Currency Exchange: What You Use Matters

currency exchange
craigfinlay/Flickr

To International travelers, the name Travelex should sound familiar. They are the largest airport currency exchange operator in the world. But a recent currency exchange study comparing the cost of using Travelex, some of the largest U.S. banks and credit cards revealed what experts already knew.

CardHub’s 2013 Currency Exchange Study compared the cost of the currency exchange services offered by 15 of the largest banks in the U.S. as well as Visa, MasterCard and Travelex. The study proved that using a no foreign fee credit card is the way to go on spending internationally. Banks charge an average of exchange rate of 7.1% and Travelex charges 15.5%.

Worried about using a credit card outside of the U.S.? Don’t be. Credit cards also provide fraud protection for just that reason.

“Even if a consumer uses a credit card with foreign fees – the average foreign transaction fee is 2.24%, according to CardHub’s latest Credit Card Landscape Report – he’ll still save 4.86% on currency conversion relative to the services offered by banks and 13.26% compared to airport currency exchange providers,” said CardHub CEO Odysseas Papadimitriou in a HeraldOnline report.

The best banks for currency conversion? The CardHub study indicates Northern Trust and Harris Bank lead the pack as they did in the 2012 and 2011 editions of the study while U.S. Bank and SunTrust hold the bottom two spots. On average though, banks are better than Travelex, saving an average 8.4%.Still, many travelers do not feel like they are fully packed for an international trip without some local currency from the country they are visiting. They want to arrive with local cash for a cab, food or supplies they may not have been able to bring on the plane.

“It’s just one of those things that have been traditionally recommended,” says Papadimitriou. “But with the banking system becoming increasingly digital, it makes sense that the easiest way to buy things in a foreign currency is with plastic.”

Credit cards are good. No foreign fee cards are better. Still, some cash will probably be necessary along the way tipping or making purchases in places that do not take cards. With that in mind, Papadimitriou recommends a debit card with low international ATM withdrawal fees but warns travelers to avoid dynamic currency conversion, when a merchant offers to convert your purchase total from the native currency to U.S. dollars.

It might seem as though that merchant in Venice is trying to be help make sense of how much a purchase really costs, in our own currency, but “they could be looking for an excuse to apply a high exchange rate and squeeze a bit more money out of you. It’s best not to find out, especially when you can use your phone or a small pocket calculator to make quick conversions and better understand how much things cost,” says Papadimitriou.

As long as we’re talking about financial security when traveling, what about pickpockets? Well, the days of those villains are ending. In this video we see that all it takes now is a smartphone to steal your credit card information.

Electronic Pickpocketers 'Steal' Credit Cards Using NFC

Bank of China offers expanded yuan service

yuan, China, chinaThe Bank of China has begun offering its customers in New York City and Los Angeles services in yuan, Bloomberg reports. Services include deposit, exchange, remittance, and trade finance. Business customers may access these services in New York City and Los Angeles, while at the moment individual customers can only access these services at the New York City branch.

What does this mean for travelers? Not much, yet. If you’re one of the many English teachers in China you can send money home more easily, but that’s about it.

It’s the long-term view that’s interesting. China is obviously trying to expand the range of the yuan (also called the renminbi) beyond its borders. In fact, Chinese Premier Wen Jiabao said as much last year when he expressed worry over how much China’s international assets are dominated by the dollar. This move allows international trading in yuan, which is sure to attract more investment and, if it’s successful, bolster the currency’s strength. It’s already at an all-time high against the dollar. The New York branch’s general manager says the move will eventually lead to the yuan being fully exchangeable with the dollar.

This will encourage further investment in China and could lead to more foreign businesses opening up shop there. It would also make it easier for international travel businesses to have offices in China. A yuan that’s strong against the dollar, however, will make trips to China more expensive for Americans.

Tourism is one of the fastest growing sectors in the Chinese economy. More and more Chinese are traveling abroad, and with greater access and use of their currency, those numbers will only increase. The World Trade Organization says if current trends continue, China will have the largest share of the world’s tourism industry by 2020, with 8.6 percent of global revenue.

