Exchanging foreign currency

euros

You can save up to 20% when you change money abroad if you shop around. Maybe more.

I found myself in Rome recently, with a wad of Swedish money I wanted to get rid of. Instead of buying American dollars with the Swedish crowns and buying the euros I needed with U.S. cash, I wanted to change the crowns to euros.

For this story, the country of origin of the money doesn’t matter much. It’s just a numbers game.

I decided to take my own advice: “Before you buy foreign currency, compare the posted prices at several booths or banks. Find out whether they charge fees or commissions [or both]. Compare, and ask for better deals.”

Let’s say the Swedish cash I had to change was worth about US $800. I popped into the first change booth I found, “Forexchange” on Via Solferno.

“How many euros will you give me for 6000 Swedish kronas?” I said.
“429,” the woman said, after some poking on her calculator.
“Is that your best offer?”
“For you, 452.”

See, I could have made 23 euros without even a pretty-please. It was a terrible deal, though. Forexchange takes a fee of €4.90 and a whopping commission of 19.7%. Of course. They’re in the business of making money by buying and selling currency.

I went to another foreign exchange booth where I was offered 495 euros. Up 66 euros from the first quote. Still a bad deal.

American Express will wave its fee for Platinum Card holders, but even with this discount, I’d only get 522 euros for my 6000 SEK. Still, that’s €93 more than the first quote.

Finally, I went to a branch of BNL bank where, after locking all my metal objects into a lobby locker, I stepped into a glass capsule that shut behind me, holding me briefly captive before opening inward and allowing me to enter the bank. The offer there was €535. 106 euros more than if I’d just made a quick change at the first available place. That’s a difference of about $150 on my $800 exchange.

Even with the recent rise in credit card companies’ foreign transaction fees, I believe in using plastic whenever possible for foreign purchases. The fees are now 2 or 3%, but that’s all. For me, credit cards are convenient and economical, and I like the other benefits of using them. But I still need to buy small amounts of local currency—enough for coffee, taxis, souvenirs, and tipping. My experience in Rome last month reminded me that it pays to shop around.

© Copyright 2008-2009 Bambi Vincent. All rights reserved.

Cash or credit card?

money

Don’t be self-ripped
That means: do your research. Besides knowing the tricks and scams prevalent in your destination, you should be up-to-date on currency. Look up the exchange rate, get familiar with the denominations of the foreign currency and what each note is worth in dollars. Low-value currency can be baffling. Menus and price tags can blind you with zeros in Istanbul, for example, with the Turkish lira at six hundred thousand some to the dollar. Will you pay 21,875,000 lira for your dinner, or 218,750,000? It’s easy to make a mistake. We got so many Zambian kwachas for our $10 once, we kept them and stuck thick wads inside our prop wallets. (That was before we realized that cut paper thickened a wallet just as temptingly.)

So, know the currency; also consider how much cash you need to carry. Bob and I recommend carrying as little as possible. We’re great proponents of credit cards. Sure, you need enough local currency for small purchases. Taxis, delightful sidewalk coffee and exotic streetfood, craft markets, tips, and all those expensive luxury items you want to buy without a papertrail, all require cash. But for the rest of it, credit cards are a better deal.

When you buy foreign currency, the money dealer makes a profit. You may be charged a poor rate of exchange, a fixed fee, a commission, or all three. Believe it or not, many money changers will Continue reading