My Simple Currency Exchange Rate Philosophy

On the surface, a discussion about currency exchange rates may sound simple. There are best practices for how to get the best rates and how to access foreign currency when you’re on a trip. Those seem like the nuts and bolts of any discussion. And best practices do change from time to time.

I remember when a really cool thing to do for Euros was to go to your local AAA office where you could buy Euro starter packs at a pretty decent exchange rate. For people who were just beginning to travel abroad, it was a great idea. I used to get them as gifts for couples going to Europe on their honeymoon! I have no idea if AAA still does that, but in the old days, they used to sell out quickly.

Image source: http://www.sfgate.com/business/article/A-brief-history-of-money-11059182.php

As we become more experienced travelers, I think we adopt a more relaxed approach to currency exchange rates and find a system that works well for each of us. For instance, I never mind returning home with a stash of foreign currency because I know I’ll use it again during an upcoming trip. But recently, a conversation I had with a friend, not so much about where to exchange currency, but more about the value he was getting for his exchange rates, sorta shocked me. It made me think about how I approach spending when I’m abroad and I gave him some advice that really opened his eyes and relaxed his anxiety, so I’m wondering what you all think. Maybe there are other viewpoints we can add to this conversation too.

First, let me tell you his approach. Do keep in mind he’s not particularly well-traveled and hadn’t been on a trip by himself in many years. He’s also a generally nervous guy. He was keeping track of the exchange rate every single day and with every transaction! To my way of thinking, he was much too focused on the small picture and driving himself and the merchants crazy. He wasn’t using credit cards, but that’s a different topic altogether!

He exchanged some dollars when he first got to his destination. Then every day, he’d calculate that day’s exchange rate and decide whether it was a good day to shop or purchase anything. He said sometimes even for purchases he’d stand at the register and calculate the exchange rate before deciding to buy or not. I could just see the shopkeeper’s eyes rolling and his impatience growing as my friend did all this. Not to mention the growing impatience of the other customers lined up behind him. I listened rather patiently, though I couldn’t believe anyone did all these calculations.  I said, “Wow, that’s a lot of work. You must have been exhausted doing that all day everywhere you went.” Then I said, “Let me tell you what I do when I travel.”

Being a much more experienced traveler than him, I knew he’d listen. But I had no idea my approach would blow his mind, for all the best reasons. I told him when I get to my destination, if I don’t have any currency left from a previous trip, and when I need some more, I use an ATM machine. OK, basic enough. And then I don’t fuss about the exchange rate at all the rest of the trip! For me, the exchange rate I get on the day I exchange my dollars is the exchange rate I go by. And even then, I’ll round it up or round it down just to get a general sense of the rate I pay for items, so I can say to myself, “Hmm, an espresso today in Rome is .90 Euro. That’s amazing, I think I’ll have another!”

I’m not at all looking at the day to day fluctuations, like my friend does. He couldn’t believe I’m not interested, once I get my cash, about the minutia of exchange rates. A light bulb went off in his head and he realized how much he was stressing about exchange rates instead of enjoying his travels. All that math was a real downer and the anxiety about not getting the “best price and rates” was exhausting. Of course, he started laughing and it was as if he couldn’t wait to travel again and not be so stressed, and dare I say, BE a bother to so many merchants. At the very least, he can turn off the calculator function on his phone!

So I’m wondering, did I gave him good advice? What would you have told him? Did you stress out about exchange rates when you first started traveling? Am I more relaxed about currency fluctuations than I should be, or than most people are? Give me a reality check here and let me know!

34 thoughts on “My Simple Currency Exchange Rate Philosophy

  1. Danny

    I think it depends on the volume of the transactions. A $50k USD purchase might give me a reason to monitor the rates a bit more for a few days. But a $1000 purchase, probably not as much. Plus the effort to get back to where you are just to make the same purchase probably negates any savings especially if you’re backtracking and paying taxi/train.

    When you say he was exchanging currency when he got there, where is he doing it? That might be a huge savings just to not have to do it at the airport or hotel. And you mentioned he doesnt carry credit cards so that means it’s probably a cash conversion which I can’t imagine to be that great of a rate.

