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Traveling to a foreign country presents various challenges for travelers, but perhaps none is more misunderstood than foreign currency exchange.  Not only must travelers be mindful of exchange rates when converting funds, but the means through which money is exchanged can also result in costly differences.

Every time currency is exchanged, there will be a fee assessed with the transaction; that much is unavoidable.  But reducing the number of exchanges is preferred and recommended to ensure travelers get the best value possible.  Travelers should convert only that which they will need; however, the reality is that most will have some money left over.

The following are a number of options that travelers may consider with regard to exchanging leftover foreign currency and converting U.S. Dollars:

Sell it back.  As simple as it sounds, it is important that consumers understand their sell-back options, together with the associated costs and fees.

  • Banks: Banks offer a cost effective option for money conversion, but travelers should research whether or not their banks offer currency conversion services and what fees are associated. Some offer the service to customers only, while others offer it to non-customers as well – do your own research on the bank’s website or speak to a representative.  Banks generally charge an average fee of 8% for each currency conversion.
  • Exchange Offices: Exchange offices are often found in airports or train stations. While their convenience encourages many travelers to utilize them for their exchange needs, that accessibility often comes at a higher cost due to various handling and transfer fees that are added on at these for-profit storefronts.  Travelers can generally expect an average conversion fee of 15% when using exchange offices.
  • ATMs: ATMs offer one of the most cost effective exchange rates, but travelers should be mindful of a couple of pitfalls: (1) Check with your bank to ensure your debit card is usable wherever you’re traveling, and (2) Be mindful of third-party ATM machines as opposed to those affiliated with banks. Third-party machines have separate handling and transfer fees while banks generally charge one set fee that is often far lower.  Bank exchange fees at ATMs are often anywhere from 2-4% per conversion.
  • Stores: This exchange involves the convenient option of using U.S. dollars to purchase items abroad. But, travelers should note that paying with U.S. dollars results in using the store’s own exchange rate, which is generally 20% higher than paying with the local currency.  This is one of the worst exchange rates available – avoid it!
  • Other Options: Beyond the above-mentioned, other potential options include the following: (1) Some hoteliers offer currency exchange at their front desk – do your research before considering this option; and (2) Some countries offer unique exchange locations that can be even more cost-effective. For example, many European travelers note that postal banks within post offices offer the best exchange rates.

Spend it.  Travelers who have been out of the country for at least 48 hours can generally bring back up to $800 worth of merchandise for personal use or as gifts.  Purchases under this amount are considered duty-free goods and will not require additional fees.  There are a number of supplemental rules about family members who live together and the combination of exemptions, as well as limitations on the quantity of certain items, such as cigarettes or cigars.

Donate it.  There are a number of non-profit entities that solicit your unused foreign currency.  Travelers may want to consider this option, especially at the end of the calendar year when they might be looking for additional tax deductions.


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