By Scott Dicken

I travel quite frequently; primarily for work and less occasionally (unfortunately) for pleasure to both major currency countries (USD, EUR, GBP, JPY) and exotic currency locations across Africa, Asia and South America. As a result, I’m quite often, and increasingly, subject to the whims of exchange rate fluctuation. As the majority of my travel is for work it’s less of a problem; after all, I’m not ultimately footing the bill.  However, with the wild swings in currency we’ve seen recently this issue is becoming an increasing problem (and will likely continue to be so) for the average tourist. In-country local currency costs can be a significant portion of your trip cost; especially if big ticket items like hotels are to be paid in local currency when you arrive. So, what exactly are your options for trying to minimize the risks associated with currency fluctuation? In this post I’ll examine a few remedies I use. I’m no financial markets expert, but hopefully some practical laymen’s guidance that doesn’t involve a broker-level understanding of futures trading might be of some use on your next big (or small in the current foreign exchange markets) trip:

It’s all about timing: So, you’ve booked a trip and you’re a few months out from departure (or a year if you’re one of those organized bargain hunters). OK, I said no futures trading complexities, but simple foresight would suggest that planning your currency purchase in advance is probably a decent idea. Look at historical trends against the currency you’re purchasing (take a look at oanda.com or xe.com) and if you see a good deal then pull the trigger and buy – especially at times like present when the dollar is so strong. If you’re really risk adverse, then you could buy in smaller batches over a prolonged period so that you end up with a historically averaged rate (what I like to the ‘the little guy’s hedging strategy’).

In bad markets use points: If your currency is currently weak (e.g. like the British Pound) then pay everything you can in ‘currencies’ that don’t fluctuate. By that I mean air miles and hotel rewards points. As my other standard currency of Sterling is performing so poorly, I’ve recently decided to finally use some accumulated rewards to pay for hotels, which is taking all of the currency exchange risk out of what is probably the single largest foreign currency expense I’ll have on my next trip.

NEVER buy at the airport: Yeah, we’ve all done it. We’re so excited by the planning process, and then so consumed by the packing process, that we forget to buy currency in advance. As a result, we end up buying it at the airport at terrible rates. Obviously, better planning would be the preferred approach, but if all else fails withdraw cash when you arrive, use a credit card if needs be, or use a currency exchange facility away from the airport when you get there. Oh, and don’t exchange currency at hotels either, their rates are also typically geared up for a captive tourist market.

Choose your trip based on the currency market: Pretty much everyone (myself included) starts the travel planning process with the question ‘where do I want to go?’ and works forward from there. Currency usually only comes into the equation after booking. What if we turn that notion on its head and we’re guided to the location by an examination of the best available deals on currency.  My travel bucket list contains pretty much every country in the world, so what harm does this approach really have? I’ll still end up at a destination that will no doubt be really enjoyable, but I won’t have broken the bank (and may have even got an absolute bargain) in the process! Of course, you’ll want to consider things other than just currency i.e. if you’ve found bargain flights or accommodation then that may trump the poor performance of your currency, but it’s definitely worth thinking about currency much earlier in the planning process.

Don’t exchange cash at all, but always use the local currency: If you don’t need cash then don’t exchange! If I’m on business I’ll typically just carry cards, but that’s mostly because all of my mealtimes are spent with clients in the hotel I’m staying in and therefore don’t really need cash. But if you’re in that position then take advantage and just use your credit card. Just make sure when you check-out that you opt to pay the bill by card in the local currency i.e. don’t allow the merchant to set the exchange rate. There are a few reasons for this including a combination of conversion fees and dynamic currency conversion but that’s probably worthy of another post in its own right so I’ll just stick with a ‘pay local’ summary. However, do make sure that you have a credit card with no foreign transaction fees if you do decide to use plastic; otherwise you’re starting out with a at least a 1.5% fee on every transaction.

Don’t Sell Back: At the end of a trip I’ll typically end up with some leftover cash. If I’m planning (or even foresee a possibility) of going back to that country at any point then I don’t sell the currency back. Instead, I store all of my spare currencies for use again in the future thereby not losing out twice on exchange rate fluctuation or conversion fees that may apply. If you have a decent amount left you could always keep hold of the money and sell back once a rate improves. You could even make yourself some money if you’re lucky!

About the Author: Scott Dicken is a world traveler and amateur photographer on top of being employed full time at an internationally known company. His love of travel is evident – you can read more articles like this at takephotosleavefootprints.com