Changing currencies while travelling abroad sometimes leads to frantic searches for absolutely the best rate. But as Terry McCrann, Australia’s premier financial writer and guru points out, the actual exchange rate often isn’t as damaging as the rates, commissions, and fees that might tend to accompany it.

As an example, when exchanging Australian dollars for U.S. ones, finding a rate of 91 cents might seem a better deal than 90 cents. However, as Mr. McCrann points out, when exchanging $1,000, that’s a difference of $10.

“Even on $10,000 the difference is only $100,” he said, “and that’s if you get a full cent.” It’s more likely the choice of exchange rates will be between 91.00 and 90.75, or something similar, which translates to pretty small change even on larger sums.

The bigger financial hit, he warns, is likely to be the surcharges, and therefore that’s where the besieged traveller’s attention should focus. For those who travel often, it’s worth the hunt for a credit card that doesn’t charge fees on cross-currency transactions. As well, obsessing over currency rates can ruin a good vacation or even business trip, and therefore convenience should not be discarded.

“The easiest and most convenient way is to just use your credit card,” Mr. McCrann said. “But the charges, and exchange rate, can be punishing, adding up to maybe more like $400 on every $10,000.”

But using a credit card for foreign currency exchange has other advantages besides convenience. One of the best is that you only exchange the amount you need, so you don’t return home with leftover travellers cheques. These are often less expensive than plastic for foreign exchange, but their downside is paying for them upfront, the risk of loss and theft, and returning home with several expensive, foreign-denominated souvenirs.

“My best advice is to accept you are going to be fleeced,” said Mr. McCrann. “Close your eyes and hand over the money and just enjoy spending it! Don’t try to count the cost.”

Source: http://www.news.com.au/