Finance
Fact-checked

At WiseGEEK, we're committed to delivering accurate, trustworthy information. Our expert-authored content is rigorously fact-checked and sourced from credible authorities. Discover how we uphold the highest standards in providing you with reliable knowledge.

Learn more...

How Do I Get the Best Currency Exchange?

Gregory Hanson
Gregory Hanson

When shopping for the best currency exchange, it is important to focus on both the means used to exchange currency and the timing of the currency exchange transaction. As a general rule, the best currency exchange rates are achieved when currencies are exchanged in extremely high volume by financial institutions at a very high level. Anyone looking to exchange currency should attempt to do so as close to this level as possible. The exchange of currency is a market transaction like any other, and the best currency exchange will take place under market conditions that weaken the currency being purchased and strengthen the currency being sold.

The majority of currency exchange takes place at the level of banks and governments. These institutions exchange large volumes of currency every day and do so at rates which include very little overhead. In many cases, the trick to obtaining the best currency exchange is to do so through a bank or financial institution. Often, this is as simple as getting currency through an ATM in a foreign country or using a credit card to pay for purchases, as the exchange transactions that facilitate these purchases are conducted on a large scale by the financial institutions handling the transactions.

Various types of currency, including US dollars, pounds sterling, and euros.
Various types of currency, including US dollars, pounds sterling, and euros.

Customers who are unable to make use of large financial institutional currency transactions directly are still well-advised to conduct business toward the top of the financial system. Exchanges brokered by banks for their own customers are typically not the best currency exchanges, though they are adequate. In most cases the least desirable form of currency exchange is that which takes place in small neighborhood kiosks. These are ubiquitous in much of the developing world where harder western currencies are used as a means to safeguard value, but they almost always offer poor value.

As with any market transaction, currency transactions are impacted by the forces of supply and demand. The best currency exchange rates will generally be available when supply of the target currency is great and demand for it is weak and when the opposite is true of the currency being used to make the purchase. Many factors affect the global currency market, and these markets are difficult to predict perfectly, but if an investor can reasonably assume that there will be a shift in the relative value of two currencies, that information can be used as the basis for a decision to either purchase immediately or to defer purchasing, as appropriate. While this is not always an option for casual users of the currency market, a well-informed tourist or shopper can obtain a much better rate by following the currency market closely for a period of time before purchasing currency.

Discuss this Article

Post your comments
Login:
Forgot password?
Register:
    • Various types of currency, including US dollars, pounds sterling, and euros.
      By: Joop Hoek
      Various types of currency, including US dollars, pounds sterling, and euros.