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What would be the best way to convert United States dollars to Australian dollars? Is it better if I visit my local bank? Or is it better to exchange at the airport?

If airports are better which ones amongst Birmingham (BHM), Dallas and Brisbane?

Usage of best and better directly relates to paying least amount of various bank fees and to get more money in my pocket.

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This question gets asked frequently for various different pairs of currencies. A good set of answers can be found here: travel.stackexchange.com/questions/110/… –  Greg Hewgill Jan 23 at 2:22
    
The best is to find some Aussie tourists or expats who have some AUD they want to get rid of. I would imagine you'd have a little more luck finding an Aussie in Texas than in Alabama. Possibly via a Facebook or CouchSurfing group, etc. Or when you're in the various airports look for travellers with Australian flags or other hints of Aussieness on their backpacks/clothing/etc. Then just offer to change at current official rates and it's a win/win. –  hippietrail Jan 25 at 16:19

3 Answers 3

You can usually get the best exchange rates when withdrawing from an ATM once you are in the country.

However, this depends a lot on your bank. Many bank charge a exchange fee (often less than 5$). This is less of a problem if you withdraw larger amounts (5$ for a 50$ withdrawal is much less than 5$ of a 1000$ withdrawal).

Some banks even charge a percentage of the amount, so in that case exchanging cash might actually be cheaper.

So the first thing you should do is check with your bank, how much they will charge you.

It is hard to tell where exchanging cash is cheapest. Airports tend to have very bad rates almost all over the world. It's usually much cheaper to exchange in the city.

I know that in Australia banks give you very bad rates as well. It's much cheaper to find some small exchange stall in the city centre. While they might look somewhat dodgy, they seem to have the best rates around.

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Don't forget the non-customer ATM fee the OP will likely be slapped with. Luckily they will be prompted to this on screen before proceeding (this is a legal requirement). I don't think I've ever seen an ATM for a global bank (e.g. Citibank, HSBC) at an airport. OP - I'd get some AUD at home before leaving, so you don't box yourself into a situation where you're forced to accept crazy fees/rates because you desperately need cash. –  Sam Jan 24 at 3:05
    
This fee seems rather rare in most countries. Banks in Australia usually don't charge it, and neither do most ATMs at the airport. The ATMs in 7-11 will charge 2.50$ though. –  MrTweek Jan 24 at 5:11
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I'm pretty sure banks in Australia do (unless it has changed recently), e.g. if I use a Westpac card in a CBA ATM, CBA will charge a fee. It is a fee levied by the ATM owner, not the bank the card belongs to. It is usually AUD$2.20 per transaction. I don't know if this applies to foreign cards, but I'd assume it does. I've also been charged similar fees in the US and Canada. –  Sam Jan 24 at 9:12
    
The fee is charged by the ATM owner to your bank, not to you. Whether your bank charges you anything is solely their choice. I have got a foreign visa card with that I can withdraw money for free from any major bank in Australia. 7-11s ATMs are the only ones I found that charged me an additional fee (which is beyond my banks control). –  MrTweek Jan 27 at 11:18

Airports are generally bad. Many larger international airports (including Australian ones) are dominated by T------X whose rates are usually about as bad as any.
Another 'big player' often visible is W------U---- who also usually have rates inferior to most alternatives.

In Asia transactions are generally, by law, based solely on the offered exchange rate. Australia allows service fees to be charged and these can add significantly to the effective rate charged. I've seen people losing over 50% of their money when exchanging small amounts at airports in order to buy food and drink. I've personally been offered less than 50% of my money by one of the above traders at an Australian airport. The offer was not accepted.

I tend to carry a largish wad of cash in my own currency [if allowed by the target country] and convert it at a good rate post arrival. I also preload a VISA account with cash and use that in foreign ATM machines. ATM withdrawals are usually at an unspecified exchange rate plus a flat fee per transaction so withdrawing as large an amount as convenient per transaction minimises the % cost of this fee. [Usually $5 in my currency (about $4 US)].

I do not know how small Australian 'side street' vendors compare but in eg Hong Kong I can get rates within about 0.5% of the current exchange rate in (fully legitimate) uptown sidestreet establishments, or more like 5% from large vendors downtown on Nathan Road.

A good quick way to see what % a vendor is making on the deal (exclusive of fees) is to divide half the difference between their buy and sell rates by the lower rate. (This is rough enough that, for fair rates, dividing by the higher rate or the mean also gives a "close enough" answer.)
eg if a vendor offers exchange rates of 75 and 85 patsrugi per quark then the difference is (85-75) = 10 so half the difference is 5.
5/75 or 5/85 is about 6% buy or sell. (5/75 = 6.7% and 5/85 = 5.9%)

It is common to see vendors offering around +/- 5% on some currencies but more like +/- 15% on a select few. It is not always obvious that there is any good reason to offer such terrible rates to the few, except because they can. I've noted that T--- seems to do this for some small Pacific Island nations whose currency and governments are stable. [Some very rude people have been known to loudly & publicly accuse airport vendors of racist treatment of certain minority groups when such punitive rates are offered at airports, but none of us know such loud mouthed people, do we ? :-) [[I know you don't set the rates, but your company appears to be racist. The rate for ...]] ].


