How To Exchange Foreign Currency

By Tonya Sandersfeld
October 10, 2006

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If you will be traveling outside of the United States, it's important to have some local currency for the area to which you are traveling. There are three basic ways to exchange American currency for foreign currency, and to exchange any leftover foreign currency back to American dollars when you return. Most foreign exchange services will accept cash for conversion to foreign currency, but you can also charge it to a major credit card. Besides obtaining foreign currency through one of these services, you can usually buy foreign currency traveler's checks, also.

1. Banks. Most banks offer at least a few foreign currencies for exchange. The advantage of exchanging your currency at a bank is that they are close to home, which makes them very convenient. You can also exchange your currency the same day, so if you've waited until the last minute, it's not a problem. The biggest disadvantage is that depending upon your location, they may have quite a lot of many currencies on hand, or practically nothing. Because of this, call your local bank before you count on being able to fulfill all of your foreign currency needs through them.
2. Airports. Every international airport has a foreign currency exchange counter where you can obtain currency for every location to which flight service is provided. They will also buy back foreign currency when you return from overseas. Airports are also a very convenient way to exchange foreign currency, but the rates that they charge can be high.
3. Online. There is a plethora of websites which offer foreign currency exchange services. Most of them offer quite reasonable rates, but there is usually an additional delivery charge. In addition, you will have to allow at least one business day for the currency to be delivered, and possibly as long as five days. Some websites offer the option of picking up your currency at a nearby location, which avoids the delivery charges. Two of the most popular websites are Travelex Worldwide Money and Wells Fargo Foreign Exchange Services.

No matter which source you choose for foreign currency exchange, they all work in similar ways. You trade in U.S. dollars for an equal amount of foreign currency. The currency exchange service calculates the currency exchange rate and gives you this amount of foreign currency in exchange. They will either add a set charge to this exchange or will adjust the exchange rate to include a surcharge. As mentioned above, there may also be a shipping and handling charge in some cases.

Another factor to consider when you're getting ready to travel to a foreign country is how the exchange rate fluctuates. If you have a very favorable exchange rate before your departure, you may wish to estimate how much local currency you will need for the entire trip and exchange it all at once. On the other hand, if the exchange rate is very unfavorable and you think it may improve while you're abroad, buy just enough foreign currency for the first few days of your trip and exchange the rest after you arrive. If you are unfamiliar with how the exchange rate varies in the country to which you are traveling, visit the Federal Reserve Historical Exchange Rate website. This site gives the exchange rate over the last six years for twenty-three foreign countries, plus the members of the European Union. Remember, you want a low exchange factor when trading from U.S. to foreign currency, and a high exchange factor when you trade foreign currency for U.S. dollars.