Currency conversion: How to get the most out of your money

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Exchanging your currency for a foreign one can become as complex as buying and selling on the stock market. Luckily, there are a few classic rules which, so long as you remember to employ them, should allow you to get much more “bang for your buck.”

It matters where you exchange your money

Shop around when the time comes to go abroad and exchange some money, as the differences can be huge.

Firstly, you should check the exchange rate for the currency you need online. A great way to do this is to simply type the query into Google (i.e. “AED EUR exchange rate”), which should give you an idea of the day’s range.

As you then research rates on the ground, you’ll probably find that big local banks are as bad as airports and hotels. Sometimes, even big name exchange shops don’t offer a good deal.

Your best bet is to find a smaller operation; an exchange shop which takes less profit on each transaction – looking around these types of shops will often see you find an exchange rate close to the figure you noted online.

When to use your credit card

Once you’ve left home, purchases such as hotel stays, extra flights, big shopping bills and restaurants are best put on your credit card – as usually your card issuer will only charge currency conversion fees of around 2% to 3% for international transactions.

What’s more, you will receive the best exchange rates; often substantially lower than the rates tacked on to exchanging cash.

The best credit cards to use are either MasterCard or Visa which you’ve previously checked harbours no foreign transaction fees.

Crucially, you should never use your credit card in a foreign (or indeed local) ATM or bank to get cash, as you’ll be charged very high interest rates as soon as you receive the money.

When to use your debit card

Depending on where you bank, you may find your debit card can be used in foreign ATMs to receive the local currency (more on this later).

Even though there are fees at your bank, the bank you’re withdrawing from abroad, and currency conversion charges to pay – the combined total only takes 3% – 8% of your total; a reasonable price to pay if you need the local currency.

In addition, a few banks have international partners or branches which mean you can use your ATM card fee-free. You should ring to check if your bank changes its charges depending on where you take your money our abroad.

Larger amounts, less often

Another great way to save on transaction fees is to withdraw larger amounts of cash, less often.

If you’re planning to visit small villages or islands, be sure to change enough money in larger towns, as you’ll always get preferable exchange rates in a city.

Try not to have too much of the currency left at the end of your trip, as you don’t want to waste money converting the foreign currency back into your home currency. If you do have some currency left, try to sell it to an incoming tourist for the rate you paid, or perhaps keep the cash if you are planning to return to the country.

The questions to ask before you go

You may want to ask your bank these questions before you leave in order to ensure you know you’re choosing the right options:

  1. Does my bank carry foreign transaction fees?
  2. Can I use my ATM card free of charge at any international branches or partners abroad?
  3. With regards to international transactions, are there any benefits if I switch accounts?

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