Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 314

Four foreign exchange secrets for travelers

Each year like clockwork, when the Australian winter sets in, my Facebook newsfeed begins to fill with pictures of Hawaiian or European summer destinations. With the July school holidays upon us, this process is well underway and conversations with friends inevitably turn to holiday check lists: where is everyone going, have they booked accommodation and what fun activities are planned for the kids?

A much less exciting item on the check list for most, but one that deserves more attention, is managing currency before you go on an overseas trip. It is often forgotten, and people miss out on what can be significant amounts of money, or at least enough to encourage a splurge at a particularly good restaurant.

Here are my top four foreign exchange tips to consider before travelling overseas:

1. Plan around currency volatility

Leaving exchanging currency to the last minute means you are at the mercy of notoriously unpredictable currency fluctuations. A Twitter post from the US President can move currency markets several percentage points overnight whilst many overseas trips are planned months in advance. People should watch how the Australian dollar sits in comparison with the country they are visiting and exchange currency when the rate looks strong.

This can be done via the traditional method of visiting a foreign exchange bureau or through the use of a multi-currency account. Citi’s Global Currency Account holds money in 10 currencies and gives the flexibility to transfer between them or externally at any time, to take advantage of favourable rates. It’s linked to a debit card and knows your location, so you can pay in the correct currency via the card when you travel, or withdraw money from the card when you are ready.

Similar accounts exist at other international banks and at fintech companies like OFX and Transferwise. Local banks offer comparable products, but these normally come with higher fees and wider currency spreads. The ‘spread’ is the difference between the price which you can sell the currency at (the ‘bid’) and the price which you can buy the currency for (the ‘ask’).

2. Factor in explicit and implicit fees

Ensure you are factoring explicit and implicit fees when you are choosing where to exchange currency. Explicit fees include account fees, ATM withdrawal fees, card load, telegraphic transfer fees, while an implicit fees is the foreign currency spread. Many banks are guilty of promoting low explicit fees and assume people won’t calculate the implicit fees and work out they are being ripped off. They can do this because foreign exchange is still an area many struggle to understand, and part of this is because of the jargon involved (like the ‘spread’, ‘bid’, and ‘ask’ explained earlier).

The World Bank has found that the average cost of sending money from Australia (7.68% of the money sent in the world) is significantly higher than the G20 average. On a hotel booking of $3,000, the average cost of $230 far outweighs the cost of an international ATM withdrawal.

Average cost of remitting from G20 countries

Source: World Bank, Remittance Prices Worldwide June 2019

3. Avoid the traps

The worst trap of all is exchanging money at the airport. A study by News Corp and The Currency Shop showed that on A$2000, travellers can lose as much as $350 by exchanging cash at the airport. While it might be convenient, it’s going to cost you.

Another way travellers get confused is when they are asked whether they want to pay in their own currency or the currency of the country they are in. If you pay in your own currency, the merchant or ATM operator will charge a foreign exchange fee at a rate they determine.

Prepaid travel cards can also be a trap. They often come with a range of fees e.g. for loading the card, using at an ATM or closing the account. It’s important to consider how these different fees will impact your budget overall.

4. Use technology to your advantage

My colleague Matthew Hayja wrote a piece for Cuffelinks called: “Retail FX: the last bastion of no competition”. While this remains largely true, there are some technological developments disrupting the FX space. Fintech players like Transferwise, Currency Fair and Worldremit specialise in small payments for individual customers. Using an online business model, they have low overheads and offer competitive rates.

Are we saying this is a reason not to transact with Citi? International banks have stepped into the ring to compete too. The rates on Citi’s Global Currency Account sit better than the domestic big four banks but slightly higher than the fintechs, with at 1.5% spread on USD exchanges. The currencies are linked directly to a Citibank debit card, meaning users can switch between currencies instantly via their mobile app and pay with their card when travelling. There are no ATM fees charged by Citibank when using local currency.

It’s worth doing your homework

Ultimately, the take-out for those about to head off overseas, is to do your homework before you go and be wary of traps that can cost you money. Hopefully, there will be continued disruption in the field of FX and providers will be forced to offer consumers more options that make it easier to go overseas and ‘spend like a local’.

 

Marcus Christoe, Head of Banking and Wealth Management Product at Citi Australia, a sponsor of Cuffelinks. This article is general information and does not consider the circumstances of any individual.

For other articles by Citi, see here. You can also view Citi’s guide to FX investing here.

 

8 Comments
BB
July 11, 2019

28 degrees master card has always served me well? No fees and FX conversion at the MasterCard wholesale rate.

Sure, it’s credit and not cash but depending on your destination, that’s unlikely to be an issue.

Gary
July 11, 2019

Agree with Adam's comment about the ING Orange card - I have used it overseas a number of times and not only is it the cheapest way to get local currency, but it also accesses the most favourable rates. If you use it online for any overseas transactions, they also refund any fees (unlike the card I have with one of the 4 big banks!)

