Whether you’re planning a holiday abroad or you just need to send money overseas, it’s important to know all the ins and outs of exchanging currency.
Your overseas holiday is booked, your bags are packed and you’re ready to go. All you need to do is convert some of your hard-earned Aussie dollars into the local currency for your destination and hop on the plane, but you’re in for a nasty surprise. When you turn up to the currency exchange counter at the airport, the exchange rate offered is much lower than the one you saw on last night’s news. Then there’s a service fee to pay as well, and you end up jetting off with significantly less cash in your pocket than you anticipated.
The above scenario is one of many common problems and pitfalls presented in the world of currency exchange. Whether you’re sending or receiving money overseas, choosing which currency to use when paying bills overseas or just looking to save money, there are plenty of traps to avoid when exchanging currencies.
Where should I exchange currency?
When you’re converting Australian dollars into a foreign currency, it goes without saying that you will want to find the best possible deal. A crucial feature of every foreign currency exchange is the exchange rate offered, as global currency exchange rates rise and fall every day. You can check the Reserve Bank of Australia website to get an idea of current rates, or visit the website of an online currency exchange service or your bank.
Did you know?
Despite the bargains to be found at currency exchange booths, the most cost-effective way to buy foreign currency is to conduct your transaction online with a foreign exchange company like OFX or Travel Money Oz. Such companies tend to offer better rates and lower fees than you could find at a physical bureau. Travelex, which operates more than 100 exchange booths across Australia, also offers an online service which typically provides better rates.
The number one place most people think of when they need to purchase a foreign currency is a bureau de change, otherwise known as a currency exchange, and they often don’t think about changing their money over until their at the airport or have arrived at their destination. These convenient bureaus can be found all over the country and the world in airports, train stations, hotels and shopping centres.
Bureaux de changes tend to charge a commission whenever you perform a currency exchange, while the exchange rates they charge can differ wildly. Bureaus at airports and hotels often tend to offer the worst rates and highest fees - after all, they have you exactly where they want you and many people will simply choose this most convenient of options over shopping around for a better deal.
However, if you do compare exchange rates and find a different bureau, you could find that you can afford to purchase a great deal more foreign currency to fund your holiday. Compare the rates of different providers - even those located on the same street can have different offerings - to find the best available deal.
- Who offers the best exchange rates? Since rates change on a daily basis, it's difficult to exactly pinpoint who offers the best exchange rate. Some notable organisations include: OFX, Westpac, KVB Kunlun and Travelex.
How should I pay for my purchases overseas?
This is the conundrum that every Australian traveller faces when heading abroad, and some people opt to use their Australian credit card when overseas. However, what many people don’t realise is that many credit cards charge sizeable fees for foreign transactions which can end up costing you a pretty penny. If possible, look for a credit card that waives these fees, such as the cards displayed below.
Depending on the card you choose, additional currency conversion fees may also apply, so read the fine print before you start adding lots of purchases to your card. It’s also a good idea to let your bank know you’re heading overseas - otherwise their security department might notice the foreign transactions on your card and think they’re fraudulent.
- Do I get still get charged the cash advance fee if I put my credit card balance in credit? Typically you are still charged the cash advance fee. This is because a credit card isn't designed to be put into credit.
If you’re using cash, sometimes you’ll be better off sticking with ‘hard’ currencies (like the US Dollar and the Euro) rather than converting to the local currency. This is because hard currencies are often accepted in many countries around the world, their values never fluctuate too much, and you can enjoy big savings when you don’t lose a chunk of your money to poor exchange rates and agent commissions.
Using a travel card
Another option for travellers is to load cash onto a prepaid travel card which you can then use for all of your overseas transactions. These cards allow you to load money onto your card in the currency of the destination you’re travelling to. However, make sure you’re aware of all the fees that apply to prepaid travel cards, as some providers have been known to surprise cardholders with unexpected charges.
One attractive option is the OFX Prepaid Travel Card, which offers locked-in exchange rates for up to nine currencies. The card can be managed online, has minimal fees and is accepted at 32 million locations worldwide.
