There are several myths about international money transfers. Many believe it to be too challenging, too costly, or even too risky. You should be aware of the following common misconceptions about currency exchange:
Making Assumptions on When Currency Values will Fall
The fact is that it’s challenging to tell when a currency’s value will decline. Currency fluctuations can be predicted with a different degree of precision than, say, the seasonal rise in the price of gasoline. Since exchange rates are calculated from a theoretical base rate known as the spot rate, this makes sense. But the real currency exchange rate considers the profit margins that different financial institutions set.
Throughout the day, this pace might change multiple times. As a result, it is challenging to foretell the daily performance of any currency pair. The real value of a currency depends on several things, such as how the market is doing and how the world economy is doing. Even a major financial catastrophe won’t be enough to cause significant currency fluctuations.
However, even an event that seems to be relatively unimportant may produce significant shifts in the value of a currency. Therefore, it is impossible to tell with absolute certainty what the value of a currency will be at any particular moment unless you have a unique knack for generating forecasts that turn out to be accurate.
You Lose Money When You Exchange Currency
Again, this is an incorrect assumption. It may seem counterintuitive to “pay” for the service of exchanging currency rather than “purchase” cash, but remember that this is what you are doing when making a currency exchange. Since you are dealing with money, the initial worth of that cash is what will remain in your memory and give you a false sense of security.
People who claim you lose money while converting currencies suggest that the cash you paid for the service must be returned to you differently. For instance, products are not resold at the same price at which they were first purchased at a shop. The vendor should earn back their investment and then some. Because of this, they have to add a profit margin to break even.
The same idea applies to money changers. They profit by purchasing the currency at the spot rate (the lowest possible rate) and passing that profit on to you. Several things affect these margins, such as how close the business is to customers, how easy it is to get to, and how much competition there is.
All Banks and Credit Unions Offer the Online Rates Posted
Online currency converters may provide inaccurate exchange rates. When you visit a currency bureau or financial institution, you may find that the rate you saw online differs from the one you are provided. Exchange rates alter on a minute-to-minute basis. The exchange rate shown by an online currency converter is valid just in that specific instance. By the time you reach a currency exchange, it will likely have changed.
On the other hand, currency converters that are accessible online will always give the most current conversion rates, while the vast majority of institutions will only update their rates once a day. Because every currency exchange company sets its own margins on spot rates, it is essential to bear in mind that the prices you see online may not be valid at all banks. This is because every currency exchange business decides its own margins on spot rates.
You Can Save Money Using Credit Card
A withdrawal of money or a kind of cash advance is the same thing as buying cash, which is what currency exchange is all about. When you make a purchase with a credit card in order to “buy cash,” interest begins to accrue the moment you make the transaction and continues to do so up until the debt is paid in full.
This purchase will not earn you any loyalty points for the store. Your charges related to the conversion of foreign currency will grow in proportion to the volume of transactions made with your credit card.
The Cost Associated with Currency Exchange is High
In point of fact, international money exchange may often be accomplished at a reasonable cost, especially when compared to other available options such as wire transfers and currency conversion.
People who automatically believe that sending money abroad would be unreasonably expensive sometimes fail to take into consideration all of the charges that may potentially arise along the process. For every international money transfer, for instance, customers of a number of different banks are subjected to an additional fee.
However, several options are available to those who would want to avoid paying such costs. People also think it’s expensive to send money overseas because they don’t know the current exchange rates. If you’re not cautious, you might lose a lot of money due to fluctuations in the exchange rate.
Airport Exchange Rate Kiosks Can Save You Money
Most certainly, you have previously come across one of the many currency exchange counters that can be found at airports. Despite the fact that they say there are no hidden costs, their conversion rate is quite low. Their close proximity to the airport may make it convenient, but this “convenience” comes at a premium price—up to 15% more than the typical rate.
In spite of the fact that currency exchange kiosks in airports are a terrible option, you could be able to locate a real kiosk at your final destination that provides advantageous conversion rates.
