With international travel and remote work slowly becoming the norm, having the ability to quickly collect and exchange currency has never been more important.
That’s why it’s crucial to understand what currency exchange is and how it all works. This will help you find the best ways to manage your finances.
Looking for a complete currency exchange guide? You’ve found it. Here’s everything you need to know about currency exchanges and about how to exchange money.
What are currency exchanges?
Almost every country in the world has its own unique currency (of course, many EU countries pretty conveniently share the €). This means that when you visit or move to another country, you will need to convert your money to the local currency. This process is called currency exchange.
Banks and currency exchange institutions around the world specialize in this. These exchange departments will keep foreign currency in stock to allow you to exchange your money for the local currency.
How does currency exchange work?
A currency exchange works by taking in one currency and replacing it with another for the same value. Currency exchanges are dependent on two major metrics. The first is the amount of currency you want to exchange, and the second is the exchange rate.
What are exchange rates?
When exchanging one currency for another, the exchange rate is the most important part of the process. The exchange rates are a simple metric that tells you how much of one currency is equal to 1 unit of the other currency.
This works for all currency exchanges around the world. Whether you want to convert EUR to USD or EUR to GBP, the exchange will swap your money according to the exchange rate. This rate constantly changes throughout the day. This means that the exchange rate in the morning is not the same rate you may get in the evening.
This is one of the biggest issues when it comes to exchanging currency. You could potentially exchange all your money before your holiday only to find out that the exchange rate got better for you a few hours later.
What are exchange rate fees?
Exchange rate fees are the added cost that banks and traditional currency exchanges impose on you. This fee is generally added to your bill so that you just receive less of the local currency when you make the exchange.
Different banks and financial institutions have different fee structures. However, most include both a flat rate and a percentage of the currency you wish to exchange.
This means that if you want to exchange $10,000 for €, traditional exchangers may take a flat $10 fee plus 3% of the entire $10,000 sum. This means that you will end up paying $310 just in exchange fees.
How long can exchanging money take?
Exchanging money at traditional currency exchanges can take anything from a couple of minutes to weeks. This is completely dependent on whether they have the currency you’re looking for in stock. Currency exchanges hold foreign currency in stock to exchange, but if they just made a big exchange for someone else, they may not have enough for you.
This means that you would need to wait for more of that currency to be delivered to the bank or financial institution. This process can take days and even weeks if there’s a real shortage of that currency in the market. This will also raise the exchange rate, making things more expensive.
This delay is not just annoying but can also be a real risk. If you don’t manage to exchange your money in time, it can have an effect on your travel plans. This is why instant foreign exchange features are so useful, as they’ll let you travel with confidence, knowing that you can pay anywhere, in any currency.
How can you exchange currencies quickly?
There are a few major ways you can exchange currency. The traditional ways are with your bank or a trusted financial exchange institution. These specialized departments will hold foreign exchange on hand for you so that you can swap your local finances for foreign cash.
While some banks will offer cards that can hold foreign currencies, most of these exchanges deal directly with cash. Either way, you will need to convert your currency for foreign exchange all at once before your trip.
This is why making payments completely electronically is preferred nowadays. With bank accounts like bunq, you’ll be able to pay anywhere in the world without having to worry about the currency exchange. bunq will work in the background to get you the best possible exchange rate, and settle the payment in the local currency for you.
This is a form of instant exchange, as you’ll also benefit from getting the latest and most accurate Mastercard exchange rate with bunq Zero FX. This means that you won’t need to take the risk of exchanging all your money before your trip but can exchange exactly what you need, when you need it.
Exchange money quickly with bunq
Having a bank account that can exchange money instantly can make the entire currency exchange process a lot easier for you. Unlike traditional banks that will charge you a hefty fee every time you want to spend your own money abroad, bunq lets you tap, swipe, and pay in the local currency with no extra exchange fees.
If you want to learn more about bunq and all the benefits that come with it, feel free to view our benefits and plans here.