So as travelers, we need to understand the main reason why at times we might end up spending more than what the currency conversions say? See, when you go to an exchange counter, you see two types of boards- one that says “we sell” and the other that says “we buy”. What is the difference and why is there a rate difference between the two?” Well, the difference lies in the fact that the bank or the exchanger would sell the local currency to you in exchange of your own currency at a lower rate in order to get more of your currency for less local currency. For example, if the Euro is equivalent to 70 rupees INR, then the exchanger would give you 70 rupees for every Euro you sell him, or for every Euro he buys. On the contrary, if at the end of your holiday, you are left with some extra local currency, the same money exchanger would now buy it back at a higher rate. For example, if you have additional INR left at the end of your perfect little Indian vacation, then a bank would buy it back at 75 rupees in exchange of one Euro, and therefore you end up paying more than what you had brought the local currency for.
In the light of all this knowledge, I would like to share some simple tricks with you regarding currency conversion and the way in which you can minimize your losses. The best way to go about it is to get yourself traveler checks, preferably in USD or Euro denominations. You should distribute these in various segments of $10, $20, $50, $100 and so on. The best thing with traveler checks is that you use them as and when you need them and you don’t need to get all of your money converted all at once. If you haven’t used up all your money in the foreign land, you can come back home and get a full refund of all your traveler checks, without loosing a single penny.
Another way to save on these unforeseen currencies exchange expenses is to tie up with a local person and try to do money exchange with him. Usually, this would require you to hike the exchange rate a bit, but in this way, you can set up an agreement under which both of you charge and give the same exchange rate while selling or buying back. This acts as a buffer to international exchange rate fluctuations and the rate differential between the selling and the buy back rates at various banks of the countries. This method is usually a great way to counter the risks of a volatile market if you are planning to stay on a vacation for a long period of time, usually for more than a month and you are therefore not sure about the amount of local currency you would be requiring for the whole trip.
So there you have it, the whole idea behind currency, currency exchange and how to minimize your currency exchange woes while on a vacation to a foreign country.
