Travel Money: Cash Is King!
Traveller cheques carry favourable rates, but they are usually subject to duty and commission as well as lengthy verification. They are being replaced by ATM cards in the wallets of most travellers because ATM cards are (almost) as good as cash, aren’t they?
Well, no.
Following on from yesterday’s post about caveats associated with taking plastic—and also from my on-going frustrations when dealing with card purchases or withdrawals both online and abroad—I’ve taken some time to consider taking cold, hard cash instead.
Taking currency along carries the most risk, but it may be well worth it from an economic point of view. Exchange rates are often better in the country of travel.
The exchange rates for the Thai Baht on 16/12/2009 were 53.452 to GBP, 32.893 to USD and 48.023 to EUR (you may have to scroll for the date). The weighted average interbank exchange rate was 33.134 Baht to the US Dollar, and online converters gave 54.38 Baht to the Pound and 48.360 to the Euro. For both the USD and EUR, the Bank of Thailand rate was about 0.7% below the interbank rate, but for Pound Sterling it was 1.7%. The Pound appears more variable than either Euro or Dollars. So, I figured that it pays to shop around.
Here are some numbers (for 16/12/2009):
The Bank of Ayudhya offered 53.110 Baht for GBP, 32.74 (exchanges of 50-100) for USD, and 47.660 for EUR,
The Siam Commercial Bank offered 52.998 GBP, 32.79 (50-100) USD, and 47.600 EUR.
Kasikorn offered 52.787 GBP, 32.79 (50-100) USD, and 47.611 EUR
There isn’t much between them: 0.6% in case of Sterling. Maybe worth it for large transactions.
(Of course, now that I’ve chased the numbers, I found the comparison table 😉 There doesn’t seem to be any more variability between the Sterling rates than between USD/EUR. It depends on the bank.)
My card provider states that they have a fixed exchange rate at 2.5% below the interbank rate, but I’ll have to take this with a pinch of salt because it isn’t at all clear what they mean by ‘interbank rate’, which may apply only to USD and EUR. And here is how much worse the figures are for the UK (where my card provider is based):
On 16/12/09, the UK exchange rates for the Thai Baht were 50.931 (ICE), 50.746 (Fair FX), and 50.608 (Post Office)—the difference was only about 0.6%, despite the considerable variation between these providers when it comes to Euros and Dollars. Fair FX is rated as the best travel card provider in terms of exchange rates, and its rate differs from the conversion rate (which I take is be based on the interbank rate) by a whopping 5.8% and from the official Bank of Thailand rate by 5%.
Five per cent! That doesn’t just pay for dinner, that pays for a couple of dives!
So, if the ATM offers me an exchange rate in the region of 52 Baht to the Pound, I should go with it, and not the rate offered by my provider. Many sites and forums advise not to buy Baht outside Thailand, and if I accept my provider’s rates, I effectively buy Baht outside Thailand.
Of course, when it comes to timing, changing money is always a bit of a gamble. I’ve watched the fluctuations of Euros, Dollars and Sterling for the past year, and I’d be hard pressed to pick a good time when to buy or sell. Overall, I do not expect sudden fluctuations in these major currencies, but it is possible that either of them may slump or that the Baht will be radically devalued (there are rumours). Here, cash has another advantage where no commission is payable: change little and often. This philosophy may be reflected in the different exchange rates offered by Thai banks for smaller amounts of US Dollars (1, 5-20, and 50-100), which can differ by around 2.5% between highest and lowest.
[EDIT: The (Caxton) cash card may just be king after all, if I have not misunderstood the statement. By my calculations, they offered an exchange rate of 54.292 on 04/01/2010, against the Siam City Bank’s 52.61. Just bear in mind the 150 baht ATM tax. There are no other fees payable.]
Tags: cash, Travel, travel money, Tag Index
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