    Reply
    1. shelli

      Good point, Danny. His purchases were small, so that’s why I thought his monitoring the rates was TOO much effort. And a really good point about having to go back again to shops just to save a few cents. I don’t know where he was exchanging his cash, but I’m thinking it was at a bank. I did tell him not to do it at the hotel or airport. Thanks for your thoughts on this. ALL good points!

      Reply
  2. Danny

    I think it might be an interesting topic for how people get better rates for getting currency exchanged similar to your Disney best practices. I always do the ATM, but I’d be curious to see if there are any other good ways.

    Reply
  3. Jean

    How about getting a schwab checking account before going abroad load it with money and use it there by withdrawing the exact amount you need for the day . All fees are reimbursed better exchange and leave the stress behind
    you are on vacation!!!!!!!!!!!!

    Reply
  4. Dan @ Points With a Crew

    Cool post and something that was on my mind as we recently returned from Peru. I did basically what you did – got Peruvian soles out from the ATM (twice) and then didn’t worry about it :-)

    I returned home with about S/50 which I plan on taking to my bank to have them put it back to dollars

    Reply
    1. shelli

      Thanks, Dan! Hope the bank turns those S/50 into a favorable exchange rate. Let us know. If you plan on heading back to Peru, might be worth hanging on to your $15 USD in Soles.

      Reply
  5. Christopher

    For a large purchase like plane/train tickets or the hotel bill I might think about exchange rates, although I’d use a credit card, not cash. For something small like breakfast/lunch/dinner or a cheap souvenir – no way! It’s not worth my time to figure out how many cents I’m going to gain/lose based on the minuscule fluctuation in exchange rate from the previous day. It’s not like we are all travelling to Venezuela!

    Reply
    1. shelli

      Well said, Christopher. That’s why I listened to what he was telling me about how fussy he was being about the exchange rate and just had to comment on his behavior. After all, friends can’t let friends be exchange rate obsessed!

      Reply
  6. Boraxo

    It is important to know how much things cost so you are not surprised and hence some value to knowing what things cost in your home currency. But more important objective is to reduce transactions costs which means preparing well in advance with a few credit cards that have 0% forex fees and ditto for ATM cards. And always with >1 bank in the event your bank cuts you off.

    Reply
    1. shelli

      Good point about knowing general costs. Souvenirs are more challenging to estimate. Our conversation was post travels for him, but I did encourage him to look into using credit cards next time. I’ll remind him about the more than one bank card in case of bank issues. Thanks!

      Reply
  7. SightseeMC

    Your advice was spot on for vacation travel. If I could add a couple of points it would be to research before you go and check which currency you’re exchanging. For example, I almost always get a good exchange rate with my bank due to my relationship, but on my last trip I was advised to exchange in country as the rate is better. Sure enough, I got roughly 10% more local money than if I had just bought currency before I left. On the same trip I noticed that local shop owners in a second country showed a preference for US dollars over our other, geographically closer currency. It didn’t make a difference for us given that we bought very little, but if we’d been buying a few hundred or thousand dollars in purchases it would have added up.

    Reply
    1. shelli

      Good point about checking with your bank first. I myself have never actually done that always assuming my rate will be better once I’m overseas. And a USD preference is also something I’ll pay attention to. For those of us that use credit cards everywhere we can, this whole concept of using cash is tricky :)

      Reply
      1. SightseeMC

        I do like using my credit card for the rewards. But in some really great places, either cards in general or specific cards can be hard to use. Even in a place like Singapore, we ended up using several hundred dollars in cash aside from our rewards card.

        Reply
        1. shelli

          Agreed. That is surprising about Singapore. I think the last place I visited in that part of the world where I had to use cash was Bali. Of course there are still plenty of places/businesses in the states where it’s cash only.

