Getting foreign money-wise

In a trip to India, I noticed my dollar took a downward slide against the Indian Rupee. This meant more trips to the ATMs as I was getting less and less rupees for a dollar. Luckily, this did not make me broke or affected my spending as I had enough in my account. Perhaps this is because the change in rupee gaining ground against dollar was not so big. But I did see many faces when I noticed at the exchange shops that foreigners from UK and other European countries liked the fact that they were getting more rupees for their currencies.

When exchange-rate is involved, greater movements in the rates can either help you or hurt your spending budget. I think it is necessary to protect yourself against exchange-rate erosions anytime you travel overseas. Because it is difficult to predict accurately how the exchange-rate will move the value of the currencies, it is important to have more money in your currency with you than needed for your trip. If you notice the exchange rate goes up and you trade your money (let say Dollar) with the foreign money (say Rupees), you are likely to spend less overall, as you will be getting more Rupees for your dollars. If this happens, you may bring more dollars back home. If, however, Rupee gains over Dollar during your trip, you will have spent more of your dollar, assuming everything else remained unchanged.

Here are some tips that may help you manage your money when traveling to a foreign country:

  • Establish priorities for your budget
  • Purchase traveler’s checks (if necessary). Traveler’s checks are safe and can get you better exchange rates. Check with the check issuing agency for details on this.
  • For serious shopping, have a calculator with you to quickly figure out how much an item will cost in your own currency. For most purchases, you may do a quick conversion to your own currency in your head, if you are good with math. Don’t let the exchange rates dictate your shopping experience. It is impossible to tell when you will get your best exchange rate.
  • Familiarize yourself with foreign currency. Examine the bills and coins to figure out how to tell them apart. Your familiarity with the foreign money will not only help make your sale transactions go fast but also avoid any money counting errors, on your part.
  • Consider use of credit cards. They provide a tremendous convenience for a trip but don’t let this option exceed your budget due to overspending.
  • Keep your receipts of your purchases, especially for credit card.
  • If you use an ATM (Automated Teller Machine) to maintain cash from your banking or credit card account, you will receive the local currency, not US dollars or some other currency. For such transactions, you will be charged a fee by your bank or credit card company. Check with the bank for all applicable fees. If you plan to use ATM, remember there is dollar limit to how much you can withdraw on daily basis.
  • To save time and sanity, don’t think about constantly converting between currencies (to see what exchange rate you are getting). If you rather think in terms of the destination currency, you may be able to bargain a price – if needed.

Important note

If you intend to use your credit card in a foreign country, your exchange rate may vary. This is because you are billed for your purchase amount according to the rate of exchange effective on the day your charge clears, not on the day you made the purchase. There may a few days of delay between the date you made the purchase and when the charge clears. Contact your credit card company for specific details on purchases in foreign currency.

Some point to remember on cash purchases versus credit card purchases overseas:

Cash purchases Credit card purchases
Cash Credit card purchases
You pay cash immediately Pay when the bill arrives. You may get possibly up to 30 days before making the payment on your purchase.
You have to count the money (when giving to and receiving from the cashier) No counting is involved, as you just swipe the card
If you exchange too much of your cash for foreign currency, you may end up with extra foreign currency that may be useless when you bring it back to your country You don’t exchange any money and you don’t have to worry about whether you have excess or little of the foreign currency
No direct fees on exchanging your money Your credit card company may be charged up to 3% of the purchase amount.
Posted on 3/27/2007
by Raj Singh