Currency Conversion
Traveling to another country might expose us to one of the most frustrating concepts of all – a poor exchange rate that you will have to deal with at your point of destination. However, there are certain things to do that can reduce the cost of converting your hard earned dollars into local currency.
Today it is not uncommon to pay a hefty 3% every time you use your credit card for purchases overseas. This usually comprises the standard 1% fee that popular credit card companies such as Visa and Mastercard charge for foreign purchases, as well as an additional 2% fee that has come to be known as a ‘currency-conversion fee’. It is worth doing some shopping around before you take out a credit card for your vacation abroad. Not all banks will charge the full 2% over and above the 1% flat fee. In general, credit cards that are issued by small banks or financial institutions tend to reduce their currency conversion fees. If you own several credit cards, check which one has the lowest fees for foreign purchases.
Despite these currency conversion fees that are tacked onto credit cards, financial experts still advise that paying by cash should be your last option. Converting dollar bills into, say, Euros has a much higher exchange rate than if the process was done using a credit card. If you do choose to use cash, be wary about exchanging your cash in locations such as top hotels, which may come with whopping 20+% surcharges!
Using your ATM card to withdraw foreign currency is also a good option with a relatively low conversion rate. However, take note of the fees, as these tend to change from bank to bank. Some banks will charge a flat fee of several dollars with each withdrawal, while other charge a certain percentage of the sum that you withdraw from the ATM.
Doing your homework before your trip by finding out which credit cards charge less, which locations at your destination offer good rates for cash conversion and which ATM machines offer you the best deal, will go a long way in saving you precious dollars that could be used for much better things on your hard-earned vacation!
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