Chris Minehan: Head of Marketing OFX talks about the OFX Travel Card
- What happens to my travel card after I finish my holiday? You can apply for a funds redemption, which means you can transfer any left over cash from your holiday back in your bank account. Note that fees and charges may apply. Another option is to withdraw all your remaining balance from an ATM when you're back home.
Using debit cards
If you'd prefer to use your own cash with the convenience of a debit card, then you could opt for one that doesn't charge international transaction fees (typically around 2-3% of the transaction amount in AUD). You'll need to look out for things such as foreign ATM fees too and ensure that your bank provides some kind of solution if it happens to get stolen or lost.
- Can I preload my debit card with foreign cash? No, cards issued in Australia (with the exceptions of multi-currency accounts) only hold AUD. When you conduct a transaction in a foreign currency, exchange rates will apply.
Once you’re fully aware of the benefits and drawbacks of each approach to making purchases overseas, you can select the most cost-effective option for your spending habits.Back to top
Can I get currency sent to me?
There are some situations where you are travelling overseas and find yourself stranded in a foreign country without any cash, perhaps because you’ve been a victim of thieves or maybe simply due to poor budgeting skills. If you need cash fast, money transfer providers like Western Union and MoneyGram make it quick and easy for a friend or relative to send funds to you. Cash can be picked up from a Western Union or MoneyGram location within minutes, and both of these companies have hundreds of thousands of locations around the world. You can see other transfer options below:
In other circumstances, you may be tempted to physically post some money overseas. While it is legal to send up to $10,000 out of Australia without requiring an International Currency Transfer Report from the Australian Transaction Reports and Analysis Centre (AUSTRAC), this method is slow and incredibly risky, so should be avoided at all costs.
How can I safely carry cash overseas?
Wherever you are in the world, it’s important that you observe a few safety precautions when carrying cash. Pickpockets and muggers can strike no matter where you’re travelling, so keep the following tips in mind when you set off on an around-the-world adventure.
- Keep it hidden. Don’t advertise the fact that you are carrying a large bundle of cash.
- Don’t wear a bumbag. Wearing a bumbag makes a tourist stand out like the proverbial sore thumb. Not only that, but it tells thieves and pickpockets exactly where you keep your money.
- Avoid carry lots of cash. Deposit funds in your bank, leave some cash in your hotel room safe or use your credit/debit/travel card where possible - keep the amount of cash you carry on your person to a minimum.
- Avoid areas where theft is a common occurrence. Every city around the world has its areas and neighbourhoods where there is a higher incidence of muggings and thefts. Use your common sense and avoid such areas.
- Travel with a friend. The extra security provided by having a travelling companion can act as a strong deterrent to thieves.
- Do your research. Hit up several online forums and blogs for advice and warnings from other travellers about common scams and areas to avoid.
- Carry it in a card instead. Carrying a card around is a lot easier than carrying around large amounts of cash. However, you will need to practice your due diligence to make sure you don't lose it and it doesn't get stolen.
Currency exchange services in Australia
You have a wealth of options at your disposal when you want to trade in your Australian dollars for foreign currency, including:
- Bureaux de change. Foreign exchange bureaus are operated in airports and shopping centres by companies like Travelex.
- Banks. You can purchase foreign currency from major Australian banks.
- Online foreign exchange companies. Travel Money Oz, OFX and other similar companies offer convenient exchange services online.
- Prepaid travel cards. These cards, offered by major banks and a selection of travel money companies, allow you to load money onto your card in the currency of your destination.
The most commonly traded currencies in Australia include:
- The US Dollar
- The Euro
- The Great British Pound
- The Canadian Dollar
- The Thai Baht
- The Japanese Yen
- The Indian Rupee
- The Swiss Franc
- The Chinese Yuan
- The Hong Kong Dollar
Other more exotic and rare currencies may not be available from all online currency exchange companies, so you may be better off visiting your bank or a bureaux de change.
With all these options to choose from, it’s clear that weighing up your currency exchange options is hugely important. Comparing the benefits, features and fees of different options will ensure that you get the most affordable deal and don’t get any nasty surprises down the track.