There are various players in the market who sell foreign exchange. They include authorised full-fledged money changers, banks, travel agents and the unregulated grey market.

Typically, forex dealers charge the lowest commission as compared to banks or travel agents. If the rupee is trading at 67.59 per euro, a bank will charge you around 70-72. This rate varies from bank to bank. A money changer may charge a rate of 68-70, which again varies from dealer to dealer. As a dealer with a full-fledged money changer says: Buying and selling foreign exchange is our bread and butter. We don't have other sources of business which can offset any possible risk that arises out of the forex business. Hence we offer forex at the most competitive rates.  When we buy currency, we have to offload the foreign exchange on the same day. An overnight exposure in the forex market can be fatal as there could be a wide fluctuation in the currency market.

The unregulated grey market may offer even "lower" rates, but it comes with a host of risk factors. A traveller may benefit by way of 10 paise to 25 paise, but it is always advisable to avoid going to the grey market. The risks are counterfeit notes, non-issuance of receipt for the foreign exchange. In fact, if a counterfeit note is found when using overseas, the authorities ask for receipt, and in the absence of the same it is construed that the money has been bought from the grey. It is most expensive to exchange currency at international airports. "Even mineral water is sold at . 100, which would cost . 10 outside. This is because the real estate is very expensive at airports. The same logic will hold for currency also. There will be loading of 2-5% depending upon the location.

Avoid Excess Cash

You cannot totally ignore cash, although most places, including taxis, accept prepaid forex cards. I would advice travellers to carry a plastic travel card. These chip-based cards offer enhanced security features and there is no fear of loss of value. These cards can be used at any POS terminal and are widely accepted even by cab drivers in developed countries.

From security point of view, card mitigates the risk of one losing the entire amount he/she's carrying in case of a theft or loss of wallet. If one is carrying a loaded forex card, it can be immediately hot-listed to ensure that the amount remains safe.

Carrying excess cash has the twin risks of likely theft and counterfeit issue which can land you in trouble. Counterfeit notes are indeed a matter of concern. We constantly train our staff to identify and detect forged notes by using ultraviolet light machines. However, super counterfeit notes beat the normal eye as well as UV light machine and is a cause of concern.

Prepaid Forex Card Is A Good Hedge

Pre-paid forex cards are an effective hedge against exchange rate fluctuations. This is because the value of the forex amount loaded is determined based on the exchange rate of the day which remains fixed. So a customer can actually load the forex value on the prepaid card in advance when forex rates are favourable.

When a customer puts forex on a travel card, he does not have any additional charges. For example, if he purchases $100 from a money changer, then all the $100 is loaded on the card. A money changer will, however, charge for the conversion, which he will do for giving cash as well. In case of credit/debit cards, banks bill on the basis of the exchange rate prevailing on the date of the transaction. On the other hand, in case of a pre-paid card, you would be spending at the rate as on the date you loaded your card. Whenever the customer uses a debit/ credit card outside the country, the transaction takes place in the foreign currency. Hence, the customer has to bear a currency conversion charge, known as cross currency mark-up, for every transaction done on the card. The value of this conversion charge is variable as usually it's a percentage of the transaction amount which is in the range of 3-5%. That's the premium a customer has to bear for every transaction.

Visiting Multiple Countries

If you are visiting a single country it makes sense to buy a single destination currency. For instance, if you are just visiting Singapore, it makes sense to purchase Singapore dollar to avoid cross currency exchange costs. At every stage, there will be a cross currency exchange cost because the operator will charge a margin to convert the foreign exchange to the local currency. If one is travelling to multiple countries in Europe, we recommend the euro, because any customer will not travel simultaneously to a European country as well as the US. Though the US dollar is a universally accepted currency, we recommend the euro to avoid cross currency exchange cost. In case the customer is travelling to the US, we recommend US dollars, which can be used across the US.