While the intricacies of foreign currency may not be a priority when you travel, it “pays” to know the importance of exchange rates. In other words, taking a proactive approach to exchange rates is essential as you can end up with less spending money without having a basic understanding of foreign currency.
Now, that’s not to say foreign currency and exchange rates are the same thing but rather to point out that dealing with exchange rates is the most common consideration you will have in terms of foreign currency.
In this article, we take a look at what you should know about foreign currency when you travel.
What You Should Know About Foreign Currency When You Travel
You see, every foreign currency has a different value. Depending on the strength of economy, trade and other factors within a country, this value will be higher or lower than elsewhere. For this reason, the value of any given currency is always changing and banks or foreign exchange offices need to calculate a fair rate when you want to buy local currency with the money.
But exactly how might this affect your travel plans?
Well, you need to know about these things in order to protect the value of your spending money. After all, if one dollar is not worth one dollar when you travel, you will need so adjust your budget accordingly.
On the other hand, understanding foreign currency and rates will also help you get the most value possible for your spending money. With this in mind, let’s take a closer look at foreign exchange rates.
What is a Foreign Exchange Rate Exactly?
Foreign exchange rates refer to the relative value between two different currencies. That is to say, an exchange rate is the amount of currency that you will be able to exchange for another currency. For example, if the exchange rate for one dollar in Thailand is 35 baht, this will mean that you get 35 baht for every dollar that you exchange.
Most currency exchange rates are also “flexible” which means that this rate will rise or decline based on certain factors. As for how these rates are calculated, a foreign exchange market (forex) will regulate the prices to reflect how many investors are exchanging for this currency every day, week, or month.
How You Can Calculate a Foreign Exchange Rate
In spite of all the confusing numbers, it’s really easy to calculate an exchange rate.
As a rule, you can simply divide your dollar amount by the rate of exchange. For instance, if you have ten dollars and want to buy Euro at a rate of 0.82, you multiply the total amount of dollars by this decimal number which means that you will receive €8.20 in exchange for ten dollars.
However, there is a much easier way to calculate these exchange rates….
Finance Apps to Help You Manage Foreign Currency
XE Currency Exchange – The Ultimate Travel Companion for Foreign Currency XE Currency is the best known foreign currency app which provided a simple structure for calculating the rate of exchange. You simply select the currency you wish to buy and then input the dollar amount to see how much you can expect to receive. Best of all? XE Currency will save the most recent exchange rate available so that you can use the app offline which is often needed when you travel to a new country.
Amount – Lightweight Option for Currency Exchange If you want to save storage on your phone, Amount is a great app which enables real-time conversions with various currencies around the world. Amount also keeps a record of your transactions and an easy-to-use interface ensures this is one of the most popular apps for foreign currency.
YNAB (You Need a Budget) – For Keeping Track of Your Budget At the same time, there are also some fantastic apps for managing your budget while you travel. While YNAB requires a fee after one month, the features are unrivaled in the budgeting department. What’s more, you can even just use the one-month trial option for your vacation and decide afterward if you wish to continue using the app.
Some Last Minute Tips for Foreign Currency
Avoid Kiosks – Don’t depend on airport kiosks for the best foreign currency rate when you travel. As these kiosks are placed right outside the terminal, they get so much business that they do not have to offer a competitive rate. In other words, you will get a better rate elsewhere.
Use ATMs – As you may know, you will automatically receive local currency when you use an ATM abroad. For this reason, consider an ATM if you do not find what you believe to be a fair exchange rate.
Pay with Local Currency – When you buy something with a credit card or debit card, you should always elect to pay for the item in the local currency. If your bank does not apply international fees, this can mean you get a better exchange rate at the point of sale.
Carry Small Amount of Local Currency – Try to travel with a small amount of local currency so that you are not feeling obliged to change money the moment you arrive. You can usually buy this currency from your local bank before you travel.
As you can see, understanding foreign currency is not rocket science and getting the most from your money is just a case of paying attention. It’s true, many travelers feel intimidated by the numbers and codes on currency exchange boards but the above information should help you better understand them.
With the above apps and a little common sense, you can now rest assured that even exchange rates are a straightforward matter and that’s all you really need to know about foreign currency when you travel.