          Reply
  8. Cleo

    Do you ATM with a credit card? If so, is there a cash advance fee? Going to Paris in the fall. Trying to figure out the best way. Thanks

    Reply
    1. shelli

      HI Cleo, I have a Charles Schwab account and use that card for ATM withdrawals. There is a fee, but Schwab reimburses them. You have time between now and then to get a Schwab account started. Hope that helps. ENJOY Paris, it’s wonderful!

      Reply
      1. Tonei

        To clarify – this is a debit card attached to a charles schwab checking account, not a credit card. And it reimburses any fees charged by the ATM owner.

        Reply
  9. Cleo

    Thanks! Do you get better rates at the ATM in the country? When we traveled last year, I got some Euros from my bank here ( no fee because I am a “private client” at Regions) and then put everything else on my CSP?
    While dollars matter, I’ve never fretted it that much. It seems such a tiny piece of a big trip…
    Paying attention to things will change what? For a 9 day trip with no big purchases, just eating and admission to museums, etc, ……
    Am I losing value by not paying attention to that?
    I am really with you Shelli. It seems really stressful and super-unejoyable.
    Maybe I will see what kind of fees Regions charge for foreign ATM.
    We have paid a deposit on the apartment for our trip and are supposed to be bringing the rest in cash.

    Reply
    1. shelli

      HI Cleo, It’s hard to answer your question about rates at the ATM vs elsewhere because it could vary from country to country. If you are a private client at your bank, I would think their rates would be favorable. It’s a great question to ask them and let us know what you find out. And as you suggested, I don’t think you’re losing value on smaller purchases. It’s the bigger dollar amounts (like your apt fee) that could make a difference. And in Paris you have FUN to focus on! Thanks for adding to our conversation.

      Reply
      1. Coffee Time!

        Key to point out the difference between “no fee” and a “favorable rate”. Just because the preferred status with the bank avoided the fee does not mean the rate was favorable. In almost every situation, using a US debit card to withdraw from an ATM in the country you travel to is the best option. Make sure your bank doesn’t have excessive fees associated with foreign ATMs before you go, and if it does, get a new bank account (Schwab, etc).

        Reply
        1. shelli

          As you said, there’s a difference between exchange rates and fees for withdrawing money from an ATM. Both questions need to be answered separately. Thanks for stopping by and adding to the conversation!

          Reply
  10. 02nz

    It’s easy to overthink exchange rates (like the example cited in this post). You can’t really come out ahead on exchange rates, you can only avoid being ripped off. So keep it simple and avoid being ripped off. My rules are: 1) Use credit/debit cards that don’t hit you with foreign transaction fees or out-of-network ATM usage fees; 2) Always decline the currency conversion offered by the merchant or ATM, i.e. always choose to be charged in the local currency; 3) Stay away from TRAVELEX, which is widespread at airports but always a ripoff. The same probably goes for any cash exchange at airports or hotels.

    Reply
    1. shelli

      Good points, 02nz. It’s true what we all want to avoid is being ripped off, so it’s a defensive play at best. And your three defensive suggestions make good sense. Thanks!

      Reply
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  12. flux

    For me if it’s a trip where I know I’ll be doing a lot of shopping (>$150 per transaction), I watch the exchange rate usually before I buy. Just a quick google search. I have a threshold of what the rate should be and if I think it’ll be favorable within the next 3 days (avg. transaction posting date), I’ll use MC, if I think the current exchange rate is great, I’ll use VISA.

    For cash, I assume whatever rate I exchanged for and won’t fuss over it since I’m only using cash 1. if the retailer does not accept card OR 2. It’s just more convenient in the moment.

    Reply
    1. shelli

      Good points, flux. Thank you. Your strategy is well thought out. Especially the one about your spending threshold for watching the rates. I like that idea!

      Reply
  13. Beth

    i do exactly what you do. ATM withdrawals and credit cards. Since your friend was inexperienced and you correctly steered him towards credit card/ATMs you should also do him the favor of reminding him to notify his cards/banks of impending travel. Getting shut down in a foreign country is no fun and he sounds like the nervous type.

    Reply
    1. shelli

      Thanks for the reminder, Beth. I’ll tell him about notifying his banks. He definitely would appreciate not being shut down!

      Reply
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