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Ever wondered why your holiday budget goes further in certain countries than others? Or why that adorable jacket from a UK site now costs significantly more money than you anticipated? That’s exchange rates hard at work, and believe me, they play a greater role in your wallet than you realize.
Here’s what’s really going on when you swipe overseas or click “buy now” on a foreign website.
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The Travel Money Game
Exchange rates decide how powerful your money is in other currencies, and that in turn impacts everything from your hotel room to your morning latte.
Imagine that you’re about to go to Europe, and the euro is at a good exchange rate against your currency. That fancy Italian meal and museum entrance fee don’t look so expensive all of a sudden. But turn the situation around, and a high euro has your money not going as far, making that fantasy vacation an expense-stretching nightmare.
Exchange rates quite literally alter the cost of everything when you travel. Your hotel room, that little souvenir keychain, even your morning coffee, all become more or less expensive based on how currencies are trading relative to one another.
This is where it gets juicy: rates change constantly. Like, several times a day. So the cash you exchanged last week could be worth more or less depending on whether you had waited until today. It’s not a precise science, but watching out for patterns in the currency before you go can assist with timing your exchange more effectively.
Online Shopping Across Borders
Currency exchange occurs at checkout using up-to-date exchange rates plus fees, so your final cost can vary from the posted amount.
Shopping from your couch is next. You’ve discovered the ideal gadget on a Japanese site or those shoes you’ve been searching for on a European retailer.
The price on the list appears acceptable, and then you go to checkout and suddenly the total is not what you estimated.
That’s because the vast majority of foreign purchases are exchanged at the prevailing exchange rate, plus whatever charge your bank or payment processor chooses to add on. And if the exchange rate’s changed since you put items in your cart versus when you actually pay, you could spend more than you expected.
Most web shops will show prices in more than one currency, but don’t forget, that’s just an approximation. The actual cost is based on the rate when your transaction is being processed.
What You Can Really Do About It
Monitor exchange rates, shop around for payment methods, and select local currency when available to reduce conversion charges and make your money go further.
So how do you get through this currency quagmire unscathed? Begin by noticing rate patterns, particularly if you’re buying something pricey or taking a high-ticket trip. There are scores of apps and websites that monitor exchange rates in real time.
For tourists, investors can also consider utilizing the services of an online forex broker to pre-lock exchange rates, but this means learning about the risks and charges involved. There are credit cards that give better exchange rates than others, and some even waive foreign transaction fees altogether, so take time to compare.
When shopping online, consider whether buying from an international seller is genuinely worth it after factoring in currency conversion and shipping. Sometimes that “deal” isn’t such a deal once everything’s converted to your home currency.
Additional advice: if offered the option to pay in your home currency or the host country’s currency overseas, generally opt for the host country’s currency. The exchange rate provided at point of sale tends to be poorer than what the bank would provide you.
Conclusion
Exchange rates aren’t something to fret over all the time, but knowing how they function can definitely save you cold, hard cash. Whether you’re globe-trotting around the world or putting imported items in your shopping cart, those fluctuating currencies are quietly influencing what you end up paying.
Monitor the exchange rates that are important to you, make smart payment choices, and feel no hesitation in waiting for an improved rate if you can afford the time. Your wallet will appreciate it.
