- Currency conversion has been a problem throughout history. As merchants and traders traveled outside their native lands, they found that the coins or symbolic tokens they used to purchase goods at home were unacceptable to people who felt they had little value. Gold, silver, diamonds and a few other precious stones have had the distinction of being used as international currencies.
- Transactions that involve the conversion of currencies are closely monitored by all countries. In many countries, ordinary citizens are prohibited from currency trading and conversion because the black market rates, based on supply and demand, are often higher than official bank rates. This has a negative effect on legitimate currency transactions. Most countries have severe penalties for trading currencies without permits and in unofficial markets.
- Today gold is the world's only universally accepted currency. Without currency conversion systems, travelers would be forced to barter for goods and services, or carry gold bullion, once they leave their home countries. Converting your currency to a local currency simplifies the process of purchasing goods and services while visiting a foreign country. Depending on when and where you convert the currency, you can benefit from favorable fluctuations in the exchange rates, even after paying required commissions.
- Cash currency conversions can be made before you leave home at many large banks, travel agencies and currency exchanges located in major airports. International banking regulations require that money transfer services like Western Union and Moneygram convert your currency to the local currency equivalent in order to complete the transaction. In addition, major credit cards such as Visa and MasterCard convert all expenditures that you charge in a local currency back to the currency used by the card issuer's home country. Most banks also issue traveler's checks in foreign currencies so that travelers do not have to carry large amounts of cash.
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Currency exchange rates fluctuate daily. Most major currencies are stable enough that you will not suffer great loss of value when converting to these currencies. In countries with unstable economies, local currency devaluations can drastically reduce the value of your local currency against the U.S. dollar, Euro or your home currency. In these situations, buy as little local currency at one time as possible.
Converting major currencies to a local one before you leave home may not be possible if you are visiting Third World countries. In these cases, you must convert your currency after arriving. Use an authorized exchange service or reputable bank. Credit card companies convert your transaction from the local currency on the day that your transaction posts, not the day you used the card. The exchange rate could increase or decrease. Remember that you will pay a second commission to convert left over foreign currency.
