If you frequently travel or send money abroad, find out how to get the best rate on currency exchange so you can get more for your money.
Exchange rates can vary significantly depending on market conditions and the money exchange service you choose. Fortunately, all it takes is a bit of research to get the best currency exchange rate and boost your buying power abroad. Keep reading for tips to find the cheapest exchange rate.
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What are exchange rates?
Ever wondered what exchange rates really are? Simply put, they’re the value of one currency in relation to another. It’s how much of your currency you need to exchange to get a certain amount of a foreign currency.
For example, let’s say the current US dollar (USD)-to-Mexican peso (MXN) exchange rate is 16.5 pesos for every dollar. If you live in the US and want to send your family 5,000 pesos, it would cost you about 303 USD.
These rates aren’t set in stone, though. They fluctuate regularly based on economic factors like inflation, interest rates, and global market conditions. One day, your currency might have more purchasing power abroad. The next day, it might have less.
Not only that, but rates can vary based on the specific bank or financial institution you use to exchange money.
Getting the best exchange rate is a combination of good timing and knowledge of the various currency exchange options. You’ll want to monitor changing economic conditions and seek the best bank exchange rate or online currency exchange rate.
Where’s the best place to exchange currency?
Unsure how to get the best exchange rate? Whether you’re traveling abroad or want to send money to your family back home, you have several options for converting money.
A good understanding of the pros and cons of each currency exchange option will help you know where to exchange currency and save on unnecessary costs. Let’s explore each one:
Banks and credit unions
Check with your local bank or credit union to see whether they offer foreign currency exchange.
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Foreign exchange houses and airport kiosks
Currency exchange businesses are commonly located at airports and near tourist areas.
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Online currency exchange
You can also exchange currency online with money transfer service providers, like Western Union.
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How to get the best currency exchange rate
Now that you know what exchange rates are and where to exchange money, let’s dive into how to get the best exchange rate. Here are eight tips to save on currency conversion costs:
1. Use online tools
Many websites and apps, including the Western Union currency converter, provide real-time currency exchange rates.
By observing how rates fluctuate, you’ll gain insight into economic trends and feel more confident about how to get the best rate on currency exchange. In particular, you’ll get a better sense of how to time your exchange and where to go to get the best exchange rate.
2. Compare rates
Compare rates so you know which location is best. Check out several banks or credit unions, foreign exchange houses, and online currency exchange platforms to see the types of exchange rates they offer and which has the best rate.
As you compare providers, remember that there’s more to the cost of exchanging currency than the exchange rate. Keep an eye out for extra fees that’ll add to the total cost. Examples include transaction or commission fees.
3. Check for fees
Currency exchange providers may charge a variety of additional fees, and these can significantly affect the overall cost of your transaction. Even if a money exchange service offers an attractive exchange rate, high fees can offset any potential savings.
Some common fees you might encounter include:
- Transaction fee: A processing charge for executing transactions
- Service fee: A surcharge to cover handling and administrative costs
- Commission: A payment made to an agent for their services
- Delivery fee: A charge to cover the cost of delivering currency to another location
- Wire transfer fee: Charged by financial institutions when sending or receiving wire transfers
- Foreign transaction fee: A surcharge for transactions conducted outside of your home country
Be sure to ask for a detailed breakdown of fees before exchanging money. Reputable service providers are transparent about their fee structure, and online money exchanges typically post fees on their sites. Explore how Western Union compares to Wise, Xoom, Remitly, and Ria.
4. Consider online transfers
If you’re sending money to a foreign country, online money transfer services or peer-to-peer platforms can be great options. They often offer more competitive rates, especially for larger sums. Plus, they are convenient and can get funds into the recipient’s hands very quickly.
Before using an online money transfer service, make sure it’s credible and secure. While providers like Western Union are highly trusted, others aren’t as reputable. Research the company’s customer reviews, regulatory compliance practices, and security measures to get a feel for their legitimacy.
5. Monitor the market
If you want to get the best foreign exchange rate because you’re sending money overseas, not because you’re traveling, then it pays to keep an eye on global trends and rate fluctuations.
Major events in the world can lead to big fluctuations in exchange rates. Consider following or subscribing to financial news sources to track inflation and exchange rates.
Keep in mind that predicting rate changes is complex, and waiting for the perfect rate can be risky. It’s often best to act when rates are good, rather than holding out for an ideal rate that may never come.
