Last year, I flew to London, U.K., to see some old friends and travel a bit. As I walked out of the plane, one of the first things I saw was a currency exchange kiosk. When traveling internationally, I always make adequate plans to get the best deal with currency exchange. In the U.K., it’s simple for me since my husband and I have a bank account there and we simply transfer money to ourselves (we like to use TransferWise for this). However, not everyone is this lucky. In my experience, the worst deal is at the first currency exchange kiosk you see. However, you have other options.
Become familiar with exchange rates
Currency value is relative to the exchange rate between two countries. Many factors will affect your exchange rate such as the countries inflation rates, interest rates, economic strength, political stability and more. For example, when I lived in London in 2014, the exchange rate hit a high of over 1.7 ($1.70 for £1.00). Today, it’s about $1.32 for £1.00. Brexit has had a large impact on the value of the pound, as it dropped to a 31 year low after the vote on article 50[1].
For me, the new exchange rate is favorable. Prices of goods and services have stayed consistent in the UK[2] and I’m getting a better deal with the new exchange rate.
It’s important to note that the exchange rate you see online is not the exchange rate you will get. Financial institutions such as banks and currency exchange companies will charge a fee on top of that exchange rate. Even if they claim to be “free,” their fee is built into the exchange rate they offer you.
Your bank at home may be able to exchange money for you in advance for a favorable rate
This is especially true if you hold a sizable balance there. But be careful, your bank may charge you an unfavorable rate as well. Either way, it’s worth it to ask.
You can withdraw money directly from an ATM in another country
The rates here may vary. When withdrawing money from an ATM, you should be given an option whether you wish to withdraw money with or without a currency conversion. Going without a conversion gives you a better deal because your bank will do the conversion instead of the ATM[3].
You can shop around at currency exchange kiosks in the city
Personally, I don’t like to do this because it’s time consuming and there’s no guarantee you will find a favorable rate at a kiosk.
Become familiar with your bank and credit card’s international use policies
While it’s important to have some cash on you, you may not want to carry around thousands of dollars in your pocket. You can use your debit or credit card to pay for goods and services. To do this, make sure you call your bank prior to your trip and let them know you will be traveling. If you fail to do this, your bank may suspect fraud and freeze your account at the first sign of an international transaction.
You also want to check if your bank charges an international transaction fee. A fee of 3% seems to be the industry standard in the United States but your fee may be higher or lower. There are debit and credit cards that do not charge international transaction fees. If you are a frequent traveler, opening an account may be a good idea!
[1] https://www.theguardian.com/business/2017/jul/24/how-has-brexit-vote-affected-uk-economy-july-verdict
[2] https://www.rateinflation.com/consumer-price-index/uk-historical-cpi
[3] https://transferwise.com/gb/blog/best-exchange-rate