comparing currency exchange
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Comparing currency exchange options

A continual query for many, comparing currency exchange options is not as simple as you may thuink. But put in to context, unless you are exchanging a very large amount of money (ie thousands) the exchange rate of pounds for any foreign currency will always be higher than the spot foreign exchange price you see in the papers / banks.

There is no way of escaping this expense. It remains a matter of comparing the spot price on any one day, with the price offered by various merchants respectively, bearing in mind that exchange rates change very quickly.

In return for this facility, the traveler gets a sum of foreign currency which they can spend at their destination, but have to accept the security risk of taking their finances in cash. This maybe suitable for a quick trip over the Channel, but depending on their requirements they may need to reconsider this alternative for want of practicality and safety.

So which option for currency exchange?

The use of a credit card facility is a great benefit in this respect because it offers security and convenience, in addition to a few secondary benefits such as discount travel insurance or accommodation, and even loyalty rewards that will be attractive if a person is regularly using their card. Depending on their circumstances, the credit card facility, while a revolving line of credit, may be able to used to its optimal functionality, by making purchases while overseas and yet satisfying the debt in full within the interest rate free period, in order to avoid the onerous rate of interest that will apply if this is not done.

Still the expense on the exchange rate that will undoubtedly be incurred needs to be evaluated to that of the physical exchange of pounds for foreign currency, but even this margin is able to be justified in consideration of the immense convenience and security of a credit card.

The fact that a record is automatically kept of all transactions is also helpful in tracking expenses and verifying purchases in the event of dispute.

A debit card has the advantage of not incurring exorbitant interest fees and allows a person to budget for their overseas expense beforehand. But depending on how you take your money out - you may be paying additional charges for access to your funds. Still, in an emergency it may be valuable to have either additional funds loaded onto the card, or a credit card just in case.

Traveler's cheques struggle to express their worthiness in the current climate of credit cards, debit cards, electronic funds transfers and phone banking. Thirty years ago, we had no such services and the traveler's cheque made perfect sense for any sensible traveler. However today, they seem to only offer benefit to those who are inexperienced with electronic purchases and these remain in the minority of travelers.

Still, the value of a traveler's cheque may be found in remote foreign destinations where the modern conveniences of contemporary finance are absent, and a capital city will offer a chance offer a chance for the traveler to cash their traveler's cheque for local currency, before embarking on their journey into the beyond. Due to their longevity, many remote places may accept traveler's cheques but yet not be conversant with the credit or debit card facility.

In these circumstances, the fees paid to acquire traveler's cheques and their relatively robust system of security, will no doubt pale in significance to risking the carrying of large amounts of cash in a foreign country.

Cash! Certainly a little cash is advisable for small purchases, but even these only incur the wrath of a retailer if they breach the minimum limit, in which case it is easy in a foreign destination to preempt ones expenses and parcel them into one transaction. If absolutely necessary, cash is available through automatic teller machines or retail outlets via a credit or debit card facility.

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-- Additional useful articles --
»  Credit card currency for cash abroad
»  Travelers cheques an option?
»  Using debit cards abroad for currency
»  Background on travelers cheques
»  Foreign exchange explained

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