Four foreign exchange secrets for travellers

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Each year like clockwork, when the Australian winter sets in, my Facebook newsfeed begins to fill with pictures of Hawaiian or European summer destinations. With the July school holidays upon us, this process is well underway and conversations with friends inevitably turn to holiday checklists: where is everyone going, have they booked accommodation and what fun activities are planned for the kids?

A much less exciting item on the checklist but one that deserves more attention is the need to exchange currency before going on an overseas trip. This item is often forgotten, and people can miss out on significant amounts of money, or at least on a splurge at a particularly good restaurant.

Here are my top four foreign exchange tips to consider before travelling overseas:

1. Plan around currency volatility
Leaving currency exchange to the last minute means you are at the mercy of notoriously unpredictable currency fluctuations. A Twitter post from the US President can move currency markets several percentage points overnight while many overseas trips are planned months in advance. People should watch how the Australian dollar sits in comparison with the currency of the country they are visiting, and transact an exchange when the rate looks strong.

This can be done via the traditional method of visiting a foreign exchange bureau or through the use of a multi-currency account. The Global Currency Account of Citibank (part of Citigroup, a large financial service and organisation) holds money in 10 currencies and gives the flexibility to transfer between them or externally at any time to take advantage of favourable rates. It’s linked to a debit card and knows your location, so you can pay in the correct currency via the card when you travel or withdraw money from the card when you are ready.

Similar accounts exist at other international banks and at fintech (financial technology) companies like OFX and Transferwise. Local banks offer comparable products, but these normally come with higher fees and wider currency spreads. The ‘spread’ is the difference between the price which you can sell the currency at (the ‘bid’) and the price which you can buy the currency for (the ‘ask’).

2. Factor in explicit and implicit fees
Ensure you are factoring explicit and implicit fees when you are choosing where to exchange currency. Explicit fees include account fees, ATM withdrawal fees, card load and telegraphic transfer fees. Implicit fees are the foreign currency ‘spread’. Many banks are guilty of promoting low explicit fees and assume people won’t calculate the implicit fees and work out that they are being ripped off. They can do this because foreign exchange is still an area many people struggle to understand, and part of this is due to the jargon involved (see the terms ‘spread’, ‘bid’ and ‘ask’, explained in the previous paragraph).

The World Bank has found that the average cost of sending money from Australia (7.68 per cent of the money sent in the world) is significantly higher than the G20 average. On a hotel booking of $3,000, the average cost of $230 far outweighs the cost of an international ATM withdrawal.

Average cost of remitting from G20 countries


Source: World Bank, Remittance Prices Worldwide June 2019

3. Avoid the traps
The worst trap of all is exchanging money at the airport. A study by News Corp and The Currency Shop showed that for A$2000, travellers can lose as much as $350 by exchanging cash at the airport. While it might be convenient, it’s going to cost you.

Another way travellers get confused is when they are asked whether they want to pay in their own currency or the currency of the country they are in. If you pay in your own currency, the merchant or ATM operator will charge a foreign exchange fee at a rate they determine.

Prepaid travel cards can also be a trap. They often come with a range of fees, for example, for loading the card, for use at an ATM or for closing the account. It’s important to consider how these different fees will impact your budget overall.

4. Use technology to your advantage
My colleague Matthew Hayja wrote a piece for Cuffelinks called: Retail FX: the last bastion of no competition. While this remains largely true, there are some technological developments disrupting the FX (foreign exchange) space. Fintech players like Transferwise, Currency Fair and Worldremit specialise in small payments for individual customers. Using an online business model, they have low overheads and offer competitive rates.

Are we saying this is a reason not to transact with Citi? International banks have stepped into the ring to compete, too. The rates on Citi’s Global Currency Account sit better than the big four domestic banks but slightly higher than the fintechs, with a 1.5 per cent spread on USD exchanges. The currencies are linked directly to a Citibank debit card, meaning users can switch between currencies instantly via their mobile app and pay with their card when travelling. There are no ATM fees charged by Citibank when using local currency.

Ultimately, the lesson for those about to head off overseas is to do your homework before you go and be wary of traps that can cost you money. Hopefully, there will be continued disruption in the field of foreign exchange, and providers will be forced to offer consumers more options to make it easier to go overseas and ‘spend like a local’.

Marcus Christoe, Head of Banking and Wealth Management Product at Citi Australia, a sponsor of Cuffelinks. This article is general information and does not consider the circumstances of any individual.

Article republished with permission from Cuffelinks.

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Total Comments: 15
  1. 0

    So what do you do when the currency you need is not one of the designated ones on any given card?

    • 0

      Which obscure currency would you want?

    • 0

      You dont need to load up with different currencies thats old school just aussie dollars and atm wiil spit out local currencies. We use citibank debit master card. Been using for 4yrs now and no probs. We use it here as well. Only ever put aussie dollars on it.

    • 0

      Not obscure SuziJ, this time it is Jordanian Dinar and Israeli Sheckels. Last year Indian Rupee, before that Nicaragua Cordoba, Costa Rican colón, Panama Balboa, ………

      And Citi bank does not have a pre-loaded travel card. Just this global currency account that does not have currencies I want/need.

    • 0

      KSS don’t need different currencies on citi bank debit card only aussie $. No charges and no conversion fees. Atms give you local currency.

  2. 0

    Just another ad for Citibank. I’ll continue to use my Global Wallet account & card, thank you. It may not pay interest, but I’ll rarely have over $5,000 in it anyway, so there’s no big difference.

  3. 0

    My Cash card has the ten currencies, but not Fijian, so we order an amount of cash. no worries. Buy (card) in local currency, as suggested in previous discussions I have recently read.

  4. 0

    We use citibank debt master card. Don’t have to load with different currencies. Just load with aussie dollars and use at most atms worldwide to get local currency. Easy to top up just electronic transfer more aussie dollars. No charges no conversion fees. Doesn’t matter if currencies go up or down we are only talking cents. Its not like we are dealing in hundreds if thousands of dollars.

  5. 0

    I also use Citibank’s Debit Card and recommend it to all my travelling friends. I also have a 28 Degree Credit Card for credit card purchases, it also gives a great exchange rate and is free.

  6. 0

    I have used my 28 degree mastercard (credit card) in all my overseas travel since 2012. And as I have been to over 130 countries, that has been a lot!

    I also use it if I am purchasing online produect from overseas.

    There are NO currency conversion fees charged at all – unless it is a cash withdrawal.

    And there is NO annual fee.

    And as it is a credit card, I do not have to “load” it up with any specific currency.

    Best of all, when I have taken the trouble to check what I was charged against the same day rate on – my bill was very,very close to their rate and in at least one case on a cruise where the charges were in Euros, quite a bit lower.

    It is fantasitc and so convenient.

    The itemised account comes in on line monthly and I have never had to query it.

  7. 0

    I’ve had a Qantas Frequent Flyer Mastercard for a number of years. I’ve found the Mastercard service awful, the flexibility of the card poor likewise the exchange rates. More recently I obtained a St George Bank Visa travel and online card. I can transfer money to and from the card and my bank account without charge, convert currencies on the go and unlike the Mastercard it’s great for online purchases too. Fees are reasonable and exchange rates are better than the Qantas card.

    KSS if it’s not a major currency at your place of destination they will usually accept a relevant major currency or a credit/debit card. I travelled for years in Ex-Soviet. Eastern Europe with a wallet full of US$, D-Mark and later Euro and never had a payment refused. Similarly on remote Pacific islands and Asia.



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