Best Way to Exchange Currencies
When you travel abroad, where do you exchange foreign currency? "Is the airport the most convenient?" "But I'm concerned about exchange rates..." Many of you might be wondering. Traditionally, exchanging currency at banks and exchange offices inside airports was common, but recently, card payments and withdrawals using credit and debit cards have become popular as well.
In this article, we'll explain the advantages and disadvantages of exchanging currency at various locations, including the exchange fees. We’ll also introduce the Wise Debit Card, which allows you to exchange currency cheaply and withdraw local currency at your destination.
There are several ways to exchange foreign currency. In this section, we will compare the methods, fees, available currencies, and exchange methods.
| Method | Fee | Currencies Available/Eligible Countries | Cash or Card |
|---|---|---|---|
| Credit Card | ◎ | Available at international brands like VISA, JCB, Diners, etc. | Card |
