- Flight & hotel bookings. CHECK.
- Visa & passport. CHECK.
- Bags packed. CHECK
- Foreign currency/Foreign exchange (Forex)…?
Some might have already bought their forex while few might opt to buy it last minute from the airport. While it’s absolutely okay for you to buy forex from an airport, financially speaking it’s a HUGE faux pas. Exchange rates at airports are much higher compared to rates offered by banks, money changers, and online platforms.
Buying forex from banks is a better option than airports, whose margins on forex transactions are between 16%-18%. Banks, on the other hand, keep margins from 2.5%-3.5% only.
So it’s much cheaper but not the cheapest and most convenient method. Banks charge a slightly higher rate than money changers & online platforms. To buy forex from banks you need to first locate the bank branch that sells forex because not all branches are authorized for this. And you need to visit the bank branch during specified hours to buy forex.
#2. Money changers
Money changers (like Thomas Cook, Centrum) are organizations or individuals whose routine business is to exchange one currency for another. Although buying your forex from them might not be as cheap as an online platform, it’s cheaper than buying forex from banks and airports. Apart from offering better rates, money changers function for longer hours than banks.
#3. Online platforms
Nowadays, you can buy and sell foreign currency online through platforms like bookmyforex.com, fxkart.com, etc. These online marketplaces offer forex or forex-related services (like international transfers, currency notes, prepaid travel cards, traveller’s cheques, foreign currency demand drafts, wire transfers) to individuals at a much cheaper rate (margins of 0.5%) than banks, money changers, travel agents etc. These platforms work like aggregators that collect data from money changers and banks in your locality and based on this data they offer the cheapest rate available.
Here’s how it works: A customer places an order for a certain amount of a certain currency, at that moment at the back-end of these platforms money exchangers bid their prices, and who quotes the cheapest price gets displayed for the customer to buy at that price.
Still confused? Think of it like the Google Maps of forex. Just how Google Maps would tell you the fastest route to a destination depending on the traffic, these platforms give you the cheapest rate at which you can buy forex depending on data it collects.
Even though buying forex online is the cheapest, you must be careful and do thorough research on the provider.
Apart from the above methods, there are travel agents that sell forex as well. Most of these are not authorized to sell them so it’s not a safe idea and they keep very high margins. People generally opt for this option because travel agents accept hard cash and don’t demand bank transfers or cheques.
Here’s a quick snapshot of forex rates from different channels:
Foreign exchange rates change constantly every second based on demand and supply. So before buying compare rates across all these platforms and then select your channel.