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How do exchange rates work?
An exchange rate is the price of one currency in terms of another.
Example: EUR/USD = 1.10 means:
- 1 Euro = 1.10 US Dollars
- Or $1 USD = €0.91 (calculated as 1 ÷ 1.10)
Exchange rates fluctuate constantly based on supply, demand, and economic factors.
Why are these rates different from what I see at the bank?
This calculator uses sample mid-market rates for educational purposes.
Actual exchange rates include:
- Spread: Difference between buy and sell rates (bank's profit)
- Fees: Transaction fees, service charges
- Commission: Percentage of transaction
Total cost is typically 3-10% worse than mid-market rate, depending on provider.
What's the best way to exchange currency?
Best to Worst:
- ATMs abroad: Usually best rates, small fees
- Credit cards: Good rates (if no foreign transaction fee)
- Banks: Decent rates, various fees
- Currency exchanges: Worse rates, high fees
- Hotels/Airports: Worst rates (avoid if possible)
Tip: Always choose to pay in local currency when abroad!
What is Dynamic Currency Conversion (DCC)?
Option to pay in your home currency when using card abroad.
Example: American in France, €100 charge
- Option 1: Pay €100 (your bank converts to USD)
- Option 2: Pay $115 immediately (merchant converts)
Always choose local currency! DCC rates are 3-7% worse.
How can I avoid currency exchange fees?
- Use credit cards with no foreign transaction fees
- Withdraw larger amounts less frequently from ATMs
- Use banks or services with good exchange rates
- Avoid airport and hotel exchanges
- Consider specialized services like Wise or Revolut
- Never accept Dynamic Currency Conversion
What factors affect exchange rates?
- Interest rates: Higher rates attract investment, strengthen currency
- Inflation: Higher inflation weakens currency
- Economic growth: Strong economy strengthens currency
- Political stability: Stability strengthens currency
- Trade balance: Surplus strengthens, deficit weakens
- Central bank policy: Can directly affect currency value
- Market sentiment: Speculation and expectations
How much should I budget for a trip?
Rough daily budgets (mid-range travel):
- Western Europe: $100-200/day
- Eastern Europe: $50-100/day
- Southeast Asia: $30-80/day
- Japan: $100-200/day
- Australia: $100-180/day
- Latin America: $40-100/day
Includes accommodation, food, local transport, and activities.
Tip: Add 20% buffer for unexpected expenses!