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Get the most out of your holiday cash with the best FX rates

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Always look at both the exchange rate and any associated fees and commissions to get an idea of the total cost of your currency exchange transaction. Source: Getty

You’ve booked your big overseas holiday, and your thoughts turn to the amazing sights, scenery and adventures that await you.

The months leading up to your trip are a great opportunity to pour over the destination guides, firm up your travel plans and think about your spending money. During this time, you can take some simple steps to ensure you get the best deal on your foreign currency.

Converting currency before you depart

Many travellers like to pre-purchase foreign currency before leaving Australia in order to lock in a competitive exchange rate and avoid fluctuations while they’re on the road, according to Bessie Hassan,’s money expert.

She says that it doesn’t necessarily mean you’ll get a worse rate if you exchange money overseas, “but you will have to take whatever the current day rate is. So that’s the risk – which might be less favourable than what it was at home.”

The more familiar you are with the exchange rates of the currencies you’ll need, the more easily you’ll be able to spot a good deal.

“The only way to know if you’re getting the best exchange rate is to know what the current rate is – so keep an eye on the exchange rate of the country you’re travelling to,” Hassan explains.

Comparison sites like, the Reserve Bank of Australia, the major banks and foreign exchange bureau services list the exchange rates for many of the world’s currencies – but it’s worth shopping around and negotiating when it comes time to hand over your Aussie dollars, according to Adrian Pin, Westpac’s head of international needs.

Pin advises to negotiate, and not to just accept the advertised foreign exchange rate, wherever you’re buying your currency from.

“Don’t be afraid to ask for a better rate, because in this modern day even the banks will negotiate with you, as will any other merchant overseas who is a currency exchange business. Ultimately, they can only say no! But I think you’ll find nearly everyone will negotiate to win your business.”

Pin also suggests that buying parcels of currency over a period of time can help you to get a better overall rate.

“If you know you’re travelling in six months’ time, and if the currency is looking like it’s reasonably good value now, then buy some now,” he says. “You might even make a decision around how much you buy – you might buy little bits along the way – it’s a way of what we call dollar-cost averaging, to ultimately get a better overall price.”

“You could then put that money into a foreign currency account with the bank; you could take the cash home and store it in your safe; or you could get a travel money card in advance, load the money on it and leave it there until you go on holidays.”

It’s also important to look at both the exchange rate and any associated fees and commissions to get an idea of the total cost of your currency exchange transaction.

“Even here in Sydney, a lot of [currency exchange services] will advertise ‘no commission, no commission – best rates!’, Pin says.

“At the end of the day, there are really two factors: there’s either a fee you’re going to pay or an exchange rate – and they can tweak and play with those as much as they like. They can make the commission zero and the exchange rate worse, or they can make the exchange rate look good and give you a bad fee,” he explains.

“So, you need to say, ‘if I’m spending $100 in Australian dollars, how much of the foreign currency am I going to end up with in my pocket?’ and use that as your measure – not the sign and the flashing lights which are trying to distract you in some way.”

If you’re travelling to a smaller country, Hassan suggests that it may be better to stick with a more stable currency like the US dollar or Euro, rather than converting it to the local currency.

“These currencies are often accepted in many countries around the world; they rarely fluctuate, so you can enjoy savings without losing a chunk of your money to poor exchange rates and agent commissions,” she says.

Finding the best FX rates when you’re overseas

It’s always worth carrying some local currency for when you arrive at your destination, in case you need to grab a refreshing drink or cab to your hotel.

Hassan cautions against exchanging money at the airport or hotel though, because you’ll generally receive a lower exchange rate due to the convenience of accessing local dollars as soon as you jump off the plane.

While it’s great to carry some cash on you at all times, carrying large amounts of cash can make you a target for theft when you’re travelling. Both Pin and Hassan recommend carrying at least one, if not a couple of alternate ways to access cash, including a mix of debit, credit or travel money cards.

It’s important to check the fees associated with any card you use overseas, as many credit and debit cards charge not only the currency conversion, but also potentially a foreign ATM fee and a foreign transaction fee of around three per cent.

“Credit cards often incur cash-advance fees when you withdraw cash from ATMs, so do keep that in mind,” Hassan says. “You’ll get the interest charge, and that high, upfront cash advance fee as well. In addition, the other fees charged by credit cards are buried, so it’s important to read the fine print before you head off.”

Pin notes that Westpac’s Lite Card, its basic credit card, does not charge fees for foreign transactions – however it also does not offer loyalty points – so it’s worth understanding the pros and cons of any card you use, and which features are most important to you.

Using cards overseas to access your money often provides great convenience – and many protections if you’re scammed or the card is used fraudulently – but Pin says vendors are always looking for ways to make that little bit extra on each transaction. One of the ways they do this when you go to pay with your card, is to offer for you to pay in the local currency – this is called direct currency conversion.

“I personally don’t use that one, because if you just let the transaction go through normally, what happens is, the credit card scheme – MasterCard, Visa or AMEX – provides a foreign exchange conversion and converts that back to Australian dollars, which you then ultimately pay. And that rate is typically quite a good rate,” Pin explains.

“If you select the other option, which is to let the merchant and their bank convert the transaction before they send it to Mastercard or the scheme, they typically take a cut out of that transaction – and that’s why they ask you to pay in local currency, because they’re making money out of it. I personally don’t use those offers at the point of sale, I just say ‘no, thank you’ and let it go through the scheme normally.”

Pin notes that this practice is becoming more widespread, and says that while it’s not really a scam, “it’s something to be aware of because it might cost you a little bit more”.

As with most things in life, a little bit of upfront planning and research can make a big difference when it comes to your holiday money, freeing you up to have a ball while you’re away.

What are your tips for getting the best conversion rates? Do you pre-purchase currency before you leave, or convert it when you’re there?

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Important information: The information provided on this website is of a general nature and for information purposes only. It does not take into account your objectives, financial situation or needs. It is not financial product advice and must not be relied upon as such. Before making any financial decision you should determine whether the information is appropriate in terms of your particular circumstances and seek advice from an independent licensed financial services professional.

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