Whether you’re loading a travel money card up for an overseas holiday or making an international money transfer of a large sum to an overseas bank account, exchange rates are the most important part of the equation.
They determine how much of one currency you can trade for another, and when you’re exchanging large amounts, even a few cents’ difference to the rate can have a big impact on how much you get.
Yet it’s likely that some people don’t give much thought to what rate they’re getting, instead paying more attention to upfront costs and fees. The exchange rate, though, can be where the providers make most of their money.
It’s a hidden cost which arises from the margins built into the currency broker’s quoted exchange rate on top of the true exchange rate (a.k.a. the “benchmark”, “headline rate”, or “spot rate”).
As CANSTAR research has found, these margins can vary significantly between different currency suppliers. In 2016, we researched and rated 12 different travel money cards for the value they provide to consumers.
How much could I save with a better exchange rate?
For the most recent Travel Money Cards star ratings, Canstar researchers captured four weeks of daily exchange rate data from all of the 12 institutions rated and then found the average for each institution.
As you can see from table below, there can be quite a difference between the highest and lowest rates offered. It may not look like much on face value, but when you think about how much you’d be putting on your travel money card, those differences can add up to quite a bit.
|Currency Exchange Rate Comparison|
|ANZ Travel Card||0.7154||0.6314||0.4858||1.0055|
|Australia Post Load&Go Travel Card||0.7222||0.6315||0.4843||1.0015|
|Commonwealth Bank Travel Money Card||0.7179||0.6273||0.4831||0.9995|
|Mastercard Cash Passport||0.7132||0.6228||0.4774||0.9908|
|NAB Traveller Card||0.7118||0.6288||0.4808||0.9976|
|Travelex Cash Passport||0.7231||0.6337||0.4859||1.0071|
|Westpac Global Currency Card||0.7162||0.6253||0.4822||0.9994|
|Source: www.canstar.com.au. Exchange rates as at 23 June 2016.|
For example, say you were going on a big trip to the United Kingdom and had set aside $5,000 worth of spending money. If you loaded that $5,000 AUD onto one of these cards at 0.4774 GBP/AUD (the lowest quoted rate) you would get £2,387. But another card with a rate of 0.4859 GBP/AUD (the highest quoted rate) would get you £2,429.50 – an extra £42.50 of spending money!
You may think £42.50 is not that much relative to the amount being loaded onto the card, but why throw money away? Chances are you’d probably think twice before spending that £42.50 on a meal or an item of clothing, so there’s no need to spend it on a worse exchange rate.
How to get a good exchange rate
Compare rates of different providers
Shop around for the best rate by making a short list of providers and checking their exchange rates over a number of days. This will help you get a feel for who regularly offers the best deal.
Don’t forget that some currency suppliers may match or even beat a rate you find quoted by a competitor, so feel free to negotiate.
Note that exchange rates form a big part of CANSTAR’s rating methodology for both international money transfers and travel money cards. Check out our comparison tables for the latest ratings of different transfer providers and travel cards.
Keep an eye on rate movements and forecasts
With daily movements in the exchange rates of the major currencies, timing is everything. With so many factors influencing these rates, picking the right time to exchange can be extremely difficult.
Essentially, you should watch out for changes in interest rates and economic forecasts because these are what can have the biggest influence. In general, an increase in a country’s official interest rate (“official cash rate”) will cause that country’s currency to rise in value (and vice versa), while an economic disaster will lower the currency’s value (and vice versa). Even general economic shifts like the Brexit (Britain leaving the EU) have shown a huge impact on both the British pound and the currencies of countries that trade with them – hence a small decline in the Aussie dollar.
A quick internet search for the latest finance news should provide you with some insights into what’s happening to a particular country’s currency.