Could yuan become another international currency like the dollar and the euro? Could we see money changers accepting them in more destinations? Only time will tell.

[Photo courtesy user Polylepsis via Wikimedia Commons]

Mexico limits U.S. dollar purchases in bid to beat drug lords

Worried that your money isn’t green enough? Well, in Mexico, the contrary may be true. If you’re headed to Mexico this year, you’ll want to bite the bullet and exchange some greenbacks for pesos. New currency laws came into effect in parts of the country last month that limit U.S. dollar-purchases to $100 per cash transaction (the most a business can accept). And, some businesses won’t be able to take even your Washingtons and Lincolns, let alone your Benjies.

The effort is related to anti-money laundering efforts, particularly as they relate to the drug trade. Even at banks you’ll feel currency-related constraints, reports USA Today, where “the amount of dollars foreigners can trade for pesos at banks and money exchangers to no more than $1,500 per month.” This doesn’t compare to the limits out on the street, though:

In addition, the tourism board says, several Mexico states – most notably Quintana Roo, home to the major resort destinations of Cancun, Cozumel and Playa del Carmen – have imposed a $100 limit on cash purchases. And regardless of location, airlines at Mexican airports can no longer accept U.S. cash for checked bag fees or other charges, says Tim Smith at American Airlines.

But, you’re still good when you pay with plastic – the sky’s the limit (along with whatever your bank has imposed on you.

[photo by redjar via Flickr]

Seven things to do with your unused foreign currency

Despite only taking out as much as money from the ATM as you thought you’d need each day, you somehow managed to come in under budget. Now what do you do with this extra foreign currency you’ve got burning a hole through your picket? You could convert it back to your home currency, getting hit with exchange fees again, or you could try one of these seven options.

Save it for next time.

If the currency in question is Euros, it may make more sense to just save the bills for your next trip to Europe. By the time you convert the money back into dollars (or whatever your home currency is), the amount you lose to fees may not make it financially worthwhile, even if the exchange rate eventually changes in your favor. Obviously, with more exotic currencies, this isn’t a good option. Who knows when you’ll be able to return to Uruguay.

Sell it to another traveler.
If you know of another traveler heading to the destination soon, you can offer to sell them your leftover currency. Offer then a rate that is lower than what they pay at the bank or once they arrive in country, but higher than what you would make selling the currency back for dollars. In this way, you both win.Donate it.
You were going to spend it anyways right? Why not give it to a worthy cause? At a few airports, I have seen donation boxes out near the security line. Throw your spare change in here and you may help improve life for someone in that country. You could also convert it and donate the changed bills to a charity at home.

Display it.
I’m fascinated by foreign currency. I always keep one or two of the most interesting or colorful bills and coins from every country I visit. I keep them in a glass jar on my mantel, as both a unique decoration and a subtle reminder of the places I have been.

Spend it on airport souvenirs. …
After arriving at the airport and realizing that (after we took out the money we wanted to keep and take home to display) we still had close to 100 South African Rand (a little more than $10) my husband and I decided to blow it on souvenirs. Since we had some time to kill, we each took 50 Rand and set out to spend as much of the money as we could on last-minute airport souvenir tchotchkes. We had a fun time and came away with a few silly mementos of our trip that we otherwise would not have bought.

Or be a big spender at the airport
I hate spending money at the airport. After spending money throughout my trip, I hate the idea of dumping more money right before I head home. But, when I have some leftover currency to get rid of, it doesn’t seem as annoying. Use the opportunity to get rid of the cash in style. Treat yourself to a a few glasses of quality wine at the airport bar, opt for the more expensive entree, or spring for one of the massages offered in your terminal. It doesn’t make sense to be wasteful of course, but sometimes it is fun to enjoy the little extras that you normally wouldn’t.

Add it to your travel fund.
If you do plan on changing the money back into your home currency, don’t just use the money for groceries or bus fare. Put into a special fund earmarked for travel and contribute to it every time you come home from a trip. After a few trips, you may not have enough to cover a plane ticket, but you might have amassed enough cash to cover a few splurges on your next trip.