How to Determine the Best Rate when Changing Foreign Currency

The following is the most method is the one I use personally when it comes to changing foreign currency.

How to know the most ‘reasonable forex rate’

1. Call at least 5 money changers. You can obtain their phone number through Yellow Pages under Money Changers or some other more glamorous names like “Foreign Exchange Brokers”.

2. From there, determine the best rates. You will need to provide them with the following information:

a. the currency that you are changing to

b. what is the selling rate of that currency

c. how much are you changing.

For instance, if I go to Thailand and intend to change RM2000 from Malaysia, I will first ask them what is their selling rate of the Thai baht. Now, currencies like Japanese yen and Thai baht works differently from US dollars. Recently when I called a few money changers, I’ve obtained the following quotes: 10.50, 10.65, 10.45 and 10.40.

To ensure your understanding is correct, you must give them an example and confirm if your understanding is correct:

Like the example above, what they meant by 10.40 is = for every 100 baht they give me, I have to pay RM10.40. If you do not ask carefully, you may have misunderstood (like I first did) that for every RM1, I get 10.40 baht- which is wrong.

So from 10.50, 10.65, 10.45 and 10.40, I realised that 10.40 is the best rate. Now, if you did not ask properly, you may have assumed that 10.65 is the best and risk getting yourself ripped! Also, since I am from Malaysia, I normally check against money changers from Kuala Lumpur (Sg Wang and Wisma Central) area as the reference.

Ask for some small denominations

Regardless of which country you go, you need to bring small denominations for expenses such as cabs, food, water, etc. This is especially going to developing countries- if you buy a bottle of mineral water for 20baht and give the vendor 1000 baht, where do you expect that fella to have change for you? So, remember to ask your money changer to give a part of that in small denominations (not the entire thing as it will be too bulky for you to carry around).

Safety Factor

You may also want to consider safety factor. It is good if you have a regular money changer that you are comfortable with- you will be surprised, if the money changer is located near your office, he can come over and deliver the money. All you need to do is to make arrangements and inform him how much you are changing. After you agree on the rate and time, you can wait for him to show up- normally they will come after 4 or 5pm (their off peak time).

All you need to do is to ask if they provide this service- you will be surprised that some of them do. But of course, before you agree to that money changer, always check up others to confirm the rate.

Previously, we have about 2 money changers near our company who will come up to our building personally to change. With this, you need not carry cash out and risk getting robbed. Normally the money changer will come on motorbike- once, the guy came and took out money from his socks- yikes! But he told me that he had to keep the money in his socks because sometimes, people may target and rob them.

To Change in your country or change in the destination country?

This is totally up to you. If the country you are visiting is the nearby country and you are from US where the currency is recognised worldwide, you can change at the destination country. For me, I normally change in Malaysia because I do not want to be marked when I change money at the airport, which I am normally placed in a vulnerable position since I am also lunging my luggage around. Do note that airport rates are always markedly higher than the money changers in town.

You can also get a rough estimate of your destination country’s exchange rate by googling their bank’s exchange rate (major banks normally publish the rates online). Of course, exchange rate from banks are normally higher than money changers but at least you get an estimate. Nowadays, currencies worldwide are fluctuating up and down- sometimes, you can even get the forex notes cheaper in your home country.

Example, on 13 October 08, I was checking the rate for Thai baht. I called my local money changers and found out the best rate is 10.40 (as given in example above). I compared the rate with Thai Siam Exchange Bank’s website which states that they will buy Malaysian notes at RM1= 9 baht.

Now, let’s compare if I were to change RM2000

Malaysia money changer:  RM10.40= 100 baht. So, RM2000 will give me: 2000/10.40 X 1000= 19230 baht.

Siam Exchange bank (in Thailand)=  RM1= 9 baht. So RM2000 will give me: 2500×9= 18000 baht.

Credit card rates always is least favourable.

If you are overseas, the exchange rate for credit card will be the less favourable to you. The rate will be much higher compared to if you pay cash because of surcharges imposed by your issuing bank and Visa/MasterCard International. And the daily rate is not available or published- so you can stop tormeting your issuing bank to give you the rate- coz they will not know it.

The exchange rate will only be known when the transaction is posted into your account. But one thing I can tell you, the rate is always most expensive. So unless your company will reimbuse you or you don’t mind paying much higher rate so that you need not carry all that cash around, then by all means. Still, you can’t complain much since credit card has the safety and convenience factor that carrying cash will definitely not give you.

Even if you were to withdraw from your ATM card, the rate is normally higher than money changer but better than credit card. And you will need to ask your bank if there is transaction fee charge for withdrawal. Transaction fee are normally charged per withdrawal- so if you attempt to withdraw from the ATM 3 times, you will be charge 3 times the transaction fee.