Related:

ATM precautions:
If using ATM machines far from home be as careful as possible not to have the card retained by the machine. Try to be sure that they offer service for the card used (eg VISA). Some don't and there can be foyers with ATMs from a range of banks, and even the same bank may have several machines, not all of which are eg VIS capable. If a transaction fails on the first attempt, consider moving on to a different bank's machine immediately. You usually get two failed attempts with the card often enough being 'swallowed' on the 3rd failed try - but I recently had a VISA card retained in my local international airport on the 2nd attempt (not even a formally failed one) when attempting to activate a brand new card prior to leaving the country. Carrying a second card from the same account can be wise if achievable. Carrying cards from two accounts is also useful. Even if an ATM card is lost or damaged you can usually carry out online transactions and money transfers using 'internet banking' if you have all card details (including the security code).

Internet banking security: Offering your banking details to an internet terminal in an unknown cafe in a far off country is an act of faith. So far over 'quite a few' journeys the faith has not been broken. I have had my gmail access hijacked after transiting Hong Kong airport (someone with a WiFi sniffer or a dummy front to a "free internet" account?) but I was able to recover it with Google's useful password recovery system. They now optionally offer a login by login sms text confirmation service. This is annoying but useful as long as you can be sure of having SMS service available when you are travelling through outer-nowhere. If they have internet access you can hope they have cellphone coverage as well. You can hope :-).


Offered and actual exchange rates:
Assuming that vendors offer buy and sell rates that are and equal percent difference either side of the true rate then true rate is about sqrt(buy x sell). So in the 75/85 case the true exchange rate is liable to be about sqrt(75 x 85) = 79.8%. Actual raw profit is then (79.8 - 75)/79.8 = 6% or (85-79.8)/79.8 = 6.5%
They'd probably shift those rates oneway or other depending on relative traffic flows, [perceived risk, degree of hedging and other secondary factors.

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Some thoughts on why there are different rates for different currencies: Trading a stable currency is less risky than trading an unstable one that might lose 10% of value in 3 days. Trading a commonly used currency is less risky than a rare one as there is a fair chance that you will sell what you bought on the same day and thus make money from it quickly, while you might need to hold onto a rare currency for a couple of weeks until you can sell it again and the rate might fall in that time. –  MrTweek Jan 24 at 1:41
    
"In Asia" ... "by law" - really? So Bangladesh, Brunei, Burma, Cambodia, China, India, Indonesia, Japan, Korea, Laos, Malaysia, Mongolia, Nepal, Pakistan, Philippines, Taiwan, Thailand, Vietnam just mostly came to some legal agreement about these fees? It sounds too monumental to just believe without some evidence. –  hippietrail Feb 18 at 3:42
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@hippietrail - " ... are generally ..." and other weasel words :-). Our 'man on the ground' / much more widely experienced traveller than I [that's you :-) ], and other rapporteurs, are liable to be able to provide individual examples to confirm or deny this sweeping generalisation. | Off the top of my head (as it were) I think it (probably) applies in China (mainland), Hong Kong, Malaysia, Singapore, Brunei, Indonesia. I should be able to add personal experiences for India and maybe Nepal shortly. | I think the "just mostly came to some agreement" may in fact be closer to reality .... –  Russell McMahon Feb 19 at 4:22
    
... than seems likely at first glance. Countries with a somewhat common financial ethos in the same general region may well use a common 'platform' to agree on such things, if they decide it's useful to do so. Could be APEC, ASEAN,... or some subset thereof. In fact ASEAN matches your list quite well - Indonesia, Malaysia, the Philippines, Singapore, Brunei, Burma, Cambodia, Laos, Vietnam. | You could also muse re SAARC, BIMSTEC, MGC, ECO, TC SCO, ACD, GCC. And yes, I cheated. I got that list here :-) –  Russell McMahon Feb 19 at 4:30
    
Also another involving India Pakistan Bangladesh Maldives Sri Lanka Myanmar - name escapes me. (It was on my Indian visa application but until then unknown to me. ) –  Russell McMahon Feb 19 at 4:34

ATM withdrawals would incur a conversion fee + local bank fee+ (3%)transaction charge! The best way I found was to transfer money using an online service provider (xoom.com) Their rates were much better than what any of the banks offered. I did not have an Australian bank account before I traveled so I inquired and found that AAA had limited currency for a very bad rate and that AUD was not a favorite currency of many banks. My bank (WF) gave a pretty decent conversion rate and overnight-ed the currency for free.

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+1 I have no idea why anyone would downvote that. Not complete advice but sounds a useful addition. (Mine is also incomplete and not certain to be correct in all aspects) –  Russell McMahon Feb 19 at 4:22

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