Resources for Currency Exchange

Currency Exchange Business Guide: Understanding Financials When Doing Business Abroad

Currency exchange will be something you run into and must deal with when traveling abroad. Exchange rates tell you how much currency you can exchange for another currency. For example, how many U.S. dollars would make up a Japanese Yen? To figure this out you’ll need to understand how to use a currency exchange chart.

Currency exchange rates are determined by Forex in most cases. The rates your money will exchange for changes daily, and it is dependent on what traders believe the currency is worth. Central bank interest rates, debts owed by the Countries, and economic strength all factor in when deciding an exchange rate.

Benefits

Complete your Transaction in Many Locations

Retail outlets in the country you travel to will often allow you to exchange your currency. This is the most convenient way to do so. American Express offices and post offices generally offer the best exchange rate with the lowest conversion charge. Exchange bureaus are also available at tourist hubs.

Exchanging for More

The benefit of currency exchange can be seen when your money is worth more than another country’s money. For example, in March 2008, the Euro was worth $1.52. That means that if you are from the U.S. and are traveling to Europe, you will be spending more money to travel. However, if you are traveling from Europe to the United States you will get $1.52 for every Euro you exchange.

Trade to Your Benefit

If you work with trading foreign currency you should know that the foreign exchange market is at a lesser risk of recession than stocks. This is because you can always change your currency and change your investing to work to your benefit. If the U.S. dollar seems unstable, for instance, you may wish to invest in Euros (if they are more stable.)

Forex is a Liquid Asset

Another benefit of Forex is that it is a liquid asset. This means it is able to be withdrawn from at any time an investor wants to access their investments.

Convenience

Third, Forex is convenient. Contact with traders is through the Internet, making it possible to trade with one another at all times. The flexibility this provides allows you to choose when you have time to trade. If you have a day job, this means the market will still be open at night when you get home.

Pitfalls

Cost of Conversion

Depending where you convert your money, you may end up paying a hefty fee. Exchange bureaus often charge the most for exchanging currency. Retail outlets may charge 10 to 12 percent more than a post office or American Express. Not knowing or waiting to exchange your currency may end up costing you more if you aren’t careful.

Currency Trading Disadvantages

Currency trading with Forex is convenient and available most of the time. However, Forex is closed on the weekends. The unpredictability of currencies is another disadvantage you may face. One day you may have invested into U.S. trade, for instance, but find that the dollar has depleted the next. Essentially, this has lost you money in trade. The safest way to work with Forex is to use the U.S. dollar, Yen, or Pound, as they are least likely to change dramatically, however, when one drops another will rise to balance the currencies.

Pricing

Credit cards, debit cards at ATMs, and the dollar all face currency conversion charges. For instance, many countries have added a two percent currency exchange fee to credit cards when they are used. This is added on top of the fee that your credit card company may charge for foreign purchases.

Debit cards may face a flat fee or a percentage. For example, some banks charge one to three percent of whatever you withdraw for the currency exchange. Others may charge a flat fee, such as five U.S. dollars, for the transaction. Worse than that, some banks charge both.

Some businesses will offer to charge you a bill in U.S. dollars. This is not good, as they will charge you a two to three percent currency exchange fee. This is on top of the two to three percent exchange fee your credit card or bank will charge. So, essentially, you will be charged up to six percent for this transaction.

Exchanging paper money generally has a two percent charge. This varies depending on where you exchange currency. If it is a retail location, they may charge you 10 to 12 percent more than if you exchange your currency at a commission-free bank.

Conclusion

In conclusion, doing business abroad is likely to be something you’ll have to face, so you should be aware of the varying conversion exchange rates that you can come across. Doing some research ahead of time can prevent you from exchanging at an expensive retailer, or can help you do a commission-free trade at a bank, saving you money.  Learning the ins and outs of Forex trading can help you stabilize income, but can also cost you dramatically if you do not understand the value of varying currencies in current economics.

Depending on where you plan to travel, currency exchange can be of benefit or to your disadvantage. Exchanging for more is always going to be of benefit, while traveling to a more costly country with higher currency is likely to be expensive.