Currency exchange while traveling is usually a necessity, whether you go to Germany, Japan, or Georgia. Georgia the country, not the state. Of course, some Californians may feel like visiting Macon, Georgia is like travelling to another country. Rest assured they still accept the greenback.
As currency exchange is a necessity, you should understand the reality and the goal of the transaction.
The reality: someone is going to make money on your transaction.
The goal: Minimize the amount of your cash that someone is going to keep just to change your home country’s cash into another country’s cash.
ATM’s and other full-service solutions have been developed around the world. As a result, there has been a decline in the use of traveler’s checks (cheques). While traveler’s checks offer security and a degree of convenience, they carry their own fees in their acquisition. Traveler’s checks will need to be converted to a local currency and may incur an additional exchange fee from a service provider. The fee is either called out separately or bundled into the exchange rate.
Let’s look at some pure currency exchange options, including: the ATM, full-service Bank, or exchange services companies.
ATM
The ATM has become an incredibly convenient way to access your money in different countries. Networks have expanded to provide almost global reach. It’s a painless process. You request 100 Euros from your account, you get 100 Euros. The Exchange rate is probably the cleanest you will see. As a case in point, last month I was in Hamburg. I went to an ATM and took out 100 Euro. The exchange from my account was $100.13. On September 8, 2022, one Euro was equal to $0.99314. This means my currency exchange with my bank was within 1% of the end of day closing.
Your bank may have additional fees for foreign ATM fees and international exchange fees that you should be aware of. The foreign ATM fee is the same fee that you would get hit with here in the US if you made a withdrawal from an ATM that is not on the bank’s primary registered network.
ATM’s have a few limitations. They are not everywhere. If you are going to a remote chalet, or a small town, you may have a challenge finding them. ATM’s have a daily limitation on the amount you can take out. Another minor negative of leveraging the ATM as your sole cash strategy is the need hit the ATM before you go out.
Full-service bank
An obvious benefit of the full-service bank is that they usually have a network of ATMs for you to access your account.
A full-service bank is a great resource to leverage for a currency exchange prior to heading out on your trip. Your full-service bank will also buy back any unspent currency from your trip. They can also add the convenience of being able to put it straight back into your account, should you wish. Most banks waive their administrative fees fro existing customers, depending on their account type. Banks also tend to be consistent in their fees in which they buy and sell the currency for their customers.
In my recent trip to Germany, I took out over $1000 Euro, and came back from with a few hundred. In both cases, the exchange was within 10% of the exchange rate for the day.
Exchange service companies
There are exchange service companies located at the airport and train stations such as: Western Union, Interchange Currency Exchange, Travelex, etc.
I do need to point out that you can purchase currency online from these firms. Your funds can be sent to your home or scheduled for pickup at a convenient retail location along your itinerary. There are some benefits as well. Online transactions may lock in the exchange rate for buy/sell transactions. You may be able to sell any residual funds from your trip at the same rate.
In-airport transactions are convenient but come with the worst exchange rates available. For the currency exchange kiosk operator in an airport, you are the captive audience, as there are no alternatives. As mentioned above, my bank bought my residual Euro at a rate with a 10% premium. The currency exchange office in the Atlanta airport offered rate of 1.25 Euro per dollar…plus a $12.95 transaction fee. Not casting dispersions here but, in my mind the Covid mask that the representative was wearing morphed into a triangle, and suddenly was wearing a black cowboy hat…faintly hearing “reach for the sky”. Obviously, I walked away and waited until I got home to conduct my transaction.
If a provider service indicates that there are no fees for the transaction, review the rate. Fees may be bundled in an unfavorable exchange rate they are offering you. The joy of the internet is that comparable information is at the tip of your finger. Quite literally, unless you ask Siri or Alexa.
Convenience comes with a cost, and lack of competition jacks that up. It is also prudent to validate what rate they buy and sell the currency at. If they charge you differently, they are being clear that they are maximizing their profit off you on both transactions for the currency exchange.
In all fairness, the $12.95 fee can be waived is you have a AAA membership.
Currency management for your trip
If you are planning a big international trip in the next year or two, consider your currency exchange requirements now.
The US Dollar (USD) is currently better than parity with the Euro. This is an occurrence that has happened infrequently over the life of the Euro currency. The British Pound is within 15% of parity. For a currency that has run between 125% – 150%, it’s at a discount. The Japanese Yen is at a 40 year low against the USD.
There is always the chance that the USD will continue to go up. However, the degree to which it could go up isn’t that substantial. It may also go the other direction in a recession, which is currently on the table. If you are a US traveler, today is a great opportunity to secure foreign currency for a future trip. Not necessarily saying buy it all now, but perhaps it is time to consider an allocation.
Cash advances and credit cards
I have touched on ways to get your own cash. But I also want to comment on accessing cash via credit card. Quite simply, use cash advances from a credit card in emergency cases only. Your credit card agreement explains their fees for cash advances. In all cases, as cash advance is given at their highest interest rate. It’s better to just pay for everything with the card as opposed to taking out currency.
I hope this has been helpful for you and gives some insight into the currency exchange process. The goal is to maximize your benefit, and not of the exchange service provider.
Travel Well. Pursue Experiences
O.M.I.A.H.