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Best way to change currency

discojam
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Best way to change currency

I'm travelling to South Africa for two weeks in March, I've been told by my friends out there that I would be better to change my GPB to Rands when I get out there as the exchange rate will be better and I just wanted to ask for some more opinions. I have seen that the exhange rate here in the UK has gone from about 11.5 rands to the pound to 10.7 in the past few days and just want to be sure that I'm best off waiting till I'm out there to exchange or to do it here tomorrow in case the rate falls further?

Just to tell you a bit about my trip I'll be flying into Johannesburg, then going to Sandton for a couple of nights, then we will be heading up to Nelspruit and staying in a retreat for 4 days, then hopefully going to Sun City for a night and the Kruger National Park for a couple of nights having a safari there.

I am SO SO excited to be visiting South Africa and cant believe I'm really going!!

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Mpumalanga, South Africa
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Leicester, United...
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1. Re: Best way to change currency

On a given day you will generally [always ?] get a better, much better, rate using an ATM in South Africa than exchanging pounds for Rand in UK. What you don't know is whether the future rate will work for or against you.

Often the rates are so bad in UK that it would take quite a swing against you to make it worthwhile taking Rand.

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discojam
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2. Re: Best way to change currency

Thank you for your reply Tony, I've just called my bank to let them know that I will be going abroad so they don't put a stop on my card while I'm away. I was thinking about taking my spending money out there in cash (£) so I don't get charged for withdrawing from an ATM, would going to a bank out there and exchanging my pounds to rands still give me as good a rate?

Thank you again!

Pickering, United...
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3. Re: Best way to change currency

"I was thinking about taking my spending money out there in cash (£) so I don't get charged for withdrawing from an ATM, would going to a bank out there and exchanging my pounds to rands still give me as good a rate?"

in short - no. Check your card charges. However, they would generally have to be much higher that the couple of % usually charged in order for you to worry. When you exchange money you get the tourist rate. Your card provider gives you access to more favourable commercial rates. The latest interbank rate was 11.2 ZAR to the £ when I checked. M&S were offering 10.5 at the same point in time! No such thing as a commission free transaction, they just give you a lower rate so that they still make their money.

As for taking cash - a few problems. You wouldn't want to waste time in a bank changing it. Bureaucracy is alive and well! Secondly, you would still get the paltry tourist rate (even if it was a bit better than here, but i doubt it would be hugely different). Thirdly, carrying wads of cash is a bit of a security issue (particularly if you're swimming!).

Who can predict rates? They're quite good at the moment. Who knows if there will be drastic changes in the next couple of weeks - my crystal ball isn't doing too well at the moment!

discojam
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4. Re: Best way to change currency

in short - no. Check your card charges. However, they would generally have to be much higher that the couple of % usually charged in order for you to worry. When you exchange money you get the tourist rate. Your card provider gives you access to more favourable commercial rates. The latest interbank rate was 11.2 ZAR to the £ when I checked. M&S were offering 10.5 at the same point in time! No such thing as a commission free transaction, they just give you a lower rate so that they still make their money.

As for taking cash - a few problems. You wouldn't want to waste time in a bank changing it. Bureaucracy is alive and well! Secondly, you would still get the paltry tourist rate (even if it was a bit better than here, but i doubt it would be hugely different). Thirdly, carrying wads of cash is a bit of a security issue (particularly if you're swimming!).

Who can predict rates? They're quite good at the moment. Who knows if there will be drastic changes in the next couple of weeks - my crystal ball isn't doing too well at the moment!

Thank you for your reply Safarifiend, I hadnt realised that about interbank rates and will check what my bank charges when withdrawing abroad. You make a good point about commisson free transactions - that makes sense!

Wanted to make sure I was getting the most out of the money I'd saved up for my trip and if that crystal ball starts working again let me know ;)

thank you again!

Cape Town, South...
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5. Re: Best way to change currency

I think you have all got this wrong. I go to South Africa often where in the past have drawn with my Natwest card at South African ATMs. I quizzed my bank manager two weeks ago when the rand was briefly 11.7 to the pound:

I said:

"Hypothetically, if I were in SA today and drew money, at what rate would I be able to draw it at?" "10.99 to the pound" was the answer. I was shocked and said that as the rate offered is so much lower than the exchange rate for any particular day, I assumed there was no charge. There is a charge I found out in addition to the lousy exchange rate; 2.5% with a £4 maximum charge.

Maybe other British banks are different, but I exchanged £200 near Hammersmith tube station and got offered a rate of 11.3 to the £ (this was 2 weeks ago when the rate was 11.7). There is also a good one somewhere in Notting Hill that is offering 11.1 (as of Saturday). The rate was 11.32 that day..

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Cape Town
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6. Re: Best way to change currency

First of all using the past week as a reference for changing money you need to be very careful. The pound has seen a rapid fall during this week, on the spot rate, from a peak of 11.83 to a low of 11.19. Some of this fall was in quick bursts which took place over periods of 10 or 15 minutes. So exactly the time that a transaction took place would have a big bearing on the rate used.

