As the Rugby World Cup in France approaches, South Africans planning on making a European trip of the occasion, can make more of their travels by being aware of a few hidden foreign exchange expenses, advises Bianca Botes, Director at foreign exchange and treasury experts Citadel Global.
For South African rugby lovers, travelling to the Rugby World Cup in France, in September and October, is likely a dream come true. While the weak rand is certainly not counting in travellers’ favour right now, there are a few hidden expenses South Africans can make themselves aware of before travelling to Europe, which can help them stretch their rands further for a more memorable trip, advises Bianca Botes, Director at foreign exchange and treasury experts, Citadel Global.
THE SOUTH AFRICAN RAND TO THE EURO – EXCHANGE RATES VS CONVERSION FEES
At the time of writing, the rand was trading at R20.87 to the euro, meaning R1 bought you 5 euro cents. However, it’s not as simple as just converting currencies, says Botes.
“Exchange rates come into play when you convert your home currency into the currency of the country you’re visiting. If the rand is stronger, you can get more value for your money abroad. However, if the rand weakens while you are travelling, you might end up getting less foreign currency for the same amount of your own currency,” says Botes, explaining the basics of currency exchange.
What many travellers forget to consider, however, is conversion fees. “When exchanging money or using your credit or debit cards abroad, there might be fees associated with currency conversion. You need to investigate these expenses. These fees can eat into your budget, so it’s a good idea to understand the fee structure of your financial institutions and explore options that offer better rates.”
OTHER FEES ASSOCIATED WITH FOREX TRANSACTIONS
When you convert one currency into another, such as your rands to the euro in France, or use foreign currency for international purchases, various fees and costs may be associated with these transactions. Botes highlights seven lesser-known/hidden fees that South African travellers need to consider when travelling abroad:
- Transaction fees: Some banks or exchange services may charge a flat fee for processing your currency exchanges or international transfers. Always investigate what a forex kiosk or a digital service provider’s fees are before you use their services.
- Spread: Spread is the difference between the buying and selling prices of a currency. When you exchange money, you may typically get a slightly lower exchange rate than the true exchange rate. The difference or balance goes to the financial institution facilitating the exchange.
- ATM fees: When using an ATM abroad to withdraw foreign currency, you might be charged fees by both the foreign bank and your home bank. Do a quick Google search to investigate what different European banks charge at their ATMs.
- Credit or debit card fees: Using credit or debit cards for international transactions might come with foreign transaction fees, which may be calculated as a percentage of the transaction amount. You can ask the vendor what the fees on your purchase will be. Additionally, if the transaction involves currency conversion, there might be additional fees.
- Dynamic Currency Conversion (DCC) fees: Sometimes when you purchase an item or a service in a foreign country, you will be given the option to pay in your home currency instead of the local currency, there might be additional fees associated with this choice. It’s always wise when given a choice at the point-of-sale machine, to choose to pay in euros instead of rands, as there may be additional fees associated with allowing the merchant to convert your currency for you.
- Wire transfer fees or SWIFT fees: If you’re sending money internationally via wire transfer, there can be fees associated with the transfer process. Be careful with these fees.
- Hidden service fees: Some services may have hidden fees that are not immediately apparent to the user. This is why it is important to review the terms and conditions of the service before making any payments.
Thankfully it is also possible to get professional advice on solutions to best manage forex risks, says Botes. “There are various available forex management strategies that can give you the ability to protect yourself from negative market and currency movements.”
Travelling abroad, especially after the travel bans of the pandemic era, can be tremendously exciting, especially when you attend a once-in-a-lifetime event such as the Rugby World Cup in France. “The trick to enjoying it more and worrying less about your travel budget is to be savvy with your rands. As South Africans, as long as the rand is weak, we need to learn to be wise about forex when travelling – because when we are, we can enjoy our travels all the more,” says Botes.