Foreign exchange savings can potentially be much more than any lucrative flight or hotel deal.
If there’s one thing most people dread when heading abroad, it’s certainly the cumbersome process of exchanging currency. While looking for the right banks, money changers or online service providers may seem to be a tedious process, if you don’t do enough research beforehand, foreign currency conversion could end up costing you a bomb and negate all that you had saved through your hard work on finding the cheapest flights and hotels.
Here are some simple tips to help you save on currency exchange. What is noteworthy is that these savings can potentially be much more than any lucrative flight or hotel deal.
1. Choose the right currency
It’s natural to assume that you must buy the currency of the country you are travelling to, when heading abroad. However, some exotic currencies such as Vietnamese Dong or Turkish Lira are not always readily available in India. Since currency rates are determined by demand and supply, this could drive up the exchange rate of such currencies.
In such a scenario, it’s best to opt for common currencies such as USD or Euros and then exchange them for local currency at the destination country. However, you must research beforehand where you can exchange currency at your destination to get the best rates. Airports, malls and areas of high footfall are a big no, owing to the exorbitant rates that they charge.
2. Choose the right product USD or Euros, forex cards,traveler’s cheques
You can choose from a variety of products such as foreign currency cash, forex cards, debit and credit cards and traveler’s cheques to take care of your expenses overseas. So, it’s natural to find yourself in a dilemma regarding which one to pick. However, it’ll be easier for you to make a choice once you understand the pros and cons of each product:
3. Compare forex rates
It’s important to note that currency exchange rates vary significantly among different banks and money changers and you may easily have to shell out an extra 5% – 10% more if you don’t choose the right partner and don’t negotiate enough. Airports should be your last resort, considering the rates can be marked up as much as 30% over and above the interbank rate! Hence, it is vital that you compare different options to exchange your currency before narrowing down on the best one.
With online forex marketplaces entering the fray, things have become relatively simpler over the last couple of years. So, instead of wasting time and energy haggling for best rates at the bank or currency exchange store, you simply need to visit a trusted forex marketplace online where you can get the best rates with negligible effort. Moreover, given the very nature of any online marketplace, each service provider is compelled to offer the most competitive rates, so that they can bag your order, thus making it a win-win for them and you!
4. Time your currency exchange
Foreign currency exchange rates are dynamic and keep fluctuating every few seconds. If you are smart about the process, you could end up saving a lot of money by keeping a track of these fluctuations. The trick is to start tracking exchange rates at least 2 weeks before your departure date. Keeping an eye on the exchange rate trends can help you time your exchange in a much better way.
Another great way to get a great exchange rate is to set up exchange rate alerts on the currency that you wish to exchange. Many online marketplaces have started offering this service and you can receive these updates via text or email, thus eliminating the need for you to keep checking the rates every now and then. Once you get a favorable rate, you can even “lock in” that amount online for a certain duration by paying a nominal amount as deposit, which is refundable.
5. Beware of hidden charges
Apart from exorbitant exchange rates that are quite evident on the surface itself, many banks and exchange companies make more money off you than you would expect by using their secret weapon – hidden transaction charges. So, make sure you ask for a break-up of all the charges including the transaction fee and other hidden charges before you exchange your currency.
(By Sudarshan Motwani, Founder & CEO, BookMyForex.com)