Many more people are enjoying international travel these days. And, as they gear up to head overseas or across the border, many of them don’t give much thought to currency exchange. However, with a volatile currency market, and the U.S. on the down end in many cases (especially in Europe and Britain), you can lose money if you haven’t looked into the proper time for currency exchange.
Keeping on top of the exchange rate
If you know you are planning to leave the country, carefully watch the currency market, and track how well the dollar is doing. You may need to ask someone for advice. Watching for a time when the dollar is at a better rate, and then exchanging then can be a good idea. You can exchange for another currency at many large financial institutions in many cities around the U.S. You do not have to wait until you get to your destination country.
You should be aware, though, that whenever you exchange your currency you will be charged a fee. This is usually a percentage of the total. No matter where you exchange, you will likely be charged 5% to 10% of the amount you receive from the exchange. Make sure that you allow for this as a cost of currency exchange. Also be aware that when you use your credit card in another country, the currency exchange charges still apply. The conversion fee will be added to your credit card balance.
Keeping U.S. dollars on hand
In some countries, you can still use U.S. dollars. Some vendors in countries like Mexico and Russia (and, of course, Canada) will accept U.S. dollars. Study the culture before you leave. If the U.S. dollar is of higher value in the country you will be visiting, keep some on hand, as you might be able to make a deal with a vendor. I was actually able to pay with U.S. dollars on one of my international excursions, and the vendor gave me my change in the local currency.
Taking advantage of an exchange rate guarantee
Another way you can avoid paying too much is to arrange for an exchange rate guarantee. These are arrangements rather similar to insurance. You pay a premium up front, and receive an agreed-upon currency exchange rate for the future. This way, if the currency market moved against you, you can still get an exchange at a certain rate. And the good news is that if the contract expires before you make an exchange, you are not forced to buy, allowing you to pick among the best rates.
International travel can be a rewarding experience, but it is also a matter for careful financial planning. Be aware of currency market movements so that you can avoid losing a great deal of money in currency exchange.
Read an excellent look at preparing for international currency exchange from Australia’s The Age. While it is specifically about Australians going overseas, it is also applicable in the U.S.