Can I Use My Money in a Different Country?
There are nearly 200 different currencies in the world, and with both global business and international travel more accessible than ever, understanding exchange rates and how far your money goes in a foreign country can be helpful. Between exchanging cash at airport kiosks, credit cards, and online bank transfers, there are many ways to pay for things in our world economy, and in some cases, even use your home country's currency in a foreign country as well. From the U.S. dollar to the South Sudanese pound, foreign exchange rates can vary greatly and change by the second.
Why different currencies?
Every country in the world has a unique economic situation. Typically, the more economic success and stability a country has combined with how in-demand its money is can create a more favorable value of its currency. This will impact not only the amount of money a product or service costs somewhere but also how much the currency is worth when compared to others. It can also affect things like the average salary for workers, and the cost of importing and exporting goods. That's why most countries issue their own currencies, so they have more control over its value (and their economy by extension).
For a traveler, knowing the differences in currencies may help a tourist decide which country to visit because of a powerful exchange rate, where their money will go farther and lead to more experiences while traveling abroad. For a businessperson, understanding different currencies is an important consideration when negotiating prices for clients in foreign countries, understanding what is realistic for them to pay and what isn't.
Understanding currency conversions and exchange rates
An important factor of different currencies is that a nation's monetary value can change by the second, making it impossible to memorize a conversion and assuming it will stay that way. In order to get accurate, up-to-date currency exchange rates, there are many phone applications and websites that work as currency converters, updating values as they happen in real-time. Normally, the rates won't change drastically in a given day, but over time, due to a nation's political and economic situation, could impact expectations of what your home country's money is worth on a global scale.
Currencies can often have the same root name such as pesos, dollars, or pounds, but when searching for currency exchange rates, it's important to use its more specific name. For example, referring to different currencies in their full names like Mexican Pesos or Colombian Pesos to eliminate any confusion. Also, keep in mind that these names are often abbreviated to acronyms like "USD" for U.S. dollars or "CLP" for the Chilean peso.
When you can use your local currency abroad
Depending on your home country's currency, there are some instances where it's possible to use it in another country without exchanging it for the local currency of the country you're visiting. Sometimes, several countries can share the same currency due to political reasons. For example, all 19 countries in Europe's Eurozone use the same currency, the Euro, integrating their economies in this unique way. There's also the Pound sterling, used in all of the territories owned by Great Britain, where the same legalities apply.
The U.S. dollar is also unique in that its the official currency of a few surprising countries like Ecuador, El Salvador, and Panama, among others. It is also accepted in other destinations, not as an official, legal currency, but accepted nonetheless. Some of these countries that accept U.S. dollars informally include Mexico, some parts of Costa Rica, Nicaragua, Belize, Bermuda, and Cambodia, in addition to several others.
Options for paying in a foreign country
Travelers can visit their local bank to exchange cash ahead of a trip, or international airports in their departing or arrival cities. Depending on the institution and the current monetary value, the airport may offer a better or worse exchange rate than visiting a bank, for example. This can lead people to research and compare places with the best exchange rates to get the maximum amount of foreign currency possible. Exchanging cash before a trip can also be risky, though, if large sums of money are converted and carried around while traveling; a significant risk if targeted by pickpockets or accidentally lost.
There are now several alternatives to exchanging cash for international travel as well. Many companies now offer credit cards without foreign transaction fees. Using a credit card abroad also allows visitors to choose if they want to pay in their home country's currency, or make a payment in the foreign country's local currency. There are also financial institutions that have debit cards with low fees or none at all, even while abroad, meaning consumers can pull out cash from an ATM in a foreign country and receive their money in the local currency, all without paying any extra transfer fees.
When to consider wire transfers
For business or for sending money to individuals abroad, taking out cash and taking a trip to a foreign country may not be a realistic option. Not only this, the amount of money may be large enough that the safest way to deliver it is to use online resources for international money transfers. Many international wire transfer companies can send money to and from foreign banks directly at pre-determined exchange rates. Additionally, there are payment platforms that transfer money internationally, too, such as PayPal. Just like exchanging currency in cash, the exchange rates and fees may vary depending on the company and the currency exchange value at any given moment. Transferring money overseas can also be done directly from one bank account to another through financial institutions themselves, without having to use any third-party platform to facilitate the process.
There are many ways to travel and send money abroad for business or personal reasons, and depending on each individual's unique situation, may require some research to decide which is the most time and cost-effective. Whether traveling to a country with the same local currency as one's own or taking out money directly in a foreign country, it's never been easier to use money in another country.