Tuesday, 24 November 2020

The Best Place to Exchange Currency

The Best Place to Exchange Currency
11 Oct
5:32

The most affordable way to spend money in a foreign country is by using your credit card, exchange rate-wise. However, credit cards may not be widely accepted in your travel destination, or perhaps you simply want to have foreign money on hand before you arrive for peace of mind.

You can purchase foreign currency from your local bank, at an airport kiosk or from an online currency exchange. You tell them the particular amount of foreign currency you need and pay for it in U.S dollars just like buying anything else.

Not every place offers the same exchange rate, though, and some places charge extra fees. It’s important to compare rates and avoid additional fees to make sure you are not paying a high price on the foreign money.

In this post, we will compare the pros and cons, and the cost of each currency exchange option for you before, during and after your travel.

Ways to exchange currency before your trip

Bank or credit union

Exchanging foreign currency before traveling gives many people peace of mind. Ordering foreign cash from your bank or credit union is a common way to do so.

This will save you time and headaches from queuing up at money-exchange facilities at the airport and sweating over the math on the spot. Most banks and credit unions offer somewhat similar exchange rates. The trickier part is to compare fees. Some banks don’t charge fees, but others do. Fees will affect the exchange cost significantly if you don’t exchange much money in the first place.

Pros

  • Banks offer relatively competitive rates compared with retail currency exchange bureaus or airport exchange kiosks because of the bigger volume they sell and buy.
  • Some banks offer online currency order and delivery. Constraints and fees may apply. For example, Bank of America customers can order up to $10,000 in foreign currency online over 30 days. But if they need more, they have to stop by a Bank of America location.
  • You can choose to receive your order in small, large or mixed denominations depending on availability.

Cons

  • If you go to a bank branch, they may not have the amount of foreign cash you need. It would usually take a few days for the bank to get the money ready for you. Don’t wait too
    long to exchange currency. Call your bank in advance for availability of specific currencies.
  • Each institution limits on amounts. With Bank of America, for instance, your order amount must be at least $100.
  • Some banks charge additional service or delivery fees.
  • Banks offer less competitive foreign exchange rates compared with credit/debit card rates.

Costs

The difference in rates offered by different banks is small. So the major factor that will affect the efficiency of your exchange is fees. We look into the fees for four major banks (they’re the largest by assets):

Bank of America

Rate: On Sept. 19, Bank of America provided an exchange rate of 1:1.2304 between euros and U.S. dollars. Purchasing 1,000 euros would cost $1,230.40. You can check the daily rates BOA offers here.
Fees: If you choose to get the foreign currency delivered, there is a delivery fee of $7.50 on all foreign currency orders less than $1,000; this fee is waived if the currency you buy is worth $1,000 or more.
Ways to purchase: You can order online if you have a BOA checking or savings account. BOA credit card holders only can order currency at a physical bank branch, but the purchase needs to paid in cash.

Chase

Rate: The exchange rate for buying euros at Chase on the same day was 1:1.251. The cost for 1,000 euros would be $1,251.
Fees: $0.
Ways to purchase: You have to show up at a branch to make an order; you can’t order online and have to pick up the cash later if they don’t have the currency you need in stock.

Citibank

Rate: On Sept. 20, Citibank offered a rate of 1:1.2462 for you to buy euros. That means if you bought 1,000 euros, the cost in U.S. dollars would be $1,246. You can check the rate of the day by calling its 24-hour Exchange Rate Hotline: 1-800-756-7050, option #1.
Fees: If you are a client with the Citigold® or Citi Priority Account Package, there are no additional fees. But if you are not, $5 service fee will be charged if the transaction amount is $1,000 or less. Additionally, Citi charges a fee from $10-$20 to deliver to your address, depending on the delivery option.
Ways to order: You will have to be a Citi client to buy foreign currency. To order, visit your nearest Citibank branch or call 1-800-756-7050, option #2.

Wells Fargo

Rate: On Sept. 19, buying 1,000 euros would cost $1,229.80 at Wells Fargo, not much different than other major banks. You can check the rates of the day here.
Fees: No fees.
Ways to purchase: Besides physically visiting a branch, Wells Fargo clients can also exchange currency through the bank by ordering money online or by phone to get it delivered to your home or a branch near you within 2-7 days.

Order cash online

No other method can beat ordering foreign currency online in convenience. You just click buttons and purchase foreign currency at your fingertips. But the rates are slightly higher than what banks have. The major player that dominates the online currency exchange space is Travelex.

