Features

Currency Exchange – Lost in Conversion

31 Mar 2011
Money exchange is something globetrotters have to deal with all the time, but the issue is a little more complicated in Asia where, within a week, you may have to deal with three or four currencies. Regardless of where you are travelling to, however, one rule holds up: Unless it is a currency that you are likely to use again soon, you should avoid buying too much as changing it back means losing out on exchange rates again and paying more fees.

Currency Exchange

To change or not to change

In Europe many countries now use a shared currency, but no such system has so far been established in Asia – at least not officially. There are some special cases to note, however.

In some Indochinese countries, particularly Vietnam, Cambodia and Laos, the US dollar is accepted and even preferred. Merchandise is often priced in American dollars. Ironically, this gives you the buyer more bargaining power. For example, tuk tuk drivers in Phnom Penh ask for more when quoting a price in riels, the local currency. If you are from a country where you can get hold of US dollars easily, you should bring them as your main currency.

Since the exchange rate of China’s renminbi went from strictly controlled to “a managed floating exchange rate system” based on “market supply and demand with reference to a basket of currencies”, the value of the currency has risen substantially. An increasing number of shops in Hong Kong and Macau accept it, albeit often with a high conversion rate. But renminbi is still a long way from universal acceptance in the Special Administrative Regions, so when visiting Hong Kong it is still necessary to change to Hong Kong dollars, which are also accepted in Macau. (The Macau pataca, however, is of no use in Hong Kong or mainland China, and it enjoys little recognition internationally. Shops or taxi drivers in Macau might give it to you as change. You can ask to have the change given in Hong Kong dollars but if that fails, remember to spend it before you leave).

Hong Kong and Singapore are two of the most open markets for money exchange in the world, and most currencies can be bought there. If you are travelling around the region and these cities are among your stops, make use of the opportunity to get currencies for your subsequent destinations. Trying to buy renminbi with Philippine pesos in Shanghai will be much trickier.

Currency Exchange

The Plastic

There was once a time when travellers’ cheques were a popular means of carrying foreign currencies securely while overseas, but as banking has become more global their advantages seem slight in comparison to ATMs which, although they charge a higher fee, provide a great deal of convenience. Many shops no longer accept travellers’ cheques, and cashing them at the bank requires queuing up and catching the bank’s opening hours – you cannot do it over the weekend, and in some small towns banks are closed by 3pm. The cashier at major hotels can cash travellers’ cheques, but there is often a ceiling on how much.

On Business Traveller Asia-Pacific’s online forum (http://asia.businesstraveller.com/discussion/topic/Best-exchange-rates), a majority of readers opt for cash from ATMs when travelling. One of them, MartynSinclair, wrote: “I always use an ATM machine, I might not get the most efficient rate and there are charges, but for the amounts involved, quite frankly, it’s far easier and far less hassle.” Also, since you can better control how much money you actually need to withdraw, you save by not having to change a large chunk of foreign banknotes back to your home currency after the trip.

Naturally, if you use the ATM of an overseas branch of your bank, you are likely to enjoy savings as well. “Transactions done by DBS Singapore ATM cardholders at DBS Hongkong, DBS Indonesia and DBS Taiwan ATMs shall be free of the usual S$5 service charge levied on international ATM withdrawals,” says a DBS spokesperson. DBS Singapore cardholders also pay a preferential flat fee of S$2 when they use their Visa/PLUS ATM cards at the cash points of Bank Danamon and Bank Central Asia in Indonesia, HDFC in India and Bank of the Philippine Islands.

But ATMs aren’t a convenient solution everywhere. In Japan, the banking system is very localised and many ATMs do not accept foreign debit cards. Citibank is one of the few banks with a notable presence there, but they are still far from being ubiquitous. Make sure you research their locations before visiting.

In China, withdrawing from an ATM requires some caution: reports have surfaced that fake bank machines have been found to steal private information from bank customers. Make sure that you are using a machine at the branch of an established bank.

As with debit cards, a lot of (but not all) credit card companies will charge you a foreign exchange fee on transactions in a foreign currency. According to a spokesperson from Hang Seng Bank, “Foreign currency transactions will be converted into Hong Kong dollars at a rate selected by the relevant card association from the range of rates available in wholesale currency markets for the applicable conversion date or the government-mandated rate in effect for the applicable conversion date, in each instance plus 1.2 percent to 1.95 percent, subject to different card products.”

