Travel is more than the seeing of sights; it is a change that goes on, deep and permanent, in the ideas of living.— Miriam Beard
How To Do Exceptional Things Inexpensively
Post #9 The Currency Exchange Game
Exchanging U.S. dollars for a foreign currency can become as complex as trading commodities on the NASDAQ exchange. However, grasping just a few basic principles can maximize your hard-earned traveling dollars.
Don't assume it doesn't matter where you change money:
The difference can be staggering. Recently I wired funds to a friend in Mexico and was shocked to discover that Fidelity (which I otherwise like) would have given me far fewer pesos than Charles Schwab. The $450 I saved paid for several lovely lunches at elegant haciendas throughout the Yucatán.
Many people like to have some cash when they arrive in a new country. I know I do. Airports and hotels worldwide are notorious for low conversion rates, so you need to do a little research at home before leaving.
Check the exchange rate for the currency of the country you're going to before doing anything else:.
If you don't have a favorite site, go to Yahoo, click on Finance in the left column, then Currencies under Market Data on the right. Find your country and write the number down. This is the official bank rate that, like stocks, changes constantly, but it gives you a good idea of the day's range.
You will quickly discover that your local bank -- Citibank, Chase, etc., with their built-in commissions, are as bad a place to change money as the airports and hotels. Even the non-bank, big-name exchange places tend to offer surprisingly low rates. For example, as I'm writing this the peso is trading at 13.17, yet a major player with offices nationwide is offering only 11.53.
In this business, numerous convenient locations often means high overhead. You can do a lot better with a smaller operation willing to make less profit on each transaction.
In New York City, I highly recommend Peoples Foreign Exchange with two midtown offices at 575 Fifth Avenue at 47th Street and 60 East 42nd. Both shops are a bit tucked away and you have to look for them, but boy is it worth it. When the peso was selling at 13.17, Peoples was exchanging it at 12.87 to a dollar -- substantially better than 11.53! Most large cities have equivalent outlets. Once you're armed with the knowledge of the official rate and what your local bank will give you, you'll know instantly when you're being offered a good deal.
Once abroad, your best bet is to put everything you can on a credit card: This means hotels, restaurants and shopping. Unless you're paying a $500-a-year membership fee for an American Express Platinum Card, tuck that AmEx card away. They impose foreign transaction fees on every single charge and many places don't accept it anyway. Use a MasterCard or Visa (like Capital One) that you've checked beforehand carries no foreign transaction fees. Now you're close to benefiting from the official bank rate of the day on all purchases.
ATM cash withdrawals using your bank card are a whole other bag. There are fees on the front end (your bank), back end (the bank you're withdrawing from) and conversion charges which together total 3 percent to 8 percent. Still, you're getting close to the official rate and it's worth it if you need local currency. Seeing a teller within the bank can cost you even more money in commissions.
If the country you're in has an affiliate of your home bank, you'll do even better by avoiding those front and back end fees:.
It's the equivalent of withdrawing money from your personal bank at home; it costs nothing at a local branch, but the fee at a competitor's bank can be anywhere from $2.00 to $5.00. For frequent travelers, it's worth it to do a little more homework. Some banks and credit unions offer perks that let you withdraw money from a non affiliate bank a couple of times a month gratis.
Another way to save on fees is to withdraw larger amounts, less often. When I don't want to travel with a lot of money, I alternate withdrawals with a friend and we split the cash. One crucial reminder: Do not mix up your cards and make the mistake of using your credit card in the ATM or to get cash in the bank. This is equivalent to a cash advance and you'll be charged high interest beginning the moment you get money.
If you don't use ATMs overseas, remember that exchange places are not equal. The shops in Paris on Rue de Rivoli near the Louvre don't compare to Société Française de Change at 21 Rue Chanoinesse one block from Notre Dame. Société, located on a tiny street close to the Seine, has been in business for years and they're open every day. You know the recent expression thrown around by politicians: do the math. The difference you get on $40 may not seem like much, but multiply that difference on $400. Whether at an exchange shop or ATM, be sure to change enough money if you're planning to visit small villages or islands. To the astonishment of a Greek island bank teller, I squeezed my hand under his cage to grab my money back when I saw the number of euros he was giving me for my dollars! You will always get better exchange rates in a city and there are still places that don't have ATMs.
Try not to have much of a rarely used currency left at the end of a trip unless you're planning to return:
You don't want to lose money a second time by having to convert it back to dollars. I usually sell mine to a tourist just arriving as I'm preparing to leave. Splitting the buy/sell exchange spread down the middle and cutting out the middleman benefits us both -- the classic win-win. But if it's a popular currency like euros or Mexican pesos, bring them home for a friend planning a vacation, or even better, your next trip back!
Let me hear about your experiences. Ask questions. I'm happy to offer suggestions and look forward to solving challenges together. And check back every two weeks for my latest travel tips. Next blog: City and Country
*Disclaimer: I receive no compensation for my recommendations.