Know the current rate of exchange. In some countries with high inflation or deflation, the currency can and does change throughout each day, so if you’re travelling in a Country that is experiencing economic turmoil, keep a close eye on the exchange rate before exchanging money. No need to waste money on poor exchange rates. Keep you budget on track by keeping track of the going exchange rate.
Find out if the US Dollar or other currency can be used interchangeably in that country or incurs a penalty
A. The Belizian Dollar is set at a rate of exactly half of the US Dollar, and either the US Dollar or the Belize Dollar can be used for payment all around the country. While the Bermuda Dollar is set to a ratio of exactly one US Dollar to one Bermuda Dollar.
B. In Cuba, the US Dollar used to be on a one to one ratio with the CUC, also known as the Convertible Peso. Now a days though, exchanging US Dollars in Cuba results in a 10% conversion fee. This is not the case with other currencies. A rude awakening for some backpackers I met a couple years ago when in Cuba, who made the mistake of buying US Dollars in their home country (losing on that exchange), only to be met with another 10% loss in travel money once arriving in Cuba. They were unwittingly using old guidebooks that advised having US Currency for travel in Cuba. The Convertible Peso or CUC is also separate from the CUP or Peso Cubano which is valued around 25 to 1 ratio to the CUC or Tourist Peso and is sometimes required to purchase food from street vendors or in some markets.
C. In El Salvador, the US Dollar is the official currency of El Salvador, so US Citizens don’t need to bother with exchanging money before they head south to El Salvador.
Always have some local currency before entering a new Country. I like to have enough of the local currency when entering the country to pay for the basics: food, water, and transportation.
A. Best way is to have your local bank purchase some for you. This may take them a few weeks depending on the currency, so plan to do this a month in advance of the trip if you go this route.
B. If you are on a backpacking adventure, and are entering the new Country from another foreign country, you should have no trouble finding a bank or exchange kiosk that will sell you some of the neighbouring countries local currency.
C. Exchange at the airport or border. This option isn’t always available, but sometimes due to a change in plans, or planning on the go, you find yourself headed to another country with no time to locate a bank or change kiosk. Exchanging at the border is typically the most risky because it usually involves some black market dealers who may or may not try to rip you off.
Exchange any extra money you have for a country you don’t plan on returning to before you leave that country. You’ll want to get rid of the unneeded currency before leaving for two reasons.
A. You may not be able to exchange it in the next country over, leaving you stuck with worthless bills. I made this mistake leaving Belize for Guatemala. I waited until I arrived in Guatemala before trying to exchange my bills on the way to the bus station. The 6 minutes I wasted in line at the exchange place in Puerto Barrios , only to be told they don’t exchange Belizian dollars, meant that I missed my connecting bus to Guatemala City by 2 minutes.
B. It may very well be illegal to bring local currency out of the country. The Cuban CUC aka Convertible Peso aka Tourist Peso is one example of currency that is illegal to take out of the country.
Not every unofficial money exchanger is a thief. Some of them just want to exchange money at a slightly more favourable rate to themselves. Which given the circumstances, isn’t always a bad thing. Sometimes some local money for food and a bus ride is worth a few pennies lost on the dollar. What you need to watch out for is the exchangers that want to do it quickly in the back alley. Those are the guys that when you go to count your money a couple minutes later, after making sure no one saw the transaction, you find out only the top bill is real, and the rest is worthless newspaper or another foreign currency that is worth pennies on the dollar.