Living abroad temporarily: cheapest way to deal with currency exchange?

July 13, 2015 4:18 AM

I'm living abroad temporarily and need advice for dealing with currency exchange in the cheapest way (withdrawing from ATMs, making card purchases, and paying rent).

I'm an American living abroad (Australia) temporarily and trying to figure out the best way to deal with currency exchange.

Some relevant info:
- My US bank account has ATMs here and I can use these ATMs without paying a fee.
- I have an Australian bank account but it's empty at the moment. It has a debit card associated with it.
- I have a US credit card that doesn't charge a foreign transaction fee. It gives me 1% cash back on all purchases.

I'm trying to figure out the best (cheapest) way to do the following:
- get cash from ATMs
- pay for things via credit/debit card
- pay rent

I can wire money into my Australian bank account using OzForex and then withdraw cash from that account at ATMs, use the associated debit card for card purchases, and pay rent via bank-to-bank transfer. I will get the OzForex exchange rate which is supposedly better than bank rates, though I don't know how much better, but I won't get 1% cash back on card purchases like I would with my US credit card, and when I return to the US I'll have to transfer the contents of my bank account back to USD again which will come at a loss.

OR

I can withdraw cash from my US bank's ATMs, use my US credit card for card purchases, and pay rent via OzForex transfer to my landlord's bank account, and leave my Australian bank account untouched the whole time.

OR

I can do some combination of the above.

I have no idea how much difference these options make. I'm also unsure if using an Australian bank account/debit card for everything will be so much easier/more convenient that it will outweigh any cost. Thanks for any advice; I'm obviously new to this.

posted by whitelily to Work & Money (8 answers total)

It's not the fees, but the exchange rate which you are charged that picks your pocket.

This is a sucker's game so the best way to maximise your position is to not expose yourself to the risks of currency exchange more times than you have to. (The rule of thumb when you want maximise your chances of winning at roulette: Put it all on black.)

My experience is that the best way to deal with currency exchange is by cash wire transfer. You can check exchange rates daily and when you're at a local maximum, make a large transaction from your foreign bank to a local account. Pay your bills and take cash out from ATMs using a local bank account.
posted by three blind mice at 4:35 AM on July 13, 2015 [1 favorite]

How long is temporary? Given the exchange rate between US and AUD right now, using your US account to pay for most things will make sense for now; if you're here for more than a few weeks, then transferring will make more sense.

PayPal and bank transfers are much more used (in my experience) in Australia than in the US, and you'll likely need money in your bank account to pay rent (unless you're in a shared house situation).

When I had to make this decision (4 years ago, from CAD to AUD, your mileage will definitely vary) OzForex was the best option.
posted by third word on a random page at 4:36 AM on July 13, 2015

Response by poster: How long is temporary?
6 months.

you'll likely need money in your bank account to pay rent
My landlord is ok with either Australian bank-to-bank transfer or a wire from the US.
posted by whitelily at 4:48 AM on July 13, 2015

I'm pretty sure you don't want to do multiple transfers every time you need to pay rent.

I've used OzForex before and they're better than the banks, but lately I've used CurrencyFair - basically peer-to-peer money transfer. There's a person in Australia who needs USD in a US account, so you put your USD into their US account and they put their AUD into your AU account. It works out much cheaper than other options, but I've only used it once so far.

If you did that once or twice with a big sum, you could pay rent from there (and use it for ATM withdrawals when you couldn't find your own bank), and then use your US credit cards wherever possible otherwise.
posted by twirlypen at 5:28 AM on July 13, 2015 [2 favorites]

I second CurrencyFair! I use it all the time to send EUR back to Australia and I reliably get great rates. I've also had really good customer service from those guys, too. CURRENCYFAIR!
posted by nerdfish at 5:33 AM on July 13, 2015

To agree with the previous replies, aim for a small number of big transfers from USD to AUD. Trying to game the exchange rate is more trouble than its worth.

One additional tip however: if you use your USD card at an ATM, you may find that it offers to apply the exchange rate itself ("you can have the money at _this_ exchange rate or at some unknown exchange rate"); in my experience the exchange rates suggested by the ATM can be horribly in the bank's favour - always go for the "unknown" exchange rate.

You may also find something similar when paying by card in shops; they will offer to let you pay in USD but, again, in my experience it is better to pay in the local currency.
posted by oclipa at 5:55 AM on July 13, 2015

Response by poster: Thanks everyone. I'm confused about something: I thought the currency conversion cost was a percentage of the amount, meaning that a bunch of small transactions will incur the same hit overall as one big transaction. But you're all telling me that I'll save with one big transaction, which leads me to believe I've got this wrong. Can someone clarify?
posted by whitelily at 4:25 PM on July 13, 2015

There can be fixed fees associated with the currency conversion, so, unless you have complete confidence no fees are involved, it is "safer" to a do a single big transaction rather than multiple small ones.
posted by oclipa at 5:19 AM on July 15, 2015