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Between packing your bags, getting the right paperwork, and leaving for the airport on time, getting ready for a trip can be chaotic, especially with the added stress of currency exchange. Whether traveling abroad or making an international purchase, understanding the basics of currency exchange is essential for safe and secure transactions. This is why we laid out our top five currency exchange tips.

What is an exchange rate?

You may have heard of the term exchange rate but are not quite familiar with it and how it works.  An exchange rate is the value of one country’s currency compared to the currency of another country.  For example, Having 150 Norwegian Krone is the equivalent of having roughly 15 United States Dollars (at the time of writing this blog), which makes the exchange rate. 099 United States Dollars for 1 Norwegian Krone (.099 x 150 = 14.85).*

 Something to note about exchange rates is that they can vary from day to day, and some can even change within the hour. This is because the exchange rate is dependent on the market value of the country’s money, which is constantly changing.**   So, keeping an eye on when to buy your money is critical in ensuring you get the most out of the exchange.

Start looking at exchange rates early

It is a good idea to start looking at exchange rates before you travel and to be aware of them during your trip!  This can influence how expensive purchases may be.  Paying attention to exchange rates allows you to buy foreign currency when rates may be most beneficial to you!  This might also affect the purchases you make abroad, so keeping an eye on these rates can help you make the most out of what you spend!

Know the difference between foreign transaction fees and conversion fees

Your foreign transaction fee is separate from the exchange rate, and is something that the bank or credit union you are using may charge while you use your debit card or credit card abroad. This can be included with a foreign ATM fee, and can vary from each institution. This fee can affect the final total of your purchase, with some foreign transaction fees being up to 4%.

The conversion fee is how much the network (company you are buying from) charges to convert your foreign currency.  So even though you may have a credit card that does not charge a foreign transaction fee, you may still be charged extra when buying items abroad. *** This might sound intimidating, but by using a card that does not have a foreign transaction fee or getting money from a trusted institution before traveling, these expenses will be less in the long run.  

Identify the country’s currency

Each country you go to may have a different currency, and between looks, amounts, and ways to pay, it is important to understand what the currency of the country you are going to looks like and what the amount means in USD.  For example, when you are traveling to a country like Norway or Sweden that does not use the Euro, it may be a shock to see their prices.  Imagine you are going to buy a pizza, and the total comes to 150 Norwegian Krone.  You may be shocked and think, “What kind of pizza is worth 150 dollars!” but what you might not realize is that due to exchange rates in USD, the pizza is only $15. 

Another example of understanding another country’s currency would be knowing how much a coin might be worth.  For example, in Japan, their currency is called the Yen. There is a 100-yen coin that in the USD would roughly be equivalent to 1 USD bill.

Buy currency before you travel

Buying money may sound weird, but it is a good idea when traveling abroad and can save you from paying high conversion and foreign transaction fees.  This is why it is essential to research trusted institutions in the area that can help you.  

First Community Credit Union now allows its members to buy foreign currency as well as to exchange foreign currency for United States Dollars’ (USD); however, they are not able to exchange foreign coins at this time, only bills.  To make use of this tool, you must be a member, and you must buy 300 USD worth of foreign currency.  If the request is made before 4 pm on a business day you can expect the money the very next day!+

To exchange foreign currency for the USD, you can exchange any amount; however, if it is under 300 USD, then there is a 10 USD transaction fee.  Your money will then be deposited into your First Community Account.  

Don’t let your confusion with foreign transfer fees stop you from experiencing the world!  With these simple tips and a little help from your local First Community Credit Union, exchanging your currency is as easy as seeing your favorite representative!

* ” How to Calculate an Exchange Rate.” Investopedia.com

** ” Exchange Rates and their Measurement. ” rba.gov.au.

*** ” What is a foreign transaction fee?”  Capitalone.com

^ “Foreign Currency Exchange.” Firstcommunity.com

+this service is only available within First Community Credit Union stand-alone branches.