And using an overseas credit card in China can be a hassle. In some cities such as Shenzhen, if you go to a mall and want to pay for something with a foreign credit card, you will be led to a special cashier – often miles away – where there is a very slow machine that takes a few attempts to get through to the approval system.

Costly convenience

The option of changing money at the airport can be tempting, but this is one of the most expensive options as it is a “distress” purchase – charges are high and rates unfavourable. Even if you are at the airport already without the currency for your next destination, try to find out whether you will be better off changing money at the arrival airport. For example, the Hong Kong dollar-to-Thai baht exchange rate is much more favourable at Bangkok’s Suvarnabhumi Airport than at Hong Kong International Airport, where Travelex has a monopoly.

To provide an example, on February 20, Travelex at the Hong Kong airport offered THB24.7 to US$1, but Business Traveller got THB29.6 from the Siam Commercial Bank exchange centre at the Bangkok airport. That’s quite a margin. But the company’s online pre-ordering service promises best online rates and they do compare to other online sources we have checked. To use the service, you must order a minimum of HK$1,000, and up to HK$12,000 equivalent. The order needs to be placed at least three hours before pick-up at the airport.

Equally, watch out for so-called “deals” with affiliates. Asia Miles has teamed up with Travelex so its members can earn miles when they buy currency at a Travelex centre in Hong Kong. Here you’ll get 20 to 59 Asia Miles when changing HK$1,000-HK$2,999, 75 to 124 miles for HK$3,000-HK$4,999, 166 to 333 miles for HK$5,000-HK$9,999, and 500 to 2,499 miles when changing HK$10,000-HK$49,999.

But since a night at Four Points by Sheraton in Bangkok requires 16,000 miles, and even a lunch buffet at SkyCity Bistro at SkyCity Marriott Hotel, Hong Kong costs 5,000 miles, one can’t help but wonder if the “loss in conversion” isn’t more than the worth of the redeemed product.

Currency Exchange

Planning is key

For the large proportion of business travellers who organise their own foreign exchange, the best advice is to order your currency in advance and in bulk. This is especially true for larger companies where staff do a lot of travel.

One of the benefits of using a corporate foreign exchange service such as Amex is that they can get their clients better rates as they regularly order large amounts of currency. Terry Perrin, American Express’s director of wholesale currency services, says: “In terms of the rates we apply it depends specifically on each client, how frequently they travel, what their spend is and how many orders they place. We can put limits around what individuals order, and companies can track that.”

Also, your average high street bank frequently – if not always – gives pretty derisory rates compared with what you can get from specialists and travel companies.

Who offers the best deal?

Most currency services have an online offering that will give better rates simply because they are not paying for a high-street office. But even among money-changing shops there are marked differences between rates, depending on location. Chungking Mansions in Tsim Sha Tsui may have a tainted image from times past as a mini-ghetto, but it has cleaned up its act a lot in recent years. What has not changed is its continued popularity among budget travellers in need of affordable accommodation at guesthouses. Money Changer HK, near the building’s entrance, thrives on offering good rates to travellers while profiting from the sheer volume of business. According to its owner Kenny Gianani, his shop is paying a much lower rent than counterparts taking up costly premises in luxury malls and prime facilities, which allows him to lower the profit margin and offer better rates.

Money exchange is a business, so as a traveller you have to expect to pay a little for the service. With planning and research you can find good deals, but without such foresight more often than not you will end up getting ripped off.

  Insider Tips Hong Kong City Foreign Exchange (www.cityforex.com) is one of the money exchangers listed by Hong Kong Tourism Board’s Quality Tourism Services Scheme. All its branches also offer Western Union Money Transfer Service. South Korea Korea Exchange Bank (www.keb.co.kr/main/en) is where many locals go to when they need to exchange money. There is also a branch located at Incheon Airport, but it offers different rates. Post offices also offer currency exchange service. Japan Tokyo-Mitsubishi UFJ (www.bk.mufg.jp/english) and post offices offer some of the best rates. Singapore A list of credible money changers can be downloaded from the Money Authority of Singapore’s website: http://www.mas.gov.sg/licensing_guide/index.html. Thailand Hong Kong-born Roger Wu, who speaks fluent Thai and has written numerous Chinese guidebooks on Thailand, recommends Super Rich (www.superrich.co.th) as the money changer to go to for its reasonable rates.
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