You’ve booked your flights, your itinerary is set and now all you need is some local cash Getting foreign currency is easy but choosing the right method could save you a ton of cash. What do I mean? Well, whenever you exchange money, there are fees involved. How much you pay in fees depends on which method you use to exchange cash. Spoiler alert, banks charge some of the highest fees.
By knowing the best currency exchange options for travellers, you can end up saving a lot of money. Although this article is focused on the best money exchange for travellers, one of my tips would also apply to people who are looking to transfer money to different countries and want to keep their fees low.
Understanding how foreign exchange works
Although foreign exchange is pretty straightforward, it’s not that simple. Companies such as xe.com show the current exchange rate, but that’s not available to the public. The number you see is what banks and governments trade at. For the general public, we get the mid-market rate which is set by processor e.g. Visa or Mastercard. Your credit card provider will usually add a 2.5% fee on top of the mid-market rate so they make a profit.
To make things even more complicated, sometimes when you use your credit card abroad, you’ll be given the option to pay in the local currency or your home currency. Always choose the local currency since that exchange rate is set by the credit card issuer, whereas the home currency rate is set by the merchant. If you want to learn more about this, you can read my post about dynamic currency conversion.
The above scenarios only apply when using a credit card. If you’re looking to money exchange anywhere else, their fees may be higher. I’ll get into those fees below as I outline the best currency exchange options.
Using ATMs / STACK Mastercard
There’s no doubt in my mind that the STACK Mastercard is the best money exchange option for travellers. STACK is a prepaid Mastercard that has no foreign transaction fees for any of its services. It doesn’t matter if you’re paying with your credit card or withdrawing money from an ATM, you’ll just pay the mid-market exchange rate which is set by Mastercard.
That said, when using ATMs, they may charge one time fee of a few dollars so it’ll likely benefit you to withdraw the maximum amount. You obviously need to ensure you have preloaded some money into your account, but that’s easy since you can do it through the app. I personally used STACK exclusively when I went to Dubai and can confirm they charged no fees for purchases and ATM withdrawals. If you sign up for STACK with my referral link, you’ll get $5 when you activate your card. You must click the link via your mobile device for it to work.
Using your debit card from your bank is also an option, but keep in mind the majority of banks charge the spot rate for the day plus a 2.5-3.5% fee. This wasn’t a big deal before since it was still one of the best currency exchange options to get cash, but now with STACK, I can’t imagine I’ll ever use my debit card again when abroad.
I get some people don’t want to sign up for another credit card, but note that since STACK isn’t a true credit card. It’s a prepaid credit card, so your credit score doesn’t take a hit when you apply.
If you do decide to stick with your regular bank’s debit card, make sure you call them and let them know that you’ll be travelling, so a lock isn’t put on your card the first time you use it outside of Canada. When you’re overseas, search for ATMs with the matching networks and you should be good. Both VISA and MasterCard have ATM locators so you can find the right ATM before you even take off.
Credit cards are a must these days since you’ll need them to book a hotel room or make large purchases. The fee of 2.5% is reasonable, but as you can imagine, those fees can add up pretty fast. The good news is that there are quite a few no foreign transaction fee credit cards in Canada. Every card comes with different benefits, but some of the most popular credit cards without foreign exchange fees include the Scotiabank Passport Visa Infinite Card and the Scotiabank Gold Amex.
If you have the best travel rewards credit cards in Canada, you get extra benefits that can save you a lot of money and grief. Most of these cards include travel medical insurance, lost/delayed baggage insurance, and trip cancellation/interruption as a standard benefit. With any insurance policy, read the fine print to find out exactly what you’re covered for.
Foreign exchange offices
Foreign exchange offices are located in popular tourist areas and airports. They offer better rates than many banks and in some countries, their exchange rates are very competitive, but you need to consider any additional fees that they might charge. They’re also convenient if you’re trying to get rid of excess currency from a country you just left.
If you’re looking to exchange money before you depart, foreign exchange offices can offer good value as long as you do your research. Look for an exchange office where thee spread is less than 2.5% and they charge no fees. Remember, foreign exchange offices often price their currency based on supply and demand. Just because the exchange rate is great for one currency, that doesn’t mean it’ll good for another.
It’s also worth noting that just because rates are good in one airport, that doesn’t mean it’s favourable in others. During my travels, I found exchange offices in Asian airports to be good. However, in North American airports, the exchange rates are often quite high. Exchange offices are one of the best currency exchange options since you can usually exchange any currency into the local one.
Using a bank
Getting foreign currency at your home bank is usually the first place you think of, but it can be a huge rip-off since their rates can be pretty high. For example, one year when I went to Brazil, the exchange rate was 10% higher than the mid-market rate. TEN PERCENT!!! Fortunately, I knew what the real exchange rate was so I decided to not exchange money at my bank
That said, you can sometimes get the best currency exchange at your bank if you’re exchanging money to a neighbouring country’s currency. For example, every bank in Canada will have U.S. dollars, so if you’re in a rush, you won’t have any issued getting USD. Speaking about rushes, keep in mind that Canadian banks don’t typically carry any other currencies besides USD. If you need any other type of currency, you’re going to need to order and that could take a few days
Online exchange companies
If you didn’t know there are also online companies that offer cheap money exchange. Since they’re fully digital, they offer some of the best currency exchange options compared to physical locations such as banks or foreign exchange offices. There’s only one “catch,” you usually need to have a bank account in the country you’re exchanging money to. For example, if you want to exchange Canadian dollars to U.S. Dollars, you would need a bank account in Canada and the U.S.
This foreign exchange option wouldn’t work for everyone, but it’s perfect for snowbirds or someone who works in one country and needs to send money to friends or family in another country. In most cases, the larger the sum of money you’re exchanging, the better the exchange rate you’ll get. If this is a fit for you, then check out my OFX review and find out how you can exchange your money without paying insane fees.
Generally speaking, this list presents the best currency exchange options, however, your individual experience may differ. It’s impossible to predict what will happen when travelling; bank machines might act up, or your local exchange office could be more expensive. Do your due diligence and pick the method that works best for you.