Make your rands travel further

Last updated on 13th December, 2017 at 10:03 am

Why is travelling overseas with money such a daunting prospect? We look at a number of ways to exchange money conveniently, and how to secure the best rate for your rand.

First let’s understand how currency trading works. You’ll hear on the news that the rand is now R15 to €1 – but at the exchange booth, there are two prices. The sell price is slightly less (ie R14.50), and the buy price is slightly more (ie R15.50). The spread (ie the difference between the sell price and the buy price) is where exchange companies make their money. Of course, they often charge a flat fee on top as well.

Pocket money

It’s a good idea to take a small amount of local currency with you, just to see you over to your destination (snacks, transport to your hotel etc). You can get this currency by changing money at your bank at home or at the airport. Note though, banks do not necessarily carry huge stock of every country’s currency. So if you are heading to an unusual location, book your currency a week in advance.

Hotels – a safe haven

Most hotels are convenient, super obliging and have a responsibility to serve their clients, but the reality is that hotels make money out of you, so the margins are quite high. Hotel exchange rates can be eye-watering; they charge you a percentage or a flat fee every time you exchange.

Cash is king

Wherever you go, a bundle of cash in the host currency works wonders, but the risks of carrying cash are acute and include mugging and loss. Also, you need to check restrictions on cash going out and coming into any country, as rules change often and penalties can be severe. Be aware of local forex regulations – read up on them before you go overseas. Two important ones: you cannot buy your currency more than 60 days prior to your trip, and you must exchange the unused currency within 30 days of your return to South Africa.

The dollar standard

Given that the US dollar is still the world’s default currency, it’s tempting to exchange rands into dollars first – especially if you’re visiting several countries. But then you’re paying twice the commission – first to change rands to dollars, and then to change dollars to the next currency.

Card culture

Pre-paid traveller’s cash cards are the new traveller’s cheques and all banks offer them. They are essentially debit cards loaded with your chosen currency. All the main banks offer competitive rates that are more or less what you would pay at an exchange booth. The cards allow cash withdrawals from most ATMs in the world’s major countries; they can be pre-loaded (a positive, so you know exactly how much money you have to spend), topped up, or replaced if lost. Just be aware that ATM fees of foreign banks may differ – try to draw money only from an ATM with low fees.

Credit cards

An increasing number of travellers are simply relying on their credit cards to draw local money from an ATM, and to pay for goods and services. This may incur a higher fee, though the slightly higher premium is worth the peace of mind and accessibility. Fees are charged whenever you use a credit card for non-rand transactions; whether withdrawing cash from an ATM or making purchases over the counter. As a guideline, Visa, MasterCard and American Express charge the following fees: non-rand transaction fee up to 2.99%; cash fee up to 5.00%. The non-rand transaction fee covers the processing and currency conversion cost of non-rand transactions. The cash fee is the handling fee for cash advances and is payable in addition to the non-rand transaction fee.

By Paul Kerton