One of the most important things which an individual has to take into consideration, if they are planning for a foreign trip or if they are looking out travelling abroad shortly is to get the currency exchange done. The maths which goes behind the calculation of currency exchange procedure is not an easy one to understand despite having the best tools in hand.
The process involved in the exchange of any international currency be it Russia's Ruble or Danish's Krone or Bahrain's Dinar or UAE's Dirham is an arduous task.
What is a Foreign Currency Exchange?
A Foreign Currency Exchange is a business which has legal rights to exchange one currency to another to its customers. The currency exchange of physical money (paper bills, coins) will be done over a counter at a teller station.
It will be easy for the traveller if they take into consideration the following list of foreign exchange tips which will help them to make the best out of the trip without the need to spend too much of time and energy in calculating the local currency exchange rates.
Let's look at the list of things to consider in case of Foreign Currency Exchange:
Monitor the Currency Exchange Rates Regularly
With the advent of technology and the introduction of several apps, one can track the value of the desired currency within a fraction of a few seconds. One can even take the help of few websites like xe.com which are programmed to help the users to save time and energy which otherwise will be drained out if you opt for manual calculations.
The apps and sites work on a real-time basis and give the user accurate information based on the movement of the currency value. By doing so, you can save yourself from getting duped.
Research on Visiting Country's Currency
Some of the foreign country's currencies can be handled easily during the exchange process owing to their straightforwardness. You can go to any country with currencies like Dollar, Yen, Pound and still can get a proper currency exchange value in almost all the countries and hence it is important to understand the basic rules of the currency exchange before visiting a new country. But some countries currencies are awful and follow unusual exchange rates.
For example, Moroccan currency cannot be exchanged outside Morocco. Cuba has a separate currency for tourists and some nations like Taiwan, Cambodia, Vietnam uses U.S. Dollars as their secondary currency. The GBPUSD (British and US) currency pair is known as cable.
Avoid No Fee Exchange Offices
Most of the tourist's destinations will have a few currency exchange offices which publicize that they do not charge any extra fees for currency conversion. Say a big no to such offices as the currency exchange rate is usually lowest here and you will end up getting a lesser amount as against the places which will charge a fee.
It is advised to go for currency conversion at a place which asks you to pay for transaction charge but it will, in turn, offer you the value for your money which is worthwhile for your journey.
Avoid Exchange at Airport
The foreign exchange offices which will have its presence in most of the airports will charge you high conversion rates and fees and hence it is best to avoid them. They usually charge a margin in the range of 8% - 12% of the cash you pay to them. So it is better to go for a foreign exchange done in advance before landing to your designated country and make the required exchange (as the need arises) after conducting proper research in the market.
Learn Currency Exchange Terminology
The global currency exchange system will have its own set of terms and vocabulary. Before heading for an exchange, you will have to spend some time and understand the terminologies associated with it. The local exchange offices try to confuse you by using the jargon and hence it is worthwhile to get used to some terms and understand as to how it works.
Some of the important foreign currency exchange terms:
a) Exchange Rate: It refers to the value of one nation's currency versus the currency of another country or economic zone.
For Example Q: How much is 1 U.S.Dollar in Indian Rupee?
A: As on Jan 31, 2020, the exchange rate for 1 U.S. Dollar is 71.41 Indian rupees.
b) Bank to Bank Rate: It is also referred to as bank rate. It is the wholesale exchange rate which the banks use among themselves. Usually, this rate is how you get your cash withdrawals done at a foreign ATMs.
c) Buy Rate: There are possibilities that you may not be spending your entire amount during your trip and if you end up with leftover currency, you can sell it in that country itself and get your home country's currency in return. The amount which you will get after selling the local currency is termed as buy rate.
Exchange your Currency in Advance
There is no thumb rule that you will have to exchange your home currency when you land at the airport. You can lookout for a currency conversion centres a month or two ahead of your scheduled trip. All you need to do is to identify a day on which you can get maximum money on exchanging your local currency from a foreign exchange office.
Avoid Direct Transactions Using Debit and Credit Cards
The transaction fee will be higher for both debit and credit cards if you make payment in a new country. Some of the banks can even block your credit cards owing to suspicion and you may even end up paying more than the actual transaction fee than you will ever pay during your complete trip.
So it is advised not to use your cards at all. It is better to inform your respective bank about your trip in advance so that they will not block your card on mere suspicion as this will save you from trouble.
Compare Between Various Shops
As we all know, the currency exchange rate keeps on fluctuation daily. Not only it goes up and down regularly but the rates also vary hugely from one trader to another. The currency exchange offices present in and around airports and prime market places usually quote higher rates than the one which is located at less popular tourist places.
All you have to do is to conduct thorough research and find out the most valuable and beneficial trader who will help you to make a profitable foreign trip at less cost.
About the Author
Archana is a Content Writer at GoodReturns. She has been writing articles related to investment planning and personal finance for more than two years.