Debit and ATM Cards Are the Way to Go
The first thing you can do to get the best rates when exchanging currency is to avoid doing it prior to departure. The rate to exchange foreign currency will be higher at home (or where you are based) than in the destination country and vice versa.
Most people however, are uncomfortable to travel without any foreign currency on them and typically make the exchange before they depart.
Instead, you should withdraw from an ATM at your country of destination as it will typically provide the lowest transaction fees when compared to other methods of exchange.
This is because it charges only 1% to 3% on top of the interbank rate; the base rate applicable when banks exchange currency with each other.
The ATM will also charge withdrawal fees for foreign currency, although some void the charges if within a regional or banking link. For instance, a Maybank debit cardholder may not have to pay a withdrawal fee when withdrawing from a Maybank ATM in Singapore.
When compared to a money changer, the difference could be as much as 7%, which might not sound like a lot but when you are exchanging thousands of currency units, this figure becomes rather significant.
How to Withdraw From an Overseas ATM
The process is similar to how you would at home, with the possible exception of varying language options.
Before you depart, make a note of the nearest ATM locations in relation to your arrival area; also, remember to activate your card for overseas transactions and check on its limit as well as the potential charges applicable.
Note that if it is not convenient to withdraw from your own bank’s ATM or if there isn’t one available, you can use any ATM with an interbank network logo, such as Plus for Visa and Cirrus for MasterCard. It might carry slightly higher fees but it is still likely to be the cheapest method.
Do plan your cash needs and draw out an appropriate amount – withdrawing too little could incur repeated withdrawal charges.
Credit Cards Are the Next Best Thing
While you might be better off using cash to pay for smaller transactions i.e. your meals, taxis and trinkets, your credit card is still a safer option for certain purchases.
Use it to pay for flight tickets, accommodation as well as personal expenses (when your luggage is lost or delayed) to qualify for travel insurance and inconvenience benefit claims.
If using a credit card for large buys, your purchases could be protected with warranties, in addition to limiting your liability in case of fraud. Some cards offer special travel perks too, such as more reward points for foreign transactions, discounts on hotels and additional air miles with your flight ticket purchases.
While credit cards do charge a fee that will be higher than cash withdrawals, you’ll likely still come out ahead when compared to making the exchange at a currency kiosk.
Buying Foreign Currency Online
After making ATM withdrawals and using credit cards, the next best way to secure good currency exchange rates would be to buy from the local bank (or your home bank) and post office of your travel destination.
However, if you have the time to plan, buying online could be a cheap option as well. One reason is because it is easier to shop around for rates on the internet and compare them to find the lowest ones.
You’ll usually save more if you do this in advance and lock in a rate (if it is expected to rise soon) rather than buying at the last minute from a currency exchanger at the airport.
A word of caution about the fraudulent activity of online currency exchange sites; only buy from reputable sites and be suspicious of deals that appear too good to be true.
Foreign currency exchange kiosks and booths located at airports, transport stations, mall and hotels might charge some of the highest exchange fees when compared to the methods listed above.
If you do happen upon a money changer or currency exchange kiosk at the airport that seems to be offering a good deal, ask if the promotional rate listed can be applied for any amount or it will only come into effect for a larger sums exchanged.
Also, check if the low rate belongs in the ‘we buy’ or ‘we sell’ category. The ‘we buy’ rate is when the money changer buys foreign currency from you. The ‘we sell’ rate is when you buy foreign currency from the money changer. The buy rate is typically lower than the sell rate as it appears side by side.
Lastly, find out if the commission being charged is a flat rate or a percentage; if it is the former, it’s better to exchange a larger sum and pay the commission only once.
Remember that every time you exchange currency, your money is losing value with admin fees being charged no matter the method of your exchange. To limit exchanging currencies repeatedly, it’s best that you budget all expenses to a tee. This way you’ll have less excess currency at the end of your trip.
If you are planning to travel extensively, you’ll need a good credit card at your disposal. It can help you save on additional fees associated with currency exchanges as well as be there to provide financial backup in times of emergencies. Use our comprehensive comparison page for help finding a card that best suits your needs.