Travelex charges delivery fees if you order a small sum of foreign currency. If you are seeking the convenience of getting foreign currency delivered, you will be better off ordering foreign currency from a bank that offers free delivery or charges a lower delivery free.

Pros

  • You can exchange currency without having to step out of your house.
  • Rates are better than kiosks at airport or hotels.
  • You can earn United MileagePlus® bonus miles if you buy currency through Travelex.
  • You can pick up money in a retail facility or get currency delivered as early as the very next day after you put in an order.

Cons

  • There’s a $9.99 shipping fee if the transaction is less than $1,000.
  • You have to order in advance for delivery.
  • The exchange rates won’t beat what banks offer.
  • Travelex does not give small denominations of foreign currencies for delivery, so you’re limited to converting to round numbers in the foreign currency.
  • The minimum amount required in each order is $50.

Costs

Rate: On Sept. 19, the euro-U.S. dollar exchange rate provided by Travelex was 1:1.285. The price of 1,000 euros would be $1,284.69. That’s $54 more expensive than you would pay Bank of America for the same amount of euros.
Fees: A UPS Standard Delivery fee of $9.99 is charged if the order is less than $1,000. The fee is waived on transactions of more than $1,000.

Airport kiosks

Departure or arrival terminals at major airports all have plenty of choices for exchanging currencies. Those are the places you should avoid because the exchange rates they offer are typically higher than bank rates and online rates. And oftentimes, those kiosks levy an additional transaction or service fee, making your purchase all the more expensive.

Take Travelex as an example, its physical locations offer different rates than its online rates. And the specific rate depends on the amount of foreign currency you order. The more you buy, the better the rate you will get. In addition, a flat $9.95 service fee applies to each transaction.

However, if you need cash but did not budget enough time ahead of your trip to order foreign currency from your bank, the currency-exchange kiosks would pretty much be your last option before departure. Many of these exchange facilities also have locations in downtown areas, hotels, train and bus stations. They may or may not carry the same rate and fees as the airports. One thing you can do to save money on exchanging money at the airport is to visit the airport’s website before you get there to compare fees from different merchants.

Pros

  • They are easily accessible at airports.
  • Their opening hours are long, if not 24 hours. Many stay open from 5 a.m. to 11:00 p.m. everyday.
  • Those physical kiosks usually have more denominations available than online orders.
  • There is no minimum amount required at a physical store; you can change small amounts of cash, but the transaction fee will still apply.

Cons

  • They offer worse rates than banks and online shops.
  • You likely will have to pay an added service fee

Costs

Rate: On Sept. 19, buying 1,000 euros at a Travelex kiosk would cost $1,370. The rate was 1:1.37. This is more expensive than what you’d get via its website (1:1.285). And if you buy 600 euros at the kiosk, the rate would be even higher — 1:1.38.
Fees: There is a flat service fee of $9.95 per transaction, however little money you exchange through Travelex. If you factor in the service fee, the cost for 1,000 euros would be 12% higher than what you would pay for the same amount of currency at Bank of America.

Ways to exchange currency during your trip

ATM

The least expensive way to access any local currency in cash is by using an ATM on the ground with a checking account that has no fee for out-of-network ATMs and no foreign transaction fees.

You would get the same exchange rate you’d get if you used a credit card at a merchant. Most ATM networks use either the Visa or Mastercard exchange rate, which is the best because it’s very close to the interbank rate banks give each other.

For example, the Mastercard euro-to-U.S. dollar exchange rate on Sept. 19 was 1:1.171, and the Visa offered a pretty close rate of 1:1.172, if the credit/debit card charges 0% fees. These rates were lower than rates of U.S. banks that day.

You don’t have to make this account your primary checking account — just transfer the money you need to your no-fee account in U.S. dollars before the trip, and withdraw on location in local currency.

For security purposes, it’s safer to withdraw cash on the ground as you need it than carrying a large sum of cash with you during the trip. It’s also better to have a separate checking account just for travel. That way if there is fraud, it’s less likely to hit your main account.

Aspiration Summit and Charles Schwab Checking are two nationally available accounts with no out-of-network ATM fees or foreign transaction fees.

With most U.S. debit cards, however, the banks levy a foreign transaction fee up to 3% of the withdrawal amount each time and a flat third-party ATM fee of $1-$5. The ATM operator may also charge a fee.

Still, ATMs would be a cheaper option than exchanging currency at banks or airport kiosks. Let’s say you withdrew 1,000 euros Sept. 19 through Visa at an ATM, if you factor in the exchange rate, the 3% transaction fee and the $5 ATM fee, the total cost would be $1,207 — less expensive than exchanging the same amount of euros at Bank of America.

