better rates than airport kiosks, and even some banks, but that’s not always the case. Be sure to shop around, compare the exchange rates, and look out for shipping or processing fees to make sure you’re getting a good deal.
Recommended: How to Deposit Foreign Currency in Your Bank Account
Overseas ATMs
If you don’t exchange any (or enough) cash before you go, another option is to withdraw cash at an ATM after you arrive. This can be especially cost-effective if your bank offers fee-free ATMs in international locations. If that’s the case, you may be able to withdraw cash in the local currency with competitive exchange rates and low fees. If you don’t have access to any in-network ATMs, however, you’ll want to find out what the out-of-network ATM fees will be to see if it’s worth converting currency this way.
Worst Ways to Exchange Foreign Currency
Now that you know where to exchange currency, let’s take a closer look at some places you may want to avoid. The following exchange locations can make converting currencies more expensive than necessary.
Airport Kiosks
Exchanging your cash at the airport usually results in some of the highest fees and least favorable exchange rates out of all your options. However, they can be a convenient fall-back, especially if you weren’t able to exchange any currency ahead of time.
Local Currency Conversion Kiosks
You may find currency exchange kiosks and bureaus at highly-trafficked tourist attractions, shopping areas, or even your hotel. Like airport kiosks, they’re a convenient place to exchange currency, but you could be paying high fees and facing less favorable exchange rates.
Alternatives to Exchanging Foreign Currency
Instead of exchanging cash and using it while traveling, you might use your credit or debit card to cover your travel expenses.
Using Your Credit Card On Trips
Paying for meals, purchases, and other travel expenses with your credit card can be a good deal, since many card issuers offer favorable exchange rates. What’s more, your card issuer may offer protection on your purchases, as well as cash back or reward points for every dollar you spend.
Before you go this route, however, you’ll want to check to make sure your card doesn’t charge foreign transaction fees. Cards that charge these fees commonly add an extra 3% for every foreign purchase. If your card does instil these fees, it may be worth applying for one that doesn’t before you leave town.
Something else to keep in mind: When using a credit card overseas, it’s generally better to pay in local currency than in U.S. dollars (USD). This way, your bank will manage the currency conversion and likely give you a better rate than you would get from a local merchant or restaurant.
Before going on your trip, be sure to notify your credit card issuer of your plans. That way, they don’t accidentally deny your transaction believing it’s fraudulent.
Using Your Debit Card in a Foreign Country
Debit cards are typically backed by Mastercard or Visa, brands which are known around the world. You may find that you are able to use your debit card for transactions when traveling, especially where those brands are welcomed. Just keep in mind that, similar to the fees charged by some credit cards, your bank could charge a foreign transaction or foreign exchange fee on every debit card purchase you make overseas. It’s a good idea to ask your bank about their policies before you leave town.
The Takeaway
Exchanging currency for travel doesn’t have to be costly if you know where to look. While airport and local kiosks often charge high fees, your own bank or credit union may offer favorable exchange rates. Using a credit or debit card can also be a smart, convenient option, provided you use a card that doesn’t charge foreign transaction fees. To ensure a smooth trip, remember to notify your financial institution of your travel dates and carry a small amount of local cash for small purchases or tipping.
FAQ
Do banks exchange foreign currency?
Yes, many traditional banks exchange foreign currency for their account holders. You can typically order foreign banknotes online, through a mobile app, or in person at a local branch. Some larger branches keep common currencies in stock for immediate pickup, while less common ones may need to be ordered days in advance. Fees and exchange rates vary by institution, and noncustomers may face restrictions or higher fees. In addition, many banks offer international ATMs as a convenient alternative for currency exchange when traveling abroad.
Is it better to go to a bank or currency exchange?
In general, it’s better to exchange currency at a bank than a dedicated currency exchange. Banks tend to offer better exchange rates and charge lower fees, particularly if you’re already a customer. Currency exchange kiosks located in airports or tourist areas tend to charge higher fees and offer less favorable exchange rates compared to banks.
Where can I change currency for free?
You generally cannot exchange physical currency entirely for free, as providers typically charge an inflated exchange rate in addition to an upfront fee. However, you may be able to exchange currency without a fee at your own bank. While some banks waive exchange fees for existing customers, they still usually mark up the exchange rate. You can research the current mid-market rate beforehand to calculate exactly how much extra they are charging you.
Photo credit: iStock/Anurak Tepkhamtai
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