Exchanging foreign currency economically

If you travel internationally, even if that is just between Canada, the U.S., and Mexico, you’ll likely be exchanging currencies at some time. How to do it most economically?

The long-standing advice still holds: the best exchange rates are obtained at banks. Accordingly, many experienced travelers wait until they’ve arrived at their destination, then withdraw cash from a local ATM. That’s where you’ll get the best rate, and may only have to pay the typical 3% foreign transaction fee that most, but not all, cards have.

Returning home with a foreign currency provides similar options. The most convenient thing for many travelers is to change their currency at an airport kiosk or Bureau du Change. The most economical thing, however, is to wait until you get home and can take it to your bank.

We recently returned from a trip to Canada where we did exactly what I’ve described: we obtained our local currency from the bank ATM next to our hotel. It was quick and convenient, and the exchange rate was favorable at 99.2 cents U.S. per Canadian dollar.

When we returned to our home in Seattle, we had CAN$100 in our pocket. While we would usually just tuck it away for our next trip north of the border, I decided to exchange it so I’d have some cash for a business trip.

A quick trip to my bank on the day I traveled got me a net exchange rate of 91.25 cents per Canadian dollar. That included whatever fees the bank charged for the service.

Once at Sea-Tac airport, I checked with the Travelex foreign exchange kiosk and was informed that their net exchange rate for the same amount would be 63.72 cents per dollar. My side trip to the bank saved me almost $30.

Of course, banks also make a profit by exchanging foreign currency. Even if they don't levy a service charge, they make money through the difference between the higher price at which they sell the currency and the lower price at which they buy it. Accordingly, it is a good idea to keep the amount of foreign currency you exchange to a minimum to minimize the expense of exchanging it.

But the simple take-home message still holds true: buy and sell foreign currencies at a bank, either in person or though an ATM, for the best exchange rate.

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