To save costs on your trip, look for a debit card with low or no foreign transaction fees and no out-of-network ATM fees. If they do charge fees, try to take out a high amount of cash at one setting to avoid multiple fee payments if you need to access more cash later on.

Credit card

The reason why credit cards are the best option to spend money overseas is that a credit card’s exchange rate will certainly beat banks and kiosks, as we discussed above. More important, credit cards offer significantly better protection against fraud than debit cards. Many credit cards charge no foreign transaction fees, and even better, you may earn miles or cashback rewards by using credit cards. Here we’ve rounded up the best travel credit cards with no foreign transaction fees.

Pro tip: One of the key recommendations for international travelers is to make sure your transaction is done in the local currency, not in U.S. dollars. Your credit card will always have a better exchange rate in the local currency than what merchants can offer in U.S. dollars. Plus, a merchant may even slide in an extra fee that you might not know about.

Cash

If you have U.S. dollars in cash, you can also exchange the local currency when you are in your host country. In fact, exchanging money in your host country gives you a better exchange rate than exchanging foreign currency in the U.S. before you go.

This is because the local currency is more common than your U.S. dollar is in that country, and therefore it’s cheaper to buy there. Meanwhile, your U.S. dollars are worth more in a foreign country because it’s a less common currency. Therefore, you will get more local money for your U.S. dollars.

Banque de France, the central bank of France, showed that on Sept. 19, the euro-to-USD exchange rate was 1:1.1667. That means it would cost you $1,167 to get 1,000 euros in France, excluding fees, which is less than you would pay for the same amount of euros at a major U.S. bank.

What to do with your leftover currency after your trip

Try to use up the foreign currency before you return to the U.S. If you have leftovers after your international trip, there are several ways to handle it.

Sell it back to your bank or Travelex

Banks and Travelex will buy the major foreign currencies; but they may not be able to purchase some foreign currencies, such as Argentinian pesos (ARS) Cuban pesos (CUP) at Travelex.

The big caveat here is that you will inevitably lose money by returning the foreign currency. The banks and Travelex make money from the difference between the purchase and sale of foreign currency. The rate they would offer for buying foreign currency from you is always lower than their selling rate

For example, Chase would buy 1,000 euros for $1,085 on Sept. 19, whereas it sold 1,000 euros for $1,251. Travelex would buy 1,000 euros for $1,020 that day. But if you wanted to buy the same amount of euros from a kiosk, the cost would be $1,370.

On top of that, additional fees may be attached to your sale. Citi, for instance, charges $5 if you exchange less than $1,000. Travelex bureaus don’t charge a service fee when you return your foreign currency. However, if you choose to send your leftover currency in the mail, a $5 fee will be deducted from your final proceeds and a delivery fee may also apply.

Keep it

You will be better off keeping the leftover currency: you’ve already bought it with extra cost, and selling it at a cheaper price means you will lose even more money. Why not save the hassle and save it for your next trip?

Sell it to friends and family

Ask your friend, family and neighbors whether they have international travel plans. If they will make a trip to the country you have visited, offering to sell them the local currency at a better rate than what banks provide.

Donate it

You can donate your leftovers after you finish your vacation — brighten up someone else’s day.

On many American Airlines international flights, flight attendants pass around to collect unused currencies from travelers as donations to UNICEF “Change for Good” charity program.

“Change for Good” charity donation barrels are also available at 10 international airports. As you walk around the airport, look out for those barrels to drop your leftover currency.

If you were not able to donate your foreign currency on a flight or at an airport, you can still support the cause by sending your money to:

UNICEF USA
ATTN: Change for Good Program
125 Maiden Lane
New York, NY 10038

Key takeaway

International travel is expensive already. Finding an affordable way to exchange foreign currency can save you some money. For that, you want to look for the option with the most competitive rate and avoid extra fees. When you are on your foreign trip, use a credit card that carries no foreign transaction fees as often as possible. As far as cash goes, the best way to access foreign currency to withdraw money at an ATM using a debit card that doesn’t charge out-of-network ATM fees or foreign transaction fees when you are on the ground. If you need a small sum of cash on hand before traveling, your local bank would be your best option. Ordering foreign currency online can be convenient, but mind the delivery fee that may apply. Our last piece of advice: Avoid airport or hotel exchange kiosks whenever possible.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Shen Lu

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Source: https://www.magnifymoney.com/blog/news/currency-exchange/

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