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Money Conversion

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Updated: 10-01-2024 05:49:25 AM

Globalisation has reduced distances among people. People travel all over the world to visit and explore serene and interesting places. In such a scenario, the currency is not an obstacle anymore. All the developed countries and frontline developing countries have their branches and ATMs at all the popular locations across the globe. People can make their full use for accessing cash and performing other banking operations. Money conversion or currency conversion is that medium which allows people to access the currency of the host nation in which they are travelling at the moment.

Money Conversion:

Money conversion is the process of converting a country’s currency to another. People often convert money for foreign trips or making payments to business organisations. It can be done through the bank or a private dealer. In this process, people may receive more or less money depending on the current exchange rates of different currencies.

You can check on the internet for exact conversion rates. However, getting the best conversion rates does not only depend on the exchange rates. It depends on the source from where you are exchanging money too. Both these factors are interrelated and are affected by each other. This is why it is always better to shop around and get the best possible rates.

Money Conversion Process:

Money conversion is a simple process in which you can visit a bank or private currency converter company. Most banks and such companies do not charge a service fee for the process. However, they charge a margin ranging from 50 paise to 1 rupee for exchanging currency. In addition, not all bank branches in the country can convert money. Only designated branches with adequate reserves are allowed to exchange foreign currency.

Things to be Mindful of while Buying Foreign Exchange in India
Section 2

Things to be Mindful of while Buying Foreign Exchange in India

Foreign exchange or currency conversion is a fairly simple process but you need to consider a few points before opting for it. Here is a list of things to be mindful of while buying foreign exchange in India.

  • Compare Exchange Rates: Conversion rates offered by different vendors vary as per their margin. It is always better to compare the rates of at least 5 vendors before choosing one. You should also check online to know the exact conversion rates to find out which dealer is charging the right price from you.
  • Check if the Dealer is RBI Authorised: You have to ensure that your preferred dealer is RBI authorised. Dealers that do not maintain transparency in their processes should not be trusted at all. Moreover, avoid dealing from the outlets located near tourist places. Foreign exchange outlets at such places are not trustworthy and some of those are even fraudulent.
  • Be Careful While Paying the Dealer: You cannot pay more than Rs. 50,000 in cash for currency exchange. However, even if you are paying a lesser amount, prefer wire transfer such as NEFT or RTGS. This is a safe way to make such payments as in the case of a fraud, the payment will direct you straight to the account holder. Such approach makes it easy for you to take legal actions.
  • Exchange the Currency Prior to Your Travel Date: Do not wait for the last moment for currency exchange. Try to get the job done before a week to your trip. Currency rates fluctuate rapidly and it is better to attain optimum rates than to expect a higher rate and wait till the last minute. Last minute changes in your plan might also result in getting lower exchange rates.
  • Do not Exchange from Airport Outlets: Currency exchange from airport outlets is an expensive option as they charge 10% to 15% commission on the amount. This will affect your travel budget as well. Consider this as a last option as this will cost you definitely more than you expect. Exchanging currency from airports will change your travel plans even before you leave.
  • Maintain Cash/Card Ratio: You should estimate the cash requirements for your trip so that you can maintain the reserve money in your forex card. Keeping a 30:70 ratio usually works. You can keep 30% cash in hand and the rest in your forex card. Forex cards also tend to offer better currency rates.
  • Avoid Using Your International Debit/Credit Card: Your international debit/credit card carries currency is INR and using it for cash withdrawals or making payments outside the country attracts mark-up charges up to 5%. These charges are high and will hit you every time you use your domestic card. You should use forex card instead as these cards carry local currencies and do not attract any mark-up at all.
  • Do not Use Traveller’s Cheques: Traveller’s cheques are now becoming a thing of the past. These have been replaced by forex cards as most vendors do not except traveller’s cheques. The vendors who accept traveller’s cheques charge a commission of up to 6% on encashing these cheques.
  • Keep a Spare Travel Card: Since forex cards are there to take care of all your money conversion needs in a foreign country, you can also opt for keeping a spare forex card. Most private currency exchangers do not charge extra money for a spare card. In addition, it is better to have a spare card in the case of a misplaced or lost card.
  • Exchange Leftover Foreign Currency: In India, you cannot keep more than $2,000 as leftover foreign currency. However, if the balance in your leftover card is less than the prescribed limit, you can keep it for future trips as well. Another possible solution is to encash the remaining balance from your dealer.

Prominent private sector banks also offer currency exchange according to current conversion rates. However, their charges vary as per the country. In general, these banks charge 0.5% for most countries but for some, there are no charges at all.

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