6. Use credit cards with no foreign transaction fees
A credit card with no foreign transaction fee can help you make purchases abroad without hefty fees. Credit cards often have better exchange rates than foreign exchange houses. Plus, using a credit card can be more secure than carrying physical cash.
Check with your credit card issuer about its foreign transaction fee policies before traveling or making foreign purchases. Also research any other charges that might apply when using the card abroad, such as cash advance fees.
7. Withdraw local currency from ATMs
Withdrawing local currency from ATMs at your destination can be cost-effective. It’s an option that might make sense for long trips abroad.
However, look out for any fees associated with foreign ATM withdrawals. Check your bank’s policies and see if it partners with any international ATMs, as this can reduce costs. It’s also generally best to avoid using ATMs in high-fee areas like airports.
8. Order foreign currency ahead of time
Instead of waiting to arrive at your destination, you can arrange a currency conversion before you travel. Order foreign currency from a bank or credit union, and pick it up from a local branch. You can also have the currency delivered to your home — often for no additional cost. Note that you may need to be a customer of the bank and present ID to use this service.
To be sure your foreign currency order arrives before you travel, pay close attention to the
How can I calculate the exchange rate?
Knowing how to calculate exchange rates can help you get the best foreign exchange rate, because you’ll be able to easily compare rates and currencies.
To determine the exchange rate between two currencies, use this formula:
- Foreign currency ÷ local currency = exchange rate
For example, if you exchange 100 USD for 1,650 MXN, you’d divide 100 by 1,650 to get the exchange rate: 16.5.
To convert one currency to another, use this formula:
- Current currency × exchange rate = currency conversion
Following the example above, you’d multiply your current currency (100 USD) by the exchange rate (16.5) to get 1,650 MXN.
You can also always let an online currency converter like Western Union’s do the math for you, but it’s helpful to know the basics of how rate calculations work.
Know how to get the best currency exchange rate
Once you know how to get the best exchange rate, you can avoid overpaying for currency exchanges. Keep an eye on the market to stay up to date with changes that could affect exchange rates. Don’t forget to compare fees, too, and not just exchange rates.
Western Union’s international money transfer app offers a secure, reliable way to send money abroad, and you can see exchange rates before sending. There are more ways to send money with Western Union, too, including online and in person at one of thousands of agent locations.
FAQs
You’ll find the best exchange rates by carefully comparing rates and fees among various providers, such as airport kiosks, banks, and online currency exchanges. You can also save money by monitoring the market and ordering foreign currency when rates are favorable.
Comparing rates is a great way to narrow your search and zero in on where to get the best exchange rate.
There are many online comparison tools that display various institutions’ current rates side by side. You can also typically find rates listed directly on banks and exchange service provider websites.
Banks typically have better rates and fewer fees than dedicated money exchange services, particularly those in tourist destinations. However, online money transfer services often have more competitive rates that are more on par with bank rates.
Exchanging currency before you travel lets you shop around for the best exchange rates at your leisure and avoid high fees at airport kiosks or local foreign exchange houses. Withdrawing money at foreign ATMs can help you get better rates.
Curious about how to get the best exchange rate for your upcoming travels? First, explore exchange rates before you depart. Once you’ve embarked on your trip, avoid exchanging money at airports and hotels, where rates are higher. Instead, opt for local banks or withdraw local currency at ATMs. It’s also a good idea to bring a credit card that doesn’t have foreign transaction fees.
Yes. Currency exchange services, ATMs, and credit cards vary in terms of the fees that they charge. Before converting cash or making a withdrawal or payment, inquire about and understand all associated costs. Common fees to look out for include commission fees, service charges, withdrawal fees, and exchange rate markups.
You may want to use a combination of both. Credit cards offer consumer protections and good exchange rates, but make sure you understand what fees you may be charged. Cash can be ideal for tips, souvenirs, and paying vendors that don’t take plastic.
Ideally, you should start tracking rates a few weeks to a month before your trip to take advantage of rate fluctuations. However, trying to time the market isn’t easy. It’s usually more worthwhile to focus on finding a reliable and cost-effective exchange service.
Make sure not to wait until the last minute, as it can take several days to a week to receive exchanged currencies, particularly if it’s not a major currency.
