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What do I need to know to save money when I exchange currency?
Vacation and business trips are expensive. Companies, as well as individuals, are very aware of how much international trips cost and usually find deals on hotels, restaurants, transportations and other items in order to save money. One important ingredient can be overlooked in that process and when it is, the results can be dramatic. The currency exchange market is a for-profit business and it is an essential part of any trip to another country. If you don’t understand how the currency market works, you’re probably spending more money than you need to spend. The most important part of planning a trip to another country starts with understanding how the currency exchange market works and how and when to exchange money, so it benefits you. Although banks have been the traditional way to exchange money, they are not the most economical way to make an exchange. Airport and hotel exchange merchants are the worse way and credit card companies are no bargain either.
The best way to exchange currency and to understand how the exchange market operates is to use a professional currency broker. A broker will offer you different strategies like exchange averaging and will give you up-to-date information, so each exchange is an informed and knowledgably transaction, not a hit and miss debacle. A currency broker will give you a real time rate without fees and surcharges, plus will help you average your exchanges while you’re planning the trip, which offsets any sudden value surges in your currency pair. When you exchange small amounts of money at different times while you’re planning, you know what each exchange costs and you know exactly how much money you have to spend in the local currency.
So how does the exchange process work?
Let’s say you’re traveling to Vanuatu for a dream vacation and want to exchange $1,000 U.S. Dollars to Vanuatu Vatu. The bank may post an exchange rate of 1 USD equals 97.3700 VUV, but when the bank actually exchanges your money they get 117.6328 for every Dollar they exchange. The difference is the bank’s gross profit, plus they add a surcharge to every exchange, so your $1,000 is worth much less than a $1000 in Vanuatu Vatu. Credit card companies may use the same exchange rate as the bank and add additional surcharges to credit card transactions on the trip, so you pay even more. Airport merchants may post an exchange rate of 1 USD equals 91.8649 VUV, plus they add a transaction fee and a hotel rate is not any better, because they know you like the convenience of exchanging money with them.
A professional broker may post a rate of 1 USD equals 112.1683 VUV without additional fees and surcharges, which means you have an extra 546.65 VUV for every $1,000 you exchange to spend on the trip. That’s a deal by anyone’s standards.
Other travel tips
Some countries have a limit on the amount of cash you can carry through customs, so check with your broker and stay within that limit. Carry cash in a leg pouch, money belt or hidden pocket that’s secure and out of sight and use the hotel safe when you arrive at your destination. Remember common sense if your best security weapon when you use it.
This article was provided by ForexTraders.com. Make sure to visit the site for in-depth information on currency trading, forex broker reviews, analysis, strategies and a free forex course.