Rod
July 11, 2019

Also does not mention the HSBC Global multi-currency acct with debit card. Cheers.

SMSF Trustee
July 11, 2019

And be realistic. How much are you going to actually spend while travelling and how much difference does the exchange rate really make to that?

Most people have paid for or locked in their hotel costs and transport, so we're talking meals and shopping mostly. For every A$1,000 you will spend, a 10% FX rate difference amounts to $100. Is that really enough to make you want to go to all the effort of doing the things this article suggests? Especially when it could just as easily go the other way and become $100 cheaper!

If you answer 'yes, $100 makes a big difference' then the suggestion about buying a bit of foreign currency each week over a few weeks or months before your trip is probably the best risk management strategy for you. Lots of options now, apart from the sponsored suggestion. All the banks have Travel Money cards, so does Qantas and the Post Office, where you can store several currencies.

Another suggestion that I have is this: don't buy too much FX. If you don't spend it and want to convert it back then you'll automatically lose around 10% of your A$ value. Better to buy a little less than you think you'll need and top up on a card during the trip, than having to switch back when you get home.

Irene
August 12, 2019

Agreed with ‘SMSF Trustee’. Unless you are doing backpack travel and not locked or paid your accommodation, transport or tours in advance. I always pay the above in advance before I go overseas, and the cash you need is really minimal.

Adam
July 11, 2019

This article fails to mention the single best way to minimise excess fees when travelling internationally- the ING Orange Everyday bank card.

With a few caveats like having a minimum monthly deposit and needing to make 5x tap and go transactions each month, it will completely refund any and all foreign ATM fees. I can't speak for fx spreads, but if the 2 conditions mentioned above are met the previous month, there is no better way to access cash abroad.

David
August 12, 2019

Preloading a travel card with different currencies usually involves higher fees and bigger spreads. Plus you might as well toss a coin because no one can predict the direction of a currency. Might as well keep the fees low and stick with the rate of the day.

Adam, agree 100% on the ING Account for those debit card transactions and ATM withdrawals, and if you want a credit card, the 28 Degrees MasterCard.

Frank
July 11, 2019

"exchange currency when the rate looks strong."

We're not FX traders. The exchange rate at a point in time is a market equilibrium, how do we know if a currency will rise or fall from that point?

 

Leave a Comment:

RELATED ARTICLES

The merits of holding some cash in US$

Retail FX: the last bastion of no competition?

banner

Most viewed in recent weeks

Simple maths says the AI investment boom ends badly

This AI cycle feels less like a revolution and more like a rerun. Just like fibre in 2000, shale in 2014, and cannabis in 2019, the technology or product is real but the capital cycle will be brutal. Investors beware.

Why we should follow Canada and cut migration

An explosion in low-skilled migration to Australia has depressed wages, killed productivity, and cut rental vacancy rates to near decades-lows. It’s time both sides of politics addressed the issue.

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Retirement income expectations hit new highs

Younger Australians think they’ll need $100k a year in retirement - nearly double what current retirees spend. Expectations are rising fast, but are they realistic or just another case of lifestyle inflation?

Welcome to Firstlinks Edition 627 with weekend update

This week, I got the news that my mother has dementia. It came shortly after my father received the same diagnosis. This is a meditation on getting old and my regrets in not getting my parents’ affairs in order sooner.

  • 4 September 2025

5 charts every retiree must see…

Retirement can be daunting for Australians facing financial uncertainty. Understand your goals, longevity challenges, inflation impacts, market risks, and components of retirement income with these crucial charts.

Latest Updates

Shares

Why the ASX may be more expensive than the US market

On every valuation metric, the US appears significantly more expensive than Australia. However, American companies are also much more profitable than ours, which means the ASX may be more overvalued than most think.

Economy

No one holds the government to account on spending

Government spending is out of control and there's little sign that Labor will curb it. We need enforceable rules on spending and an empowered budget office to ensure governments act responsibly with taxpayers money.

Retirement

Why a traditional retirement may be pushed back 25 years

The idea of stopping work during your sixties is a man-made concept from another age. In a world where many jobs are knowledge based and can be done from anywhere, it may no longer make much sense at all.

Shares

The quiet winners of AI competition

The tech giants are in a money-throwing contest to secure AI supremacy and may fall short of high investor expectations. The companies supplying this arms race could offer a more attractive way to play AI adoption.

Preparing for aged care

Whether for yourself or a family member, it’s never too early to start thinking about aged care. This looks at the best ways to plan ahead, as well as the changes coming to aged care from November 1 this year.

Infrastructure

Renewable energy investment: gloom or boom?

ESG investing has fallen out of favour with many investors, and Trump's anti-green policies haven't helped. Yet, renewables investment is still surging, which could prove a boon for infrastructure companies.

Investing

The enduring wisdom of John Bogle in five quotes

From buying the whole market to controlling emotions, John Bogle’s legendary advice reminds investors that patience, discipline, and low costs are the keys to investment success in any market environment.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.