How Do You Exchange Currency?
Whether you go to a currency exchange kiosk overseas, process an exchange through your local bank branch, or request the currency online, it works the same way:
You request a different currency than you have. The institution processes the exchange based on its exchange rate and fees. You pay the amount due in one currency and receive the amount requested in the other.
But the place you choose to do the exchange could make a big difference in how much cash you end up with. For example, say you have $1,000 and you’re thinking of exchanging it for the equivalent amount in euros at an airport kiosk run by International Currency Exchange (ICE). The ICE exchange rate for U.S. dollars to euros when we were doing our research was 0.73, which would get you about €720 for your $1,000. By comparison, Wells Fargo’s rate was 0.80. Trading in your $1,000 at Wells Fargo in advance of your trip would get you €800, which is €80 (about $94) more than if you were to make the exchange at the airport.
Where to Exchange Currency
When it comes time to exchange currency, you have several options—both at home and abroad. You can go to:
Your local bank or credit unionCurrency exchange kiosks (often in airports)Foreign ATMs with a credit or debit cardOnline money transfer services like Xoom and Western Union (use abroad)
Which option is the best? To find out, we compared the exchange rates, fees, and total costs from a variety of institutions. Here’s what we found:
Best Places to Exchange Currency in the U.S.
Banks and credit unions tend not to have fees—at least if you’re changing an established minimum amount—but they make up for it (and then some) by charging you a less favorable exchange rate. You may have the best luck asking at your own bank for the more popular foreign currencies. In other cases, you may have to order the currency from the bank and wait for it to come in or be delivered to you. That process may come with additional delivery fees. You can also visit currency exchange shops in tourist areas before you leave town, but these tend to have the most unfavorable rates you’ll find. Exchanging currency before you leave your home country is not necessarily required or beneficial. Actually, you can likely access the foreign currency at a lower cost upon your arrival.
Best Places to Exchange Currency Abroad
Services like Xoom and Remitly also have competitive rates and offer money pickup locations worldwide. You can create an account and request the transfer online. Then, you pay for the foreign currency using a debit card, credit card, or bank transfer. Xoom also lets you pay with PayPal. Once paid, you can pick up the foreign currency from a local cash pickup location at your destination (you cannot pick it up in the U.S.). It’s important to note the fees can vary depending on the payment method you choose. Remitly charges 3% when you pay with a credit card. Xoom doesn’t charge any fees for paying with your bank account or PayPal, but charges $17.99 for using a debit or credit card.
Where You Shouldn’t Exchange Currency
If possible, steer clear of airport exchange kiosks, as they generally have the most expensive rates. In the example above, ICE was the most expensive option—the fees reduced the net amount of currency you’d receive by 14%. Additionally, getting a cash advance from a credit card (either through an ATM or at a bank in your destination country) can come with a collection of fees, along with interest costs if you don’t pay off the balance. Depending on where you’re staying, your hotel may offer currency exchange, but that also tends to be an expensive option. That’s not to say that you shouldn’t bring a good travel rewards card on your trip (one with no foreign transaction fees). Making purchases with the card in places that accept credit cards is one of the best ways to save yourself the hassle of cash, plus, it’ll get you some of the best exchange rates going.
How to Cut Currency Exchange Costs
There are a few ways to lower the cost of exchanging money when you’re in another country, whether you’re using a card to make a purchase or exchanging currency for cash. The first, as we’ve mentioned above, is to avoid credit and debit cards that charge foreign transaction fees for processing transactions in another currency. At around 3% per transaction, these fees add up quickly if you’re using your cards to make multiple purchases and/or withdraw funds. So if you’re going to use a credit or debit card abroad, look for one with no foreign transaction fees. Next, when making purchases using your credit or debit card overseas, don’t accept the transaction in U.S. dollars. If you do, the merchant can process the currency exchange itself and give you a worse rate than if you’d paid in the local currency. This is known as dynamic currency conversion. Instead, accept the transaction in the foreign currency so you can benefit from the competitive exchange rates provided by Visa and Mastercard. Lastly, don’t be lured by low transfer fees alone. They are only part of the story. Look up the most recent exchange rate from U.S. dollars to the foreign currency you’ll be using. Then, compare the exchange rates offered by providers to calculate your total costs.
