Getting The Best Foreign Currency Exchange Rate

When the Aussie dollar goes up, people always jump at the chance to exchange some money and take advantage of getting foreign currencies while it’s high. Over the last couple of weeks I’ve been explaining the options for those who want to lock in holidays spending money at these rates using things like travel cards.

But be careful where you make the exchange because rates can vary wildly.

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This is how things looked yesterday

My sister-in-law flew out to the US on the weekend to visit her parents. At the airport she went to exchange some Aussie dollars into Greenbacks looking forward to the best conversion rate in years. We’ve always known the rate you get at the airport can be a little uncompetitive, but it’s not usually too much of a difference.

Well on Saturday the official exchange rate was around 95 cents. When she went to buy some US dollars for her trip before getting on the flight, they were selling at just 85 cents. A whopping 10 cents lower than the official interbank rate.

So she calls up my financial adviser brother a bit confused, he gets on the phone and is told that it’s low “because it’s a Saturday”. My brother naturally argued, so you know what happened?

“How about I give it to you at 89 cents”. The bloke selling his wife the US dollars started negotiating the rate! What the..? Since when did institutions like Travelex negotiate exchange rates.

We’ve always known there’s a bit of a difference between the wholesale exchange rate and what we all get. But it’s usually not more than a cent or two.

According to the Travelex website yesterday, Aussie dollars were being converted at 93 US cents. Well I called around a few of the individual Travelex outlets to ask what they were selling at.

Sydney Airport had a rate of under 86 cents.

Melbourne Airport was 90.4 cents.

Doncaster shopping centre had 89.7 cents.

The actual wholesale exchange rate was over 95.8 US cents.

That means some customers were being ripped off by almost 10 cents for every dollar they exchanged. That’s over 10 per cent difference.

Travelex explained to me the reason for the difference is the varying costs of operating each branch. For example, they pay higher rents at Sydney airport so that’s where you get the worst rate.

BUT you can order your foreign cash over the website, at the website rate (with no commission deducted) and pick it up at the airport.

The major banks and Australia Post are a lot more consistent. They give you a rate on their website and that’s the rate you’ll get at every branch no matter how expensive individual branch costs are. Yesterday it was around 93 US cents for $1 Aussie for all of them, only 2 cents below the interbank rate. The added bonus of exchanging currency at the Post Office is they don’t charge additional fees, where as most banks will throw a 1 per cent commission on top.

The interbank rate is the rate which the banks sell currency to each other. It’s the one you see in the newspapers and on the news.

So if you’re seeing the rocketing dollar and wanting to get in while it’s hot by buying some foreign currency, don’t get suckered and find an outlet that won’t rip you off with a stingy rate.

Best buy for the currency is definitely Australia Post. A rate which equals the best of the banks and no commission on top

If you use Travelex never, EVER exchange at an airport or a branch. Always order online, lock in the best rate and pick up the cash at a branch.

Also, feedback from lots of viewers on Twitter says that you should be careful also when using PayPal because they have terrible exchange rates which really are ripping people off:

@dionsmum: @kochie_online paypal make a s**tload of money on exchange rates too

@camgrant84: @kochie_online Paypal ALWAYS offers terrible exchange rates. Not unusual to be offered 88 cents when the market rate is around 95

Comments

+6 #42 2011-11-14 13:17

I agree about the post office, best rates, sure it may take a day or two but surely if you know you are going on a trip and where you are going, you would be organised enough to get your money beforehand. When I book my trip, I start looking at the rates and seeing where they are going, and when they are up, I go and buy at the PO. Couldn't be easier.

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0 #41 2011-10-28 20:17

Really it's a difficult thing to find the best foreign currency exchange rates.

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-1 #40 2011-10-26 16:01

Thanks for informative article. Travelex is NEVER the best option, for cash or a card. You need to prepare your options about a month out and decide to apply for cards or change cash with the best provider. The initial exchange rate with travelex is a rip-off compared with others. For travelcards Comm Bank and ANZ are considered to be good but what about 28 degrees. Some swear by that. What do you think?
Aust Post best and honest for cash exchange.

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0 #39 2011-10-18 20:47

[quote name="Kylie"] We are an AFSL holder who exchange foreign cash, foreign cheques, foreign travel cards and perform International Money Transfers at much more competitive rates than the banks and actually have the currency on hand as opposed to the Post Offices and most banks who must order currency in.
Kylie - I need to know who you are and where to find you! I am semi-organised and an trying to convert AUD to EU now, for some transactions expected in about 6 months time....... help

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+4 #38 2011-10-07 17:07

were flying to Bali in a month. The rate here at the moment in 7611 and in Bali its 8600. Really confused if we should convert our cash now as the rate is dropping. Any advise would be appreciated :)

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0 #37 2011-10-07 17:03

Were travelling to Bali in a month. The rate here is 7611 and in Bali its 8600ish. As the rate is dropping should we be looking at buying cash here now or wait until we get there.....really confused :/

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0 #36 2011-09-28 14:38

just went to travellex and uae exchange hornsby. travellex quoted 5.31 for $A to yuen plus a $12fee and uae 5.80 no fee. you choose. what a world.

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+2 #35 2011-09-19 10:23

I arrived at Pudong international airport, Shanghai last month eager to exchange some dollars into yuan. I found all the local exchange dealers on the arrivals level had similar rates - well below the offical rate. However, when I went upstairs to the departure longue I found the Bank of China had rates pretty much on par with the official rate.

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+1 #34 2011-07-28 13:19

DOY

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+1 #33 2011-06-14 19:18

I read this article before traveling last month to Italy. A few things to reinforce. Suburban banks and post offices need to order foreign notes in, so plan ahead by at least 3 days. Do not exchange at travel hubs, including rail stations, unless you are desperate- you will be gouged. I copped a crap rate AND 15pc service fee at Milan railway. I was naive and desperate- a recipe for disaster. Conversely, I found banks in Venice to have excellent exchange from AUD to E (approx 10e per 100aud better than the money change offices scattered around). And if going to Bali, take AUD cash, know the bank rate and negotiate with reputable looking street change offices. I have had some good wins as they can be keen to get the daily quota. Good luck.

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