How To Get The Best Rate On Your Currency Transactions

How To Get the Best Rate On Your Currency Transactions

Don’t let the banks leave you with a thin wallet after changing money.

As I’m just about to nip off to Japan for a short break, the subject of currency exchange is on my mind.

I’m very happy that the Japanese central bank has been printing even more money than the Americans lately, as it has resulted in the Yen taking a nosedive and thus my trip becoming much cheaper!

Foreign currency transactions are a regular occurrence for us expats for quite obvious reasons:

  1. Most of us send cash back to our home countries to save, invest, pay bills or mortgages, or support loved ones.
  2. We move residences from country to country or have residences in more than one country.
  3. We travel for business or pleasure quite regularly.
  4. We use credit/debit cards that are issued in one country for purchases in another, whether in person or online.

In all of the above cases, there are financial institutions involved, and they love to make money from your FX purchases! In fact, some of them like to make A LOT of money from your transaction, often without you realizing it.

Fortunately, not all banks and foreign exchange brokers are created equal, providing opportunities for the savvy expat to minimize FX fees and even, in the case of regular payments, secure preferential exchange rates months in advance. However, a general rule of thumb is that the big banks usually have the highest fees and worst exchange rates.

Let’s take a look at how we can avoid these high charges and save ourselves hundreds, if not thousands of dollars each year.

How To Save On International Money Transfer

1. Focus on the Exchange Rate, NOT the Fee

Have you been working hard to try and find a low fee for your currency transfers? Great, but you are only looking at one side of the coin, and it is the wrong one!

You should be focusing on the exchange rate, as this is where financial institutions make their real profits. A low fee is nice, but the savings can be totally wiped out by a higher exchange rate. Let’s see how this works with a real-life example where I wasn’t doing my homework and could have been saving hundreds of dollars a month.

I had been sending our savings back to Canada on a regular basis with my “global bank”, as I was able to do so very efficiently through their online system for free. I could transfer from one account to another in seconds without paying an intermediate bank a hefty fee. However, I wasn’t happy that their exchange rate was about 2.6% worse than the market spot rate (this is quite normal for big banks, by the way). I checked with an FX broker, and their rate was much better. However, I was discussing this issue with a friend and he mentioned that he couldn’t believe that he was getting very close to the spot rate with our local bank. I was incredulous. Could the bank really be giving him that good of a rate? But on further investigation I found it to be true, so as I already had an account with them, I set up online banking and now do all my international wire transfers through my local bank. I usually only pay about .3% above the spot rate for to exchange my money when I send it.

Doing the math on this is shocking. Let’s take a $10,000 transfer as an example:

Global Bank:

Transfer Fees = 0

Exchange rate differential: 2.6% x 10,000 = $260

Total Cost = $260

Local Bank:

Transfer Fees (including intermediary bank fee): $30

Exchange rate differential: .3% x 10,000 = $30

Total Cost = $60

Savings = $200

WOW! Do that a few times a year and it really adds up. Actually, just making that one change about 6 months ago is paying for most of my trip to Japan 😉

So shop around. Compare exchange rates at your local bank, an online FX dealer, and your international bank. Do it all on the same day within a few minutes of each other. Find the one with the lowest overall costs and set up your account. Once you have spent the time to do this (an hour or so), transferring money each month will only take a few minutes.

An excellent website for making FX comparisons is MyCurrencyTransfer. I love comparison websites like this one and the one for expat health insurance mentioned in a previous post, as they survey the whole market in seconds and give you a number of options to choose from.

2. Buy a Forward Contract for Large or Regular Payments

If you send regular payments each month or anticipate sending a large amount at a specific date in the future, you may benefit from purchasing your currency ahead of time. There are a couple of advantages to this:

  1. You have peace of mind that no matter what the exchange rate does, your budget won’t be affected (and we love good budgeting here on HealthyWealthyExpat, don’t we!).
  2. You will be able to take advantage of good exchange rates when they occur and thus get an even better rate than you had budgeted for.

For example, in just the last few days, the Canadian dollar has dropped a couple of percent compared to the USD. As we get paid in USD and then send the money to Canada, this is like getting 2% more on our money with absolutely no risk! If I know that I will be sending a large sum home in the next few months, then I may want to contact my FX broker and secure the rate.

This is another situation where an FX broker can help you and your local bank generally can’t, and broker rates are much better anyway.

How NOT To Get Fleeced On Currency Exchange For Travel

Ah yes, most of us expats love to travel, and of course we often spend quite a bit while doing it. And if we’re travelling to a country where we don’t have a bank account, we are going to have to exchange some money. There are a few ways we can do this:

  1. Withdrawing cash at an ATM
  2. Purchasing with a Credit/Debit Card
  3. Changing money at a bank or exchange bureau

Here, it’s going to be tough getting as low a rate as .3 above spot; on the contrary, your job here will be not getting totally ripped off by money sharks preying on your ignorance of the local currency.

1. Know the Rates & Fees for Using Your Credit/Debit Card

Most card transactions incur about a 2.5-3% premium on the exchange rate, but you should check your card fine print so you know the exact rate.

Most ATM withdrawals also incur a further transaction fee unless you are using a machine with the same bank your card is from (here is where my global bank does actually save me money).

With this information at hand, you can go into your local bank or currency exchange office before you leave and see if you can get some cash at a better rate. If not, use your ATM card or exchange some cash when you arrive.

2. Know the Current Spot Rate When Changing Money on Arrival

For exchanging cash when you arrive, again, the key is to know your exchange rate. Look it up on the internet the day you are leaving on your trip or while you are waiting for your plane.

Thus, when you land and need to change money, you can decide whether to change a little or a lot. Sometimes the rate is horrible at the airport and great at a bank in town, but I’ve also experienced the opposite. Of course, the worst place is at a hotel, which will give you a horrible rate!

Now, with your local currency in hand, you can get on with enjoying your trip. Bon Voyage!


Please, please, please don’t get hooked into opening a currency trading account by those ads promising easy riches in the currency markets. You may as well kiss that cash goodbye. Currency markets are the least predictable of almost any financial instrument on the planet, so don’t get any illusions that you can beat them.

How about you? Do you have any tips for getting the best exchange rate for our hard-earned cash? Or maybe you’d like to share a story on how you saved after reading this article. Share your wisdom with the community in the comments box below.


  1. Capital One is the only credit card we’ve found that doesn’t charge a foreign transaction fee. It also offers quite a good exchange rate.

    • Thanks for the information, Mark. Are those cards available internationally? I did a little search, but could only find them available in Canada, US, and, UK. How close to the spot rate do you reckon the exchange rate is?

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