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Travelling overseas: A guide to exchange rates

How exchange rates work

A beginner's guide to exchanges rates and how exchange rates work, to help you get the most from your Australian dollar when travelling overseas.

Getting a great exchange rate makes a big difference when you’re heading overseas on holiday. 

The strength of the currency exchange rate will determine how much spending money you can play with. Time it right and you could afford more shopping sprees, expensive dinners out or even stretch your dollar to a flight upgrade and a few nights in a luxury hotel.

Exchange rates can change quickly though, so it’s a good idea to keep an eye on them several weeks before you travel so you know when the rate is in your favour or not. 

What affects the exchange rate?

Exchange rates fluctuate for a number of reasons, including:

  • Inflation 
  • Interest rates 
  • Balance of payments
  • Economic growth / recession

Since the exchange rate is the value of one currency in another at any given point in time, these factors will ultimately have an impact on how much local currency you’ll get for your Aussie dollar.

How can you check the exchange rate?

You can check our latest foreign exchange rates on CommBank.

This shows you the exchange rates we offer for changing dollars into foreign cash and Travel Money Cards.

It’s also a great way to find out which currency you’ll need for the country or countries you’re visiting.

Should you buy currency here or abroad?

This is a common dilemma for travellers. Again, it depends on what’s happening in the country you’re visiting and with the exchange rate at the time. 

If you’ve kept track of the exchange rate and think it’s looking pretty good, then you can lock it in before you go either by:

If you’re holding out for a stronger rate you may decide to get a small amount of local currency (just to tide you over) and change most of your money once you’re overseas.  

A few things to consider if you’re choosing this approach:

  • Check the advertised exchange rate and ask about fees before changing currency at the airport or at overseas banks – it pays to shop around
  • You’ll usually get charged a conversion fee and a transaction fee for withdrawing cash at overseas ATMs – you may also incur a cash advance fee if you use a credit card 
  • If you pay for things using your credit card you’re charged according to the exchange rate at the time you pay. Many people choose to pay in the local currency rather than in Australian dollars because merchants sometimes add a sizeable fee for converting dollars to local currency at the point of sale. 

It’s a good idea to give yourself some flexibility. Think about taking some foreign cash, a Travel Money Card, your debit/ ATM card and a credit card if you’ve got one. That way you may reduce the risk of losing out if the exchange rate suddenly changes.

Is it better to pay in advance?

Another way to take advantage of a strong exchange rate is to pay for things in advance with an International Money Transfer (IMT). It’s surprising how many places accept this - short term holiday rental owners for instance may favour this approach. 

You can send money to around 200 countries, in over 30 currencies, from NetBank and the CommBank app.

 

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Investors should consult a range of resources, and if necessary, seek professional advice, before making investment decisions in regard to their objectives, financial and taxation situations and needs because these have not been taken into account.