Smart Money Habits for Managing Foreign Currency Spending

Key Takeaways

• Use forex apps and travel-friendly cards for better exchange rates.

• Avoid ATM dynamic currency conversion fees by choosing local currency.

• Plan ahead with emergency funds and research local payment practices.

If you’re travelling overseas, you’ll inevitably need money to fund your upcoming trip. But unless you’re travelling domestically, you’ll likely go through a couple of hoops to convert Australian Dollars (AUD) into the currency of your target destination. 

This is, of course, a pretty reasonable course of action. We reckon you’ve likely converted local cash into foreign currency several times in the past through your bank or a money conversion stall. 

There are many other reasons why you’d need foreign currency. Perhaps you’re dealing with an international trader, and they want you to purchase their goods in their currency. Or maybe you’re the one operating the business and are looking to increase your reach and customer base overseas.

With the wide range of reasons to get foreign currency, you may be wondering in the back of your head: Is your current method of converting currency the most optimal way to do it? Are there other ways to manage foreign currency and get the most bang for your buck?

Turns out, there are several ways to strengthen the control you have over your foreign currencies. If you want to manage your spending smartly and most effectively, then you’re in the right place. We’ll give you some smart tips to help you manage your foreign currency like a professional.

Let’s jump right into these tips!

1. Get a Forex App to Manage All Your Currencies

One great way to manage your foreign currencies is by having a dedicated account to oversee all your currencies. 

Typically, with a bank account, you’ll need to create a separate account per currency you wish to store. 

This can work if you’re just dealing with a single foreign currency, as having your local savings account and main foreign savings account within one platform makes it easy to oversee. OFX has listed some of Australia’s best business bank account providers for you to consider.

However, if you’re dealing with multiple currencies on a daily basis, having to juggle between multiple accounts can be a frustrating ordeal. In such cases, having a dedicated Forex platform is the optimal solution, as such an account allows you to manage multiple currencies in a single account. 

Besides having access to an intuitive foreign exchange platform with multiple currencies available for trade, a Forex app account will also provide you with real-time updates on the current exchange rates. 

Furthermore, these platforms tend to have competitive rates and are open 24/7, granting a high level of accessibility for all Aussies interested in entering the Forex market.

2. Get A Travel-Friendly Debit and Credit Card

Another smart way to make the most out of your foreign currency is by using a travel-friendly debit and credit card. 

Some credit cards can incur extra fees when purchasing an item priced at a foreign rate. Moreover, some debit cards convert withdrawals at a higher rate than others when you use them in another country or with a foreign ATM provider.

These fees can increase your overall spending and make your bank account drain more quickly than if you used a more travel-friendly card. As such, always prioritise using a travel-friendly card when shopping or redeeming rewards in a foreign country.

One sign of a good credit card to use while travelling is one with a miles or travel rewards program. The ANZ Frequent Flyer Platinum and Citi Premier Card are both excellent choices and can help you get great deals if you prove to have an excellent payment schedule.

For frequent travellers, a travel-friendly credit card or debit card can be a great way to spend less (due to the lower conversion rate) while accumulating perks to enjoy travel more. 

It’s a win-win situation, making it a perfect card to have around while on the go, as you don’t have to worry about high foreign transaction fees.

3. Avoid Letting the ATM Convert Your Currency

Here’s a pro tip when dealing with foreign ATMs: When the machine asks you if you want to be charged in the local currency, say “YES” every time. Don’t choose to be charged in AUD, or your bank’s home currency.

ATMs use dynamic currency conversion to inflate their exchange rate. The machine usually inflates the currency higher than the local currency’s value, leading you to withdraw a higher amount than you would’ve otherwise gotten with a local currency deposit.

Instead, stick with the local currency always. This way, you won’t let the ATM operator get a cut from your savings or pay for extra hidden fees. More often than not, your Aussie bank or debit card will provide you with a fairer rate when withdrawing from an ATM overseas.

4. Pay Attention to Time Zone and Potential Delays

When managing foreign currency, it’s important to get things done sooner rather than later. This includes making payments or closing deals. 

Time zones can play a big role in influencing the processing speed of the payments made through foreign currency. 

For instance, it may be working hours in your country, but if the receiving country’s time is past bedtime, then it may take a couple more hours for the receiving end to verify your transfer. 

Furthermore, some banks may also close at certain times, like during holidays and weekends abroad, so be aware of these timing differences when timing your forex transfer. 

This way, you can stay on top of time-sensitive purchases and ensure that the operations are smooth and the customers are happy.

5. Keep Emergency Funds in Local Currency

When travelling overseas, it’s important to have a stash of cash ready for use in case of emergencies. 

Avoid dipping into this stash for impulsive buys or non-essential spending; this emergency fund should be used responsibly, like to cover emergency transportation, medical bills, or pharmaceutical medicine.

Moreover, it’s important to have this currency in your target country’s currency from the start. It’s best to convert it right away when you touch down at the country’s airport so that you can use it immediately.

If that isn’t possible, another alternative is to have emergency funds in USD. This way, you can assuredly find a money exchange stall that will accept that currency when you’re travelling around the city.

Securing an emergency fund is critical to ensure that you don’t end up penniless in a foreign country. 

Ideally, you should secure at least $100 worth of emergency funds in your bag before heading out to your target destination—it doesn’t have to be inside your wallet. This ensures that you’ll have a contingency plan in case you misplace your main wallet.

6. Research Payment Norms Overseas Ahead of Time

Before spending foreign currency abroad, it’s a good idea to familiarise yourself with the standard way locals pay for things. 

For instance, you should know whether local businesses include taxes or service charges in the price tag or if they’re only added in the final receipt.

You should also be familiar with whether your target country has a tipping culture. For instance, Japan doesn’t have one, but the US does. You can then factor that into your overall budget so that you’ll know how much you’ll likely be spending per day.

Furthermore, you should also figure out if you can get VAT refunds for purchases made abroad. Usually, places like Singapore and South Korea offer this, so if you want to gain a bit of your spending back, then try to take advantage of this benefit to ensure that you’re not overspending.

We hope these tips will serve you well when you’re dealing with foreign currency. All the best!