While the intricacies of foreign currency may not seem like a priority when you travel, it “pays” to understand the importance of exchange rates. Without a basic understanding, you can end up with less spending money on your trip.

Foreign currency and exchange rates aren’t the same thing, but exchange rates are the most common factor travelers deal with. Here’s what you should know before your next trip abroad.

What You Should Know About Foreign Currency When You Travel

Every foreign currency has a different value. Depending on a country’s economy, trade, and market factors, the value of its currency will rise or fall. Because of this, exchange rates are constantly changing, and banks or currency exchange offices must calculate a fair rate when you exchange money.

How This Affects Your Travel Plans

Understanding exchange rates helps you protect the value of your travel budget. If one U.S. dollar is worth less abroad, you’ll need to adjust your spending. On the flip side, knowing how to maximize exchange rates can help you get the most value for your money.

What is a Foreign Exchange Rate?

A foreign exchange rate is the value between two different currencies. For example, if the exchange rate for one U.S. dollar in Thailand is 35 baht, you’ll receive 35 baht for every dollar exchanged.

Most exchange rates are “flexible,” meaning they rise or fall based on market activity. Rates are regulated by the global foreign exchange (forex) market, which reflects daily trading activity.

How to Calculate Exchange Rates

Calculating exchange rates is simpler than it looks. For example, if you have $10 and the Euro exchange rate is 0.82, multiply 10 x 0.82 to see you’ll get €8.20. You can also use online tools or apps for quick conversions.

Best Apps for Managing Foreign Currency

1. XE Currency Exchange – One of the most popular currency apps for travelers. XE Currency lets you quickly calculate exchange rates and even works offline with saved rates.
2. Amount – A lightweight, real-time currency converter with an easy-to-use interface. Great for keeping quick track of conversions while on the go.

Quick Tips for Handling Foreign Currency

• Avoid Airport Kiosks: Exchange rates at airport kiosks are often worse because of convenience markups. Use banks or ATMs instead.
• Use ATMs: Withdrawing cash abroad often provides better rates than currency exchange counters.
• Pay in Local Currency: When using a credit or debit card, always choose to pay in the local currency for better rates (if your bank doesn’t charge high foreign transaction fees).
• Carry Some Local Cash: Buy a small amount of local currency from your bank before traveling to avoid exchanging money at poor rates upon arrival.

Understanding foreign currency doesn’t have to be complicated. With a little preparation and the right apps, you can make the most of your travel budget and avoid costly mistakes with exchange rates.