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where to exchange currency

Traveling abroad can be expensive. Besides renewing your passport, booking your flight and arranging accommodations, you have to pay for transportation, food and all those incredible experiences you left home for. Even if you have reliable credit cards or a debit card tied to your checking account, you’ll probably have to exchange currency at some point during your trip. Rule of thumb says you should always have at least $50 worth of local currency on hand. In that case, you’ll need to know where to get that cash without losing too much to fees.

What to Know About Currency Exchange

First things first, you might want to brush up on exchange rate basics. Look into the local currency of your destination and check for any rules and regulations. For example, you need to already be in Morocco to exchange for Dirhams. Many countries do allow, or even prefer, that American visitors pay in U.S. dollars.

When you go to exchange your money, you should know exactly what you’re paying. For one, you might face commission charges on a per-item basis rather than a flat percentage. This means you should ask for the net rate before making any exchanges. Some exchanges also post sell rates (what you get when you exchange your dollars) instead of buy rates (what you get when you exchange leftover foreign currency back to dollars), or vice versa, to lure customers under false pretenses. Others list a rate only available for exchanges of thousands of dollars or tools like traveler’s checks or prepaid cards. Rates vary from place to place, too, making it important to shop around for the best price before making a purchase.

You may also want to watch the interbank rates for your destination on a site like www.xe.com at least a month before your trip. The interbank rate is the wholesale exchange rate that banks use when trading between themselves. Currency rates fluctuate constantly according to economic affairs, interest rates, employment numbers and political situations. Keeping a close eye on the rate allows you to buy when the dollar is strong. This is when you can get the most foreign currency for your buck.

Where Not to Exchange Currency

Before you head out to exchange currency, it’s important to understand where not to exchange currency. It may seem like the convenient option, but airport and major transportation hubs exchange rates don’t offer the most favorable rates. These places know that they will either be your first or last choice to exchange currency so they tack on additional fees and commission charges. The same goes for your hotel and major tourist centers. Avoid any currency kiosks at airports unless they’re your last resort during an emergency or you know they’re the only option available at your destination.

Where to Exchange Currency in the U.S.

where to exchange currency

If you like to plan ahead and want to exchange currency in the U.S., your bank or credit union will be your best bet. They have access to the best exchange rates and usually charge fewer fees than exchange bureaus. Most big banks sell foreign currency to customers in person at a local branch. You can also order the currency online or over the phone to have it shipped to your home. While convenient, this method does come with shipping fees. Post offices tend to offer similar services, too.

You can also order currency online through foreign exchange providers. These companies provide currency exchanges and international payments through in-store pick-ups or mail delivery. They rarely have the same rates you’d find at your bank, but they’re better than bureaus you might find at your destination. Often, they’ll waive the shipping fee if you order large amounts. Plus, they’re convenient. To get the most money at the best rate, you can use a comparison site like Travelmoneymax.com.

You still have the option of purchasing traveler’s checks. They’re a bit outdated, but banks and credit unions do still offer them. You can typically buy traveler’s checks even if you aren’t in the bank’s network. You just might face an extra fee. An upside to traveler’s checks is they can be replaced if lost or stolen and used only by you since they’re in your name, unlike using cash. The downside is they aren’t accepted everywhere so you’ll likely have to cash them at a bank in your destination. They also aren’t available in every foreign currency.

For the modern equivalent, consider a prepaid travel card. You load U.S. dollars onto the card before you leave the U.S., then use it like a debit card overseas. The rate will be consistent with the day you loaded or bought the card, not when you spend. As with traveler’s checks, its value is protected if your card gets lost or stolen. You just report the incident and request a replacement card. Someone can also top them up from afar while you travel, making them great for young travelers and students abroad. Unfortunately, they also come with a lot of the same downsides of traveler’s checks like limited acceptance and transaction fees.

Where to Exchange Currency Abroad

If you can’t exchange currency ahead of time, no need to worry. You’ll have plenty of opportunities once you reach your destination. It just might be a little harder to find a good deal. Again, steer clear of major transportation hubs, your hotel or stores in tourist centers.

