What is Foreign Exchange?

Foreign Exchange is the process of converting your local currency into that of another country. All travelers – business or tourist – use this to acquire money while abroad, and it can take the form of cash, cheque or electronic, which uses your credit or debit card.

One thing to remember is that there are significant numerical differences in currencies abroad, so look into this when you decide how much money to change.

Quick Questions:

Q I am traveling to Europe this summer. Which countries use the Euro, and can I still use the old currencies such as the Spanish Peseta or the French Franc which I kept from previous trips?

A The “EuroZone” currently includes: Austria , Belgium, Finland , France, Germany , Greece ,Italy , Luxembourg , The Netherlands, Spain , the Republic of Ireland and Portugal.

As of July 1st 2002, previous European currencies such as the Franc, Peseta and Deutschmark are no longer legal tender in their respective nations. Commercial establishments will not accept them.

However, banks in the respective countries continue, for a fee, to exchange your old currency into Euros. But take advantage of this whilst you can as it will not continue for long.

Q How do the lower withdrawal limits of ATMs abroad affect me?

A When using ATMs abroad that do not meet your domestic daily maximum withdrawal, you can make several smaller withdrawals, but this will obviously incur ATM fees for each transaction.

Q When exchange rates fluctuate quickly, am I in danger of losing purchasing power when I am traveling?

A For most tourist destinations, the answer is no. However, if you do find yourself in parts of the world which are experiencing economic or political turmoil, inflation may spin out of control resulting in currency devaluation.

Protect yourself by ensuring that you have enough money to leave the country if needed, and also try to keep some US Dollars on hand as these are universally accepted worldwide and can be invaluable in securing help quickly, especially when you may need it the most.

Q On the retail level, how does foreign exchange work?

A If you pay with a foreign currency in a retail establishment, these businesses will usually overcharge so that when they convert the money they don't incur a loss themselves. They may also take advantage of the fact that some tourists doing this will not be familiar with the currency and exchange rate – so that they make a big profit and the traveler loses out.

Neighboring countries, especially in border areas, will sometimes accept the currency of their neighbor. Some European countries practice this, as do some Canadian businesses, who are happy to accept United States dollars. However, it always comes out cheaper for the tourist if they had converted to the local currency first.

Using local currency is the best way to ensure a good deal in most countries, except those in a state of political chaos where US Dollars are the preferred option.