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Guide to Exchanging Currency for Overseas Travel

Updated on March 29, 2023 02:40 pm
Guide to Exchanging Currency for Overseas Travel

Ready for the adventure of a lifetime? You've booked your tickets, planned your itinerary, and packed your bags. But wait, have you thought about managing your money abroad? The last thing you want is to be caught in a foreign country with no local currency or struggling to find an ATM that accepts your card. 

Navigating the world of currency exchange can be daunting, but fear not! In this comprehensive guide on how to exchange currency for overseas travel, we'll take you through everything you need to know about exchanging currency for overseas travel. From deciding whether to exchange before you go, to finding the best exchange rates and managing your money once you're abroad, we've got you covered. So sit back, relax, and let's dive into the world of currency exchange!

The first step in making sure you don't end up paying more fees than necessary is to understand currency exchange rates. Exchange rates are constantly changing, so it's important to monitor them or simply use CompareRemit, a free exchange rate comparison platform. By doing so, you can exchange your money at the best time and at the best exchange rate every single time. 

What is an Exchange Rate?

Exchange rates can make or break your international travel plans, and understanding them is the key to saving money while you travel.

Simply put, an exchange rate is the value of one currency in comparison to another currency. It determines how much money you will receive when you exchange your home currency for the currency of the country you are visiting. For example, at the time of writing, the exchange rate of USD to INR is 81.71, which means 1 USD equals 81.71 INR.

Exchange rates are not fixed and are subject to fluctuation based on supply and demand in the foreign currency market. However, some countries may fix or peg their currency to a specific value. For example, the Hong Kong dollar is pegged to the US dollar. 

Understanding exchange rates and how they work can help you make informed decisions about when and where to exchange your money for the best value.

How Does Currency Exchange Work?

The exchange rate is technically called the mid-market exchange rate between any two currencies. It is the mid-point between the buying and selling prices of the two currencies in question at a given point in time.

The rate you see on Google searches or from independent sources like Reuters is the mid-market rate, which is also known as the interbank rate (because banks trade currencies at this rate with one another).

The currency exchange rate between two countries is influenced by each country's Gross Domestic Product (GDP), interest rate, imports, exports, economic conditions, inflation rates, and even geopolitical situations, among other factors.

Since the rates tend to rise and fall as per market conditions, the value fluctuates. So when you are exchanging currency, say, US dollars for another foreign currency, you want to make sure you get the most foreign currency for your US dollars, which means getting the best possible currency exchange rate and limiting the fees you have to pay.

Read more on exchange rates.

Do You Need to Exchange Currency for International Travel?

You will need to exchange currency at some point while on a trip abroad. If you are unaware of the tricks, you can find yourself paying more than necessary.

What you want to avoid is - exchanging currencies at poor exchange rates and paying high currency exchange fees. Get familiar with exchange rates. It can be fun and interesting.

You can start by finding out the real and fair exchange rate of the currency of the country or countries you are visiting.

Because of high currency exchange fees, you should exchange currency before traveling and know where to go to save on the fees once you are abroad.

Read the tips below so you can exchange your money at the best rates while saving money on your international trip.

Where to Exchange Currency in the US

Banks, Credit Union, & Online

The cheapest place to exchange currency is at your home bank or credit union. They offer competitive rates and possibly the lowest fees.

Most major US banks or financial institutions will have foreign currency ready to sell to you without charging an additional fee above the exchange rate, depending on which country (or countries) you are traveling to. If you exchange less than a certain amount, there can be a small fee.

You can order currency in cash at your local bank branch, or you can order currency online or by phone to be delivered to your home or picked up at a branch.

Although ordering cash online will probably come with delivery fees and the exchange rate won't be as favorable as it would be at your bank, this is still a better choice than the alternatives you really must avoid.

Certain currencies may be available for same-day exchange or the following day, depending on your bank, where you live, and which country's currency you need. With less popular currencies, it can take a few days or longer.

Withdraw Local Currency from ATMs

Once in a foreign country, the best way to get foreign cash or the local currency at competitive exchange rates is to use a foreign ATM.

Pro tip: Check to see whether your bank has an international ATM or banking affiliates in the country you're visiting if you don't have time to get the foreign currency before leaving or don't want to carry a lot of cash.

Big US banks such as Chase, and Bank of America, often have the added benefit of having ATMs overseas. Use an ATM inside the airport as soon as you land in your destination country.

Where NOT to Exchange Currency

Avoid Airport Kiosks for Currency Exchange

Airport kiosks may be tempting and convenient if you didn't have time to get cash at your home bank. But they should be your last resort because they offer poor rates and charge high fees.

