One common question I get about money is, should I exchange money or withdraw from an ATM? Well, the answer is not that simple, and it varies depending on your bank, current exchange rate, and currencies you’re exchanging.
Before you start your trip, you should check the current exchange rate for the currency you wish to exchange at a site like xe.com. With their converter, you will know the current rates for all currency pairs in the world and have an idea of how much you should expect when you exchange money abroad. Please be aware that these rates change everyday.
What is a currency pair? When you see EUR/USD on a FOREX screen, that’s a pair. It tells you how many Dollars are needed to buy a Euro, for example. At the moment, it stands around $1.12 per Euro.
Additionally, you should know that currency pairs are classified as Major, Minor, and Exotic. Major pairs are the ones that include the US Dollar, Minor pairs don’t include the US Dollar but include the other three major currencies (British Pounds, Euros and Yen), and Exotic are the other pairs that don’t include any of the above (like Thai Baht to South African Rand).
Major pairs, since they are the most traded, require a lower commission or spread for the exchange. Minor pairs are not traded as much as the Major pairs, so they charge a bigger spread; and the Exotic, being the rarest, charge an even higher spread.
So, when should you withdraw from your ATM and when should you exchange at a kiosk to get the best rates?
Now that you know the basics of exchange rates, you’ll be amazed at how much money you’ll be able to save by making smart choices when getting foreign currency.
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Norbert Figueroa is an architect who hit the pause button on his career in 2011 to do a round the world trip. He's been blogging for over three years at globotreks.com, where he shares his travel experiences, budget travel tips, and a good dose of world architecture. From hiking Mount Kilimanjaro to diving with great white sharks, he is always on the search of adrenaline and adventure. Norbert is originally from Puerto Rico and he is currently based in Milan, Italy... when not roaming around the world, that is. He has traveled to more than 80 countries in 5 continents and his goal is to travel to all 193 U.N. recognized countries. Follow Norbert on Facebook, Twitter, Instagram and Google Plus.
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