Then did you change money in the offices that quoted 11.3 or 11.1? In Exchange Bureaux the “Headline Rate” that they show in the Window is usually never the actual rate you get. On the Window Board in small letters it will often say “Commission Rates Apply”. Often subtracts 2 or 3 percent from what you get! As safarifiend points out places that advertise "Commission Free" usually give you a poorer rate - same thing different name!

That said changing money through an ATM – although generally the best option – depends completely on what your local Bank Charges. This varies significantly with Banks like NatWest giving a very poor deal!

Maybe I should re-post an explanation of ATM exchange charges that I made on here a week or two ago (updated with current rate) :

The very best rate that you can get, in either South Africa or the UK, at anytime, is the Spot Interbank rate. This is the rate for transactions of many millions of pounds between banks. This is the core rate against which every other rate is calculated. It is adjusted every few seconds and quoted on many websites such as the BBC. Right now (well abut 30 seconds ago!) it was posted as 11.30410.

If your card, Credit or Debit, is branded Visa or Mastercard, the Visa or Mastercard corporation handles the foreign exchange transaction – not the local bank. So the exchange rate through an ATM is the same at any point, wherever you do the transaction. The current Visa Interbank rate is 11.238125. This 0.6 percent difference is what Visa corporation makes it’s profit from. Remember that they are handling millions of pounds worldwide every few minutes! Visa Interbank is the base rate applied to all Visa transactions via Debit Card, ATM or Credit Card.

The local South African banks apply nothing on top of this for direct card transactions or ATM withdrawals. You request say R2,000 using your debit card – you get R2,000 not a cent less! The only charges are then applied by your Bank or Card issuer in the UK against the Visa core rate. This commission ranges from zero, with a few UK Credit/Debit Cards such as Halifax Clarity CC, Santander Zero CC or Metro Bank Debit/ATM card. Through one percent with Nationwide CC or Debit Card (but 2 percent for ATM withdrawals). Most UK Banks charge between 2.75 and 4 percent for Debit Card/ATM transactions. Some of them sneak a fixed charge between £1 and £4 on top of this!

Remember that also most Credit Cards will charge interest on Cash Withdrawals (at home or abroad) on ATM cash withdrawals right from the day of withdrawal. So best to use your Debit Card for ATM cash and your Credit Card for everything else.”

I have a UK account which I recently changed from Nationwide, as they dropped charge free withdrawals, to Metro Bank. I change Sterling to Rand a few times every week, and have done so for nearly ten years. Using Metro Bank, which charges only the MasterCard 0.6 percent against spot rate with NO additional charges, saves me hundreds of pounds a year compared to any other way of doing things. Even transferring big sums of several thousand pounds by SWIFT Bank to Bank transfer costs me typically 1.5 percent – I get charged locally as well as in the UK.

On holiday it doesn’t make such a big difference but, If you travel frequently, it is still worthwhile opening a UK account with minimal charges. Metro Bank is currently best (if you can get to London to open an account) but Norwich and Peterborough is also a new, no charge option but you need to keep a minimum balance.

For further discussion see :

moneysavingexpert.com/travel/…halifax

Edited: 28 February 2011, 06:31
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discojam
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7. Re: Best way to change currency

Thank you for your replies!

Graham5000 that does sound like a good rate, unfortunately I'm limited to the places I can get to due to work did you pre order to get that rate?

Van_de_Caab

I had been doing some googling after posting here and read the MSE info about cards but wont have time to get one before I go, I also came across your post when searching for info about interbank rates :) I have checked what my bank charges for foreign transactions and it says this:

Foreign transaction fee (applied to any card

transaction in a currency other than sterling)

2.75% of value of transaction

Which seems to be quite high!?

Is the interbank rate the same between all banks or does it differ?

Thank you!

Cape Town, South...
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8. Re: Best way to change currency

My place I use in Hammersmith that offered me 11.3 the other day does not charge commission - I calculated in advance what I thought I would get as I know many of these places are subtle with their charges. The one in Notting Hill I cannot remember the name of but it is on the corner of Portobello road and the main road and is not a well known name

Cape Town
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9. Re: Best way to change currency

Hi Graham

When you calculate it the Hammersmith office is charging the difference between 11.7 and 11.3 (approx rates) which is 3.5%. I agree that this is very low for an Exchange Bureau, who normally charge around 5%, but higher than most bank ATM total charges - 2.75% is the norm as discojam mentions. Not as high as NatWest though!

The "Notting Hill" office rates and charges were not verified but maybe you could check? I would be very surprised if total charges were less than 3.5%.

But then, if you are in Hammersmith you are in the heart of Metro Bank country! Offices in Cromwell Road and Fulham Broadway. Just call in and open an account. Takes less than 45 mins total - including getting all you cards printed ready to go. And you get a cup of coffee! Then you are only charged MasterCard's 0.6% against the Spot Rate from an ATM anywhere in the world. In South Africa, if the Spot Rate is 11.7, at that minute you get 11.63. You can use your account just for forex if you want - or for anything else. It's a full current account. Unlike some other accounts, you have no minimum deposit or monthly spend requirement and no charges.

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Pickering, United...
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10. Re: Best way to change currency

Graham, you lucky man! I live in the wilds of North Yorkshire so don't have the option to visit places like you have mentioned (shame, eh). So it's back to researching the best card for this year's travels . . .