You solely come to fully understand the worth of something once it is no longer obtainable. And when it comes to hard-earned funds, we undoubtedly do not wish to acquire that knowledge through difficult means. As much as it is preferable to handle our finances more effectively before it is too late, travelers frequently end up losing a substantial amount of money while journeying abroad, particularly when they choose to convert foreign currency.
Given that the decision of whether or not to convert foreign currency at the airport has long been a dilemma, we have gone the extra mile to unravel the mystery and present you with what you should be aware of before embarking on another international trip.
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What Occurs When You Convert Foreign Currency?
The amount you lose is dependent on the sum you intend to convert when you decide to convert foreign currency. If the amount you want to exchange is small, then the foreign exchange rate is not a concern. You only notice the difference when you are exchanging a larger sum. However, the fact that remains true is that you end up losing some funds when you exchange without conducting proper research on where to do so and where not to.
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How Much Funds Do You Lose When You Convert Foreign Currency?
On average, travelers typically lose a minimum of 6 to 8 percent and a maximum of 12 to 15 percent of the amount when they convert foreign currency in various forms. For instance:
- In Europe, you end up losing around 8 percent by converting dollars to euros or any other foreign currency at a bank.
- By exchanging currency at popular booths like Forex and Travelex, which can be easily found at airports, you may end up losing approximately 15 percent of the cash you require.
How Do You Lose Funds While Converting Foreign Currency?
There are numerous ways in which travelers lose funds, some of which are still unknown to them. It is also highly likely that travelers may be aware of the methods through which they can lose extra funds while converting foreign currency, but the difference is often so insignificant that it goes unnoticed or disregarded.
Therefore, listed below are a few ways in which you may lose your money when converting currency in India and other countries as well:
- When you convert foreign currency at the airports, travel kiosks, and so on
- As a part of convenience charges at the banks
- Higher conversion rates in foreign exchanges
- Fees for transactions at ATMs abroad
- Converting with unauthorized dealers
- Interest rates for using credit cards abroad
- While converting currency that typically has higher values like the British Pound, Euro, and US Dollars
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Where Should One Avoid Converting Foreign Currency?
1. Airports
If indeed there is a terrible location worldwide to convert foreign currency, it has to be the airports. Not only do the currency exchange in airport take advantage of your vulnerability, but they also plan well in advance to overcharge you as the number of travelers who end up making last-minute transactions is quite high.
The conversion rates reach exorbitant levels and there is no point in comparing the different kiosks as they will all offer similar rates. Hence, ensure that you convert your currency well in advance before heading to the airport and keep this option as a last resort. Converting currency at the airport is the most secure way to exchange.
2. Local Markets
The moment you think you have made a clever decision by not converting foreign currency at the airport, you find yourself in a different predicament. Sometimes, travelers end up in local markets which are usually situated near the airports where they come across numerous unauthorized dealers.
When it comes to converting cash, understand that regardless of how much you negotiate, you will be the only one to endure losses in the end. Hence, be cautious of these local agents or dealers who are always ready to deceive you into converting foreign currency with them.
3. Banks Abroad
The main issue with banks, whether in India or abroad, is that most of them would refuse to convert foreign currency if you don’t have an account with them. Hence, in such situations, they prefer conducting transactions via card so that they can also charge convenience fees on top of it.
Where Should One Convert Foreign Currency?
Whichever the destination may be, swapping foreign currency at the Government institutions is always advantageous. Whether it’s India or any other international destination, ensure you try your hand at swapping currency at the national post offices and government banks that usually offer superior exchange rates than the private dealers.
Pointers For Swapping Foreign Currency
- You don’t have to wait until your travel date to swap foreign currency. It is quite evident that you will be planning your trip well in advance and you might as well swap foreign currency simultaneously.
- Incorporate the practice of the 30/70 principle. While it is imperative to carry some amount of cash, it is always preferable to carry cash and cards in a proportion of 30:70 respectively for better financial management.
- Always compare. Do not rely on verbal information when you are about to swap foreign currency. Always compare the rates with various dealers on different platforms and on different dates to find a superior exchange rate.
- Avoid excessive utilization of your debit and credit cards. Despite being proficient at enhancing your credit score, excessive usage of credit cards and international debit cards could result in unnecessary convenience fees and transaction fees that can further contribute to the interest rate you pay as the exchange rates can fluctuate at any moment.
- When swapping foreign currency in India, ensure you verify that the dealer you are dealing with is an authorized stakeholder of RBI.
- Fund Transfer is crucial. While cash and credit balance and expenses may be restricted to a particular amount that varies from bank to bank, utilizing NEFT/RTGS for your transactions may fetch you a better deal.
- Digital Wallet is the future. Online payment gateways such as PayTM, Mobikwik, and PayU are some of the leading digital platforms utilized for every other transaction in India. Hence, make the most of it while the opportunity persists.
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Realized what you’ve been doing incorrectly all this while? Well, if not, then we’re pretty certain a cautious message has been conveyed for transacting better in the future. And if you still feel we missed out on something, do not hesitate to share your perspectives and opinions with us in the comments below!
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