For travelers, getting the most bang for your buck is essential. Currency exchange is a huge factor in how much money is in your pocket because it directly affects how much cash you have to spend. In this regard, banks and airport exchange counters are the two most common sources for switching currencies.
Exchange Rates
Airport Exchange Rates
When it comes to the exchange rate, airports typically have higher rates than banks and other options. Airport counters will mark up the rate higher to make a larger profit as unlike banks, it’s the only source of revenue for the business. Furthermore, being located in the airport itself allows them to charge a premium for the convenience they offer jetlagged travelers.
Bank Exchange Rates
For the most part, banks have a better exchange rate than airport kiosks. Banks use the interbank rate which is the rate they exchange currency between other banks as the basis for setting their rates. It’s based on the current market conditions and is subject to potential variability.
Here are the main causes of exchange rate variability:
• Supply and demand in the foreign exchange market.
• Major economic events such as central bank decisions and geopolitical developments.
• Market volatility.
• Peak travel seasons.
• Location of the branch.
Fees and Charges
Airport Fees
At airport exchange counters, you’re going to run into fees. Some of these fees are common and transparent and others are opaque or not so well known.
Here are some common feestravelers will likely be aware of:
• Exchange rate markup.
• Commission fee.
• Service or administration fee.
Here are some that travelers may not be aware of:
• Handling fees.
• Double conversion costs.
• Minimum transaction fee.
Bank Fees
While lower than airports, banks still have fees of their own. However, if you’re an existing customer there’s the possibility of reduced or zero fees as banks want to retain customers.
Here are the typical fees for banks:
• Exchange rate markup.
• Transaction or service fee.
Convenience
Airport Convenience
In terms of convenience, airport exchange counters are king. Open 24/7 at the point of arrival or departure. The convenience of airport exchange counters is the main reason they can charge more than banks for the same service.
Bank Convenience
In comparison to airports, banks are less convenient. To exchange via a bank, travelers must visit a branch during business hours. For less common currencies, it may also be required to order in advance.
Security and Reliability
Security at Airports
Airport exchange rates can vary wildly and it’s often difficult to tell if they reflect the current market value. The rate can be adjusted as they like because if you need local currency at the airport then they’re the only place to do it. What’s more, taking large amounts of cash across borders can be risky, especially regarding theft and loss.
Security at Banks
Banks are at the center of all things money and for that reason, you can rest assured it’s a secure and trusted environment for financial transactions. The risk level is much lower as you don’t need to bring cash to the airport because the money is directly deposited into your account.
Alternative Options
ATMs
ATMs are universal in most places which makes them a convenient alternative. However, many countries still function as primarily cash economies which means many trips to the ATM. The rate is typically still lower than at airports but there are additional fees involved, such as:
• ATM usage fee.
• Foreign transaction fee.
• Fees for using ATMs outside your bank’s network.
Online Currency Exchange Services
Modern tech has allowed for dynamic online alternatives such as Wise or Revolut. These multi-currency services offer rates that are competitive with banks and prepaid cards that come with minimal fees. However, it’s best to lock in the exchange rate ahead of time as you can reap additional benefits including:
• Avoiding market fluctuations.
• Accurate budgeting.
• Better rates.
Case Scenarios
Short Layovers or Emergency Situations
For short layovers or emergencies, it can make sense to absorb the additional costs at airports for convenience’s sake. However, to avoid paying too much this should be avoided whenever possible.
Planned Travel with Time to Prepare
Banks are more secure and have better rates and lower fees. So, the best strategy for reducing the costs of foreign exchange is to plan ahead, use theirservices, and avoid using airports.
Tips for Currency Exchange
Plan Ahead
Planning ahead is the best method for doing things right and currency exchange is no exception. Researchingand comparing rates before your tripwill help find the best time to exchange and understanding fee structures will help avoid them. Also, ordering in advance from your bank is a great way to lock down the optimal rate and ensure you have the cash in time.
Compare Rates
There is a myriad of online tools that can be used to compare the rates on offer from different services. Comparing as many sources as possible is the ideal way to ensure you’re getting the best deal out there.
Avoid High Fees
To avoid high fees and poor exchange rates, steer clear of airports.However, there will likely come a time when there’s a valid reason to use them andthe same goes for ATMs or online services. The best option may be a combination of services that will be cost-effective, convenient, and specific to your requirements.
Conclusion
Airports offer an unrivaled level of convenience and fast access but the downside is poor rates and excessive fees. Whereas, banks are secure, and have better rates and transparent fees with the downside being more planning required. From a financial and security perspective, banks are the ultimate option, and with a little planning, the inconvenience factor can be mitigated.