For example, if you are leaving for the US from India and your bank offers you an exchange rate of 82 INR per US dollar, but the airport kiosks only offer you INR 77,  it costs you more in the form of fewer rupees for your dollars. You would have received an extra 5 USD in cash if you had made the exchange at your home bank.

Airport kiosks may also charge higher currency exchange fees, which are sometimes hidden within the poorer exchange rates they offer for converting your dollars to another currency.

But, it can be worth it to spend a little bit more for convenience if you have a last-minute trip and require foreign currency in cash at the airport currency exchange counter.

To avoid using airport kiosks and other exchange counters, exchange money in advance at a bank or credit union if you have the time.

Travelers' Checks and Prepaid Debit Cards

Traveler's checks are no longer widely used due to their inefficiency and high transaction costs. Instead, people use more efficient credit cards. When compared to cash, they offer only a little benefit in terms of security.

Moreover, prepaid debit cards have transaction fees, foreign transaction costs, and ATM usage fees.

Quick tips on exchanging money for overseas travel

Tips For Exchanging Foreign Currency & Managing Money Abroad

Know Your ATM Fees and Limits

It is best to be aware of the ATM withdrawal fees and daily withdrawal limit before using the machine.

If you feel that the daily withdrawal limit is too low, contact your bank to increase it.

Withdraw larger amounts all at once to save money from paying withdrawal fees repeatedly. Instead, use a bank that reimburses overseas ATM fees.

Moreover, be aware of any charges your bank might impose if you use an out-of-network ATM outside of your country.

Keep in mind that the foreign ATM's daily withdrawal limit may be lower than the one set by your home bank.

Plan to make sure you have enough cash during your trip.

Use a No Foreign Transaction Fee Credit Card or Debit Card

Remember that using a credit or debit card may be handy, but there may be foreign transaction costs. Thus, it makes sense to bring a credit card and debit card with no international transaction fees.

Your card may charge a foreign transaction fee of up to 3% on each purchase you make abroad, depending on your bank and the card you use.

Specific cards with no overseas transaction fees are available from major US banks like Bank of America, Capital One, and other major credit card issuers.

Read the fine print on your bank's or credit card's website before your travel to check if they charge foreign transaction fees or you can contact your bank and ask if they charge foreign transaction fees with the type of card or account you have.

Many credit card companies offer good travel rewards credit cards where you can earn points and miles.

Also, credit cards are likely to offer fraud protection on an overseas trip. In a way, it is better than carrying a huge amount of cash. You can replace a lost or stolen credit card, but lost cash can never be replaced.

However, don't use a credit card for a cash advance to get foreign currency. You will need to pay a cash advance fee and a high-interest rate that starts accruing immediately.

You also need to inform your credit card companies to let them know which country you are traveling to so that they do not flag your transaction as fraud and block your usage.

Pay in the Local Currency to Avoid Currency Conversion Fees

To save money on foreign transaction fees, choose to pay in local currency because you will be charged an extra currency conversion fee and likely get a poor exchange rate.

Keeping some local currency is also convenient in case you need to take an airport taxi into town, book a local guesthouse, or buy some snacks.

Use a Multi-Currency Account

Consider using an international banking app, like Wise, Revolut, or others, to manage your money abroad if you frequently travel abroad.

These apps provide multi-currency accounts, allowing you to store different currencies and send money to accounts in several countries. You could avoid the fluctuation in currency exchange rates by doing this.

Exchange Foreign Currency for Free

Ask your bank if they exchange foreign currency for free and if there are any conditions you must complete to avoid paying foreign exchange costs.

Remember that unless you have a premium account or are exchanging at least $1,000, some banking institutions may charge a fee for currency exchanges.

Watch Out for Hidden Fees

Ensure that you are not spending more than necessary when you exchange money. Request upfront fees, or seek out a foreign currency source that offers transparent pricing.

Don't Put All of Your Money in One Place

Consider your options for carrying your money if you travel abroad. Take some local currency with you to pay for travel, food, and taxis. or load money onto a travel card for large purchases like hotels and reservations. Also, don't forget to bring your debit or credit card as a backup or in case of emergencies.

Also, bring US dollars (or your home currency) with you on your trip in case your credit card or ATM card malfunctions.

Have Multiple Credit Cards

There are various levels of credit card acceptance. Visa is the most widely accepted worldwide. While American Express and Mastercard are somewhat accepted. But it is always good to have multiple credit cards so that you have another one available if one gets declined.

