Currency Exchange – When, Where, and How Much

If you’re heading overseas for an extended stay, you will want to have a good strategy for converting your money into the local currency.  (I’m assuming that you will not be paid in the local currency, which is standard practice for international companies.)  It’s important to learn before you go where to keep your money and how you’ll get it once in your foreign home.

Rates and Commissions: Somewhere along the line, somebody is going to keep a portion of your money when it is converted.  Nobody does it for free.  You just want to find the process with the lowest commission.  If ATMs are plentiful at your destination, I have found them to offer good rates.  They do the currency conversion at prevailing “bank rates” at the time of the transaction.  Your dollars are withdrawn from your home account but are dispensed from the ATM in the local currency.  The biggest drawback to this method is that you are then in a public place holding what might be considered a large sum of money.

Exchange houses: They go by many names, but they are all places set up to convert your money into their money, for a small fee.  Warning: the more you convert, the more commission they make, so they will always encourage you to convert a higher amount.  In many countries you can’t then convert your money back into dollars (for example) unless you have a government document proving that you are about to leave the country.  My advice is to exchange only as much as you need.

A local bank account might be a good alternative.  I don’t recommend putting large amounts into travelers cheques.  Even though they often get a better rate at the time of conversion, they are too tangible and portable for my liking.  Yes, they can be “replaced if lost or stolen”, as the ads say, but that’s a hassle.  With a local bank account, you may be able to arrange for electronic transfers of funds from your home account at little cost to you.

Black Market: Exchanging money on the black market is illegal almost everyhere, besides being unsafe and subject to higher incidence of counterfeiting.  I don’t care if everybody does it, or if your employer encourages it, or if you get 5 times more than you can at the banks and exchange houses; my advice is to stay legal.  It might make the difference between living like royalty (which you’re not) and living as you always have.  It might also be the difference between peace of mind and penalties or jail time.

Inflation:  If the local currency is subject to extreme inflation, hold as little of it as is necessary.  Simple math dictates that 100 samolians will buy less tomorrow than they do today when inflation is eating them up.  Conversely, you might be one of the lucky ones who is assigned to work in a place that has a more stable economy and currency than you have at home.  If this is true for you, move as much of your cash to the foreign economy as you feel is safe.

Similar Posts