Don’t exchange money at the airport
One US dollar is now worth around Rs 46, almost Rs 4 more than where it was just 50 days ago. So, if you are travelling abroad and want to purchase say $500, you could end up paying Rs 2,000 more.
However, the rate at which you get a dollar would also depend on who you purchase it from. Moneychangers, banks, travel agents, hotels or the airport kiosks all offer foreign currencies at different rates.
Vinod Khanna, general manager — international banking, Union Bank of India says there will always be a rate differential between banks and others since banks are direct dealers in foreign exchange.
Banks and travel agents offer more or less similar rates. However, the rates offered at most airports and hotels are high. When the market rate for dollar was Rs 45.77, a bank was selling the dollar for Rs 46.6, the airport moneychanger was selling it at Rs 48.90 and the hotel exchanged it for Rs 48.97.
Going by Khanna, the rates at the airport are higher as there is a margin attached. Moneychangers handle cash and have to deal with retail customers, so there is a cash-handling charge involved.
According to another banker, the bank rate depends mostly on demand and supply. This is because, banks take the inter-bank rate as the base rate and add a margin depending on the frequency with which the price changes and the period for which the bank has to hold the currency.
But, why does a moneychanger whose branch in the city offers a lower rate ask for a higher one at the airport?
Moneychangers say there is a higher cost involved in selling and buying at the airport.
An official at a moneychanger said, over and above the tax, they need to pay the airport authorities Rs 2.50 for every dollar sold.
Also, the rent for a kiosk at the airport works out to Rs 3-4 lakh, so they are forced to charge a higher margin to cover that cost.
Moneychangers also exploit the fact that people would be willing to pay a stiffer charge for major foreign currencies, such as the dollar and the euro, at the airport since that is the last resort and no one will exchange Indian rupees once in a foreign land, the official conceded.
Clearly, then, the airport is not the best place to buy foreign currency and an exchange is based done with banks and travel agents.
One should also note that banks, travel agents and moneychangers charge transaction fees on the rates displayed. This would typically include a service charge ranging between Rs 22 and Rs 100 at banks and between 0.2% and 0.7% of the amount involved at travel agents and moneychangers.
Further, not every bank branch offers foreign currency and among those that do, not everyone might have the currency you are looking for. Indeed, it is possible nobody keeps the currency of the country you are travelling to, say Korean won, Singapore dollar, Zimbabwean dollar, etc. In such a case, the traveller would have to buy US dollar or euro and get them exchanged at the destination.
If you don’t like carrying cash around, buy traveller’s cheques (TCs), which both banks and moneychangers offer. For example, on a day a certain bank was selling US dollars at Rs 46.58 at its branches, TCs for US dollar were going at Rs 46.46 apiece. The reason is not far to seek: Currency has to be stored properly and has insurance and loss costs attached, but if a traveller’s cheque is lost, nobody else can encash it.
According to another banker, “TCs will give a customer a higher return as the bank transfers the money to the overseas correspondent. This money is put in a nostro account and the bank earns an interest on it.”
But, again, TCs for all currencies are not available. For instance, it is rare for a bank to issue TCs for Hong Kong and New Zealand dollars.
Pre-paid traveller’s card or forex cards offered by banks are yet another option one could consider. These can be used at merchant outlets, to be swiped at will and refilled when the balance comes down.
Given the charges involved, it pays the traveller to be sure about the places he is likely to visit on his travel abroad in order to get the best deals on the currency to be bought. The US dollar is not accepted everywhere. On the other hand, the euro is fast catching up as the international currency; if you are visiting countries like Mauritius or certain countries in North Africa or around the Mediterranean Sea, it makes more sense to carry euros.
One US dollar is now worth around Rs 46, almost Rs 4 more than where it was just 50 days ago. So, if you are travelling abroad and want to purchase say $500, you could end up paying Rs 2,000 more.
However, the rate at which you get a dollar would also depend on who you purchase it from. Moneychangers, banks, travel agents, hotels or the airport kiosks all offer foreign currencies at different rates.
Vinod Khanna, general manager — international banking, Union Bank of India says there will always be a rate differential between banks and others since banks are direct dealers in foreign exchange.
Banks and travel agents offer more or less similar rates. However, the rates offered at most airports and hotels are high. When the market rate for dollar was Rs 45.77, a bank was selling the dollar for Rs 46.6, the airport moneychanger was selling it at Rs 48.90 and the hotel exchanged it for Rs 48.97.
Going by Khanna, the rates at the airport are higher as there is a margin attached. Moneychangers handle cash and have to deal with retail customers, so there is a cash-handling charge involved.
According to another banker, the bank rate depends mostly on demand and supply. This is because, banks take the inter-bank rate as the base rate and add a margin depending on the frequency with which the price changes and the period for which the bank has to hold the currency.
But, why does a moneychanger whose branch in the city offers a lower rate ask for a higher one at the airport?
Moneychangers say there is a higher cost involved in selling and buying at the airport.
An official at a moneychanger said, over and above the tax, they need to pay the airport authorities Rs 2.50 for every dollar sold.
Also, the rent for a kiosk at the airport works out to Rs 3-4 lakh, so they are forced to charge a higher margin to cover that cost.
Moneychangers also exploit the fact that people would be willing to pay a stiffer charge for major foreign currencies, such as the dollar and the euro, at the airport since that is the last resort and no one will exchange Indian rupees once in a foreign land, the official conceded.
Clearly, then, the airport is not the best place to buy foreign currency and an exchange is based done with banks and travel agents.
One should also note that banks, travel agents and moneychangers charge transaction fees on the rates displayed. This would typically include a service charge ranging between Rs 22 and Rs 100 at banks and between 0.2% and 0.7% of the amount involved at travel agents and moneychangers.
Further, not every bank branch offers foreign currency and among those that do, not everyone might have the currency you are looking for. Indeed, it is possible nobody keeps the currency of the country you are travelling to, say Korean won, Singapore dollar, Zimbabwean dollar, etc. In such a case, the traveller would have to buy US dollar or euro and get them exchanged at the destination.
If you don’t like carrying cash around, buy traveller’s cheques (TCs), which both banks and moneychangers offer. For example, on a day a certain bank was selling US dollars at Rs 46.58 at its branches, TCs for US dollar were going at Rs 46.46 apiece. The reason is not far to seek: Currency has to be stored properly and has insurance and loss costs attached, but if a traveller’s cheque is lost, nobody else can encash it.
According to another banker, “TCs will give a customer a higher return as the bank transfers the money to the overseas correspondent. This money is put in a nostro account and the bank earns an interest on it.”
But, again, TCs for all currencies are not available. For instance, it is rare for a bank to issue TCs for Hong Kong and New Zealand dollars.
Pre-paid traveller’s card or forex cards offered by banks are yet another option one could consider. These can be used at merchant outlets, to be swiped at will and refilled when the balance comes down.
Given the charges involved, it pays the traveller to be sure about the places he is likely to visit on his travel abroad in order to get the best deals on the currency to be bought. The US dollar is not accepted everywhere. On the other hand, the euro is fast catching up as the international currency; if you are visiting countries like Mauritius or certain countries in North Africa or around the Mediterranean Sea, it makes more sense to carry euros.