Hello, my friends! It’s Isabella here again to help with your pressing travel questions.
I’ve been asked several times what is the best way to trade currency when travelling abroad. This is an important question right now because a lot of families are going on holiday at this time of year.
First, it is important to remember that it isn’t necessary to carry a lot of cash overseas anymore. A decade ago, credit cards were less popular than they are today because of the lack of point-of-sale devices. Now, with ‘chip and pin’ ensuring that the card is present and not fraudulent, credit or debit cards are accepted a lot more abroad than they used to be. Therefore, it is better to have only a small amount of cash on hand and use cards to protect against robbery and theft. Unlike cash, A credit card can be quickly stopped and replaced.
One important point about using cards abroad, though… Quite often you’ll see an option to pay in your home currency or in the local currency when you use a card abroad. This is called ‘Dynamic Currency Conversion’ or ‘DCC’. While DCC provides you certainty on the exchange rate, that rate is 5%-10% worse for you than the prevailing rate. In short, DCC is not a very good deal. If the amount you are charging is small, DCC won’t amount to very much, so why use it, and if the amount you are charging is large, the worse rate for DCC will cost you. So, I recommend that you always charge in the local currency and skip the option to pay in your home currency.
If you feel that you must take cash with you when travelling abroad, here are a few guidelines to help you determine how to trade that currency. Probably the worst place to trade currency is at the airport in your home country before flying. It is generally always better to trade your currency at the destination. This is especially true if you live in the United States, the United Kingdom or a country using the Euro. However, whenever you use a currency exchange company at the airport, there is almost always a commission to be paid. A currency exchange company will almost always offer a better rate than your hotel.
Check with your bank before you leave if you plan on converting a significant amount of cash. Often, your bank will offer a competitive purchase rate and no commissions if you are a good customer who has been banking with them for a while. This is often a good way to trade currency and to know that you are secure with your transaction.
If your credit card or debit card does not have fees for using cash machines, the very best rate could be obtained from withdrawing money from a cash machine at your destination. Do some research to see what banks might have a low fee or no fee at all when you travel abroad and use those cash machines whenever you can. There are a lot of cash machines these days and some have very high fees, however, most are obligated to tell you that fee before you complete the transaction. Do a bit of research so you can withdraw cash with confidence at a cash machine while abroad.
Finally, there is a fairly new option that may be the very best. Several companies now offer multiple currency prepaid cards. These new cards offer standard security through chip and pin and are designed for travellers that require multiple currency payments. There is no commission fees for switching currencies and they offer good exchange rates. You top up the funds on the card from a mobile app and then use the card as you would a credit or debit card.
Whichever option you choose, stay safe out there and enjoy your time abroad!