Once you’re abroad, you’ll have most success accessing your bank’s ATM network with your debit card. Check whether your financial institution has a partnership with any overseas banks. That way, you can withdraw cash from their ATMs without paying a fee. You can still access your bank’s funds without that kind of partnership, you’ll just face foreign transaction fees and surcharges from both your bank and the ATM owner. Foreign transactions fees usually total 1% – 3% of the transaction amount. In this case, it’s a good idea to take out as much money as you’re comfortable carrying at one time. This allows you to avoid multiple withdrawal fees.

If you travel regularly, you may also consider getting a checking account without foreign fees, like the Capital One 360 Checking Account® or the Schwab Bank High Yield Investor Checking® Account from Charles Schwab. Notably, Charles Schwab also reimburses any foreign ATM fees you pay and forgoes currency conversion fees.

You can also visit a currency exchange counter. While banks usually have better exchange rates, counters likely offer lower transaction or service fees. In major tourist areas, several currency businesses compete with each other, allowing you to try and strike a deal to find a favorable rate.

Lastly, you can send yourself money through a wire service like Western Union, MoneyGram or Paypal. You can send it to your destination whether from home or on the road so you can pick it up in the local currency.

What to Do With Foreign Currency After Your Trip

where to exchange currency

After your trip, chances are you’ll probably end up with a bit of foreign currency leftover. There’s no need to feel shortchanged, though. You can easily go back to your local bank, credit union, post office or currency exchange counter after you return. Keep in mind that many of these places don’t accept coins, so try to spend those first and save the bills for later.

If you travel frequently, you could just hold onto that foreign currency for your next trip. Of course exchange rates may not stay consistent throughout your many travels. This strategy could help you get ahead, but you could also take a hit. It works best when you have less than $50 in another currency that you’ll likely use again.

So you don’t want to make a trip to the bank but don’t want your foreign currency collecting dust, either? Try selling it to friends who plan to travel to the same destination you just visited. You can use the current interbank rate or the rate that you paid for it, saving you both money either way. You can also sell foreign currency on eBay. Just be sure to pay attention to the ground rules.

You can also donate your leftover foreign currency to organizations like the United Nations International Children’s Emergency Fund (UNICEF). In partnership with airlines like American Airlines, UNICEF collects leftover currencies onboard your flight or through the mail.

Using a Debit or Credit Card Abroad

Even though it’s important to have local currency on hand, you don’t need to pay for everything in cash. In fact, paying with a credit card can make more sense for major expenses like car rentals. (You may also get free car insurance if you pay for the rental car with your credit card.) Plus, using only cash overseas means you could be missing out on some serious benefits. There are dozens of credit cards without foreign transaction fees that you can use not only to avoid fees, but potentially rack up travel rewards.

It’s also important to know that when you pay with a card, foreign merchants may ask you if you want to pay in USD. This might make the conversion math easier for you in the moment, but you end up having to pay currency conversion fees. It’s simpler and cheaper just to say no and let your bank do the math for you later.

Bottom Line

Using these tips for exchanging currency can help you save time and money any time you travel. It’s important to pay attention to conversion rates and what you’re paying to avoid getting ripped off. You may even want to shop around and wait before making your transactions. It also helps to have a mix of cash, debit and credit cards when you travel. This helps you avoid unnecessary fees and use your money in the most efficient way. That way, you can actually enjoy you vacation instead of worrying about managing your money too much.

Financial Travel Tips

  • Traveling is expensive, but luckily there are ways to cut costs and get rewarded for your travel expenses. To start saving money, you’ll want to avoid foreign transaction fees however you can. You can do this by using fee-free credit cards or avoiding foreign ATMs out of your bank’s network.
  • If you’re a frequent flyer, take advantage of one (or more) of the many airline frequent flyer programs out there. These programs offer discounts on certain expenses and rewards for the purchases you make. This can make your travels more affordable and comfortable.

Photo credit: ©iStock.com/baona, ©iStock.com/vm, ©iStock.com/mixetto

Liz Smith Liz Smith is a graduate of New York University and has been passionate about helping people make better financial decisions since her college days. Liz has been writing for SmartAsset for more than four years. Her areas of expertise include retirement, credit cards and savings. She also focuses on all money issues for millennials. Liz's articles have been featured across the web, including on AOL Finance, Business Insider and WNBC. The biggest personal finance mistake she sees people making: not contributing to retirement early in their careers.
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