The Old Hack

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Think of a foreign currency as a tin of baked beans. Supposing you are planning on visiting France, Germany or Holland where the currency is the Euro. You will need to buy (for example) five hundred Euros, and in order to do this you will visit a currency exchange outlet in order to buy your Euros at the price quoted for that day. The price you pay will be less than the currency trader paid because you are buying a few hundred Euros for your holiday, whereas he is buying several thousands of Euros in order to stock his shop with Euros to sell you. Not really so different from baked beans.

Ah - I hear you say - but the price of baked beans doesn't change every day! Well that is true. Trading in currencies depends on various economic and political circumstances and what is going on between the big players - the banks and financial institutions of the world. Bad news on the stock market(s) or an unstable political situation can cause a currency to fall in value as compared with other currencies. That is because the banks invest money on a daily basis in foreign currency conversion based on their take on what is likely to make them the most profit. A bit like playing red or black on a roulette wheel, but with perhaps just a little more finesse and expertise and a little less chance!

Foreign currency exchange rates will dictate how many holiday Euros you will get for your dollar, pound, yen etc. and foreign currency exchange rates will also dictate how much your foreign currency trader pays. Look up the exchange rates for any foreign currency and you will notice that there are several rates quoted. The rate you will get is the tourist rate. The rate your currency trader gets will be much better, because of the quantity he is buying and the comparative risk he is taking.

Will all foreign currency traders offer you the same foreign currency exchange rates? Well no. As with baked beans, shop around before you commit yourself to buying from a particular currency trader. Some may charge you a percentage commission on your purchase. Some will not, but may not offer you such a competitive exchange rate. Take your calculator, ask whether the amount you pay will depend on how much currency you buy. Sometimes the rate will change if you are buying a larger amount of foreign currency.

Foreign currency conversion can be done by you at home on the internet. Choose a couple of currency sites and compare rates. Take an average. Be prepared so that you will recognise a good deal  A huge barn with fishing pond in a beautiful location for renovation  - 76300€

on the High Street or with your bank. Take the very best deal you can find - and bear one more thing in mind.

Sometimes it will pay you not to exchange your currency before you travel abroad, but simply to take your international bank card with you and make use of ATMs (cash machines) in the country you are visiting. All major cities in Europe and North America are well-equipped with such facilities, and in Europe many do not make a charge for cash withdrawals. Ask your bank what they will charge you, and see if they have a special deal available. For example in the United Kingdom, First Direct bank will not charge you for withdrawals anywhere in the world if you sign up to their 'First Directory'. You pay just a monthly flat charge. If you are a frequent traveller, this could save you a great deal of money in a year.

Whether you are travelling on business or for pleasure, enjoy your travel, take the best deals going, and don't be talked into accepting the first deal you are offered. You wouldn't pay over the top for your baked beans or cornflakes, so why make any exception for your foreign currency?