Have cash, will travel
Your guide to foreign exchange
So, you're about to travel the world! You've bought the tickets, got the travel insurance and you're happily ticking things off the to-do list when you realise you haven't sorted out your currency yet. What most people don't realise is that it's so easy to actually lose money when converting from one currency to another because 'foreign exchange' makes you feel like you're already overseas, so here is a guide to help understand and get you more spending money in return!
Let's start at the beginning. Firstly, whether you go to a bank, or any other place that sells foreign exchange, you will never get the same rates you see on the TV. Those rates are actually wholesale rates that your bank or foreign exchange merchant base their own rates on. This means rates are competitive, so you should definitely check out a few banks and companies and see which has better rates!
The one thing you can rely on about rates is that they change every day and are heavily influenced by the world market. It just means rates can be good one day and horrible the next, but unless there's some total catastrophe, they generally change minimally.
'Buy' and 'sell' rates are probably the most confusing terms when it comes to foreign exchange. So you actually shouldn't look at what seems like the most logical way and check out 'buy' when you want to buy money, and 'sell' when you want to sell it back for Aussie cash, because it's actually the total opposite. It means the company sells you the money, then buys it back from you.
In a nutshell, when you want to buy foreign cash, you need to start checking out sell rates. And when you're looking at that long list of numbers, all it means is how much one Aussie dollar is worth. So if a sell rate for the US dollar is 0.88, it means that one Aussie dollar will get you US$0.88. Or, if the sell rate for the New Zealand dollar is 1.11, for every Australian dollar, you get NZ$1.11.
For buy rates, it's the opposite. When a buy rate for the US is 0.956 it means for every US$0.95, you get one Aussie dollar. Or for a New Zealand buy rate of 1.30, NZ$1.30 gets you one Australian dollar. Buy rates are always higher than sell rates since, like any retail store, profit needs to be made, and most of the money you hand over is actually used to purchase the foreign money from wholesalers. Most of the profit companies make from foreign exchange comes from the commissions they charge for the service of changing the money. This is another trap to leave you further out of pocket.
Commissions differ depend on the company you go to, but they are all the same in that they always charge one. When you buy foreign money, make sure you ask what commissions they charge. There are websites that allow you to buy money at better rates and commission-free which you can pick up the currency at the airport, and that's a better way to do it.
You may read all this and think, "Hey, whatever, I'll just do it at the airport. I mean I don't want to be carrying this money for ages before I go". But did you know that, like shopping in the city, it is even more expensive to buy your cash from airports? Rates tend to be worse, taking advantage of travellers buying last-minute cash. Researching and checking out different sites and places will definitely make your hard-earned holiday all the sweeter!
https://www.travelex.com/au/secure/moneynet.asp?content=mn
http://www.qantas.com.au/fflyer/dyn/partners/travelMoney
By Cecelia Rotella