What Should You Do With Leftover Foreign Currency?

Travelers who have returned to India are required to surrender foreign exchange held in the form of currency notes and traveler's cheques within 180 days of their return.

However, you are free to keep US currency exchange up to 2,000 USD in the form of foreign currency notes or TCS for future use or credit to their Resident Foreign Current (Domestic) Accounts.

On the other way around, if you are back in the US from an overseas trip, you can go to your bank or credit union to transfer any foreign currency to US dollars. Remember that banks may not buy back all types of currencies. If this happens, the best option is to exchange money at a currency converter counter or an airport kiosk, even though the rates are not that favorable.

Enjoy Your Travels!

If you do a little homework before leaving for your trip by knowing about exchange rates and tips on managing money overseas, you’re likely to save money. 

To avoid high exchange rates and fees, remember to stick to ATMs when you are abroad, no-transaction-fee credit card purchases, and paying in local currency whenever possible, and refrain from converting money at airport kiosks, and hotels, and paying for purchases in U.S. dollars.

To learn more about the currency exchange rates for the country you are visiting, use the CompareRemit online exchange rate comparison tool today!

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You may have to pay a fee for the replacement card.Pros and Cons of PaycardsProsA win-win situation for unbanked employees and their employers.Green alternative to paper checks.Immediate payment to employees.No hassle of cashing a paycheck.No monthly or maintenance fees.Added security when assessing their funds (paycards require a PIN).Employees can report to the issuer if funds are used unauthorized.Paycards can be reloaded during each payday, saving money on issuing paper checks.Added efficiency for the employer as the employer would not have to physically present or mail paychecks to unbanked employees.ConsEmployees may incur fees for several reasons. Be aware of such potential fees.Employers have certain responsibilities to educate employees about the usage of paycards.Limited range of services and flexibility in managing your funds compared to bank accounts and other prepaid cards.The best paycards programs are easy to set up, have lower fees, quick access to funds, and provide a range of benefits such as cashback and discounts. We have made a list of popular paycards providers for businesses:Wisely Paycard by ADPOnline portal and mobile appCompatible with Apple Pay, Samsung Pay, and Google PayZero cost sign upNo hidden feesNo credit checkNo overdraft feeZero cost direct deposit of pay and other sources of income (including government benefits)Accepted wherever Visa is acceptedKeep track of spending and account balances 24/7 on the appGet cash back at major retailersSurcharge-free ATM withdrawalsFDIC insuredSecurity features include instant card lock, purchase protection, and travel alert notificationsRapid PaycardDirect Deposit onto rapid paycardLoad funds from approved checks with Ingo Money mobile appsNo fee for cashing paycheck24/7 account access with rapid! Access mobile appNo credit checkCan be used at ATMs, merchants worldwide, wherever Debit Mastercard or Visa debit cards are acceptedPay bills and make purchasesBook airline and hotel reservations onlineEarn interest on savings accountGet cash back rewardsFDIC insuredMoney protected with Zero Fraud LiabilityKittrell PaycardNo fees to use (there are fees for certain situations)Fee-free ATM network with MoneyPassWebsite and Kittreall AppGet real-time alerts and push notificationsCash back at point-of-sale terminals2-way texting to manage your card and accountCompatible with Apple Wallet, Google Pay, Samsung PayEasy portability (Get direct deposit of stimulus checks, tax refund, benefits)Freeze or unfreeze card on-demandSkylight PaycardZero sign up feeNo credit checkNo minimum balance Personalized your card with a family photo or unique imageManage money anywhere on Mobile AppDirect deposit your government benefits, tax refundsUse anywhere where Visa Debit & Debit Mastercard are acceptedFDIC insuredZero liability protectionPay bills onlineEarn interest on savings accountEarn cash back with Payback RewardsSend money to or receive money from friends and family with Netspend cardsSet text alerts about transactionsRefer a friend and boost your card balanceSkylight overdraft limit is $100 & 3 times/ monthConclusionOverall, paycards can be convenient and cost-effective for employees and employees when compared to paychecks or for those employees with no bank account. And the paycard fees are becoming more transparent and competitive.While paycards can be challenging at times, especially when you are employed in multiple jobs and have a separate paycard with each employer, your funds are scattered in multiple cards so it becomes difficult to manage your finances. Some may prefer to put all their money in one place, like a checking account.However, if you can't open a bank account, a paycard is a great option to get paid. Read the fine prints before signing up for a paycard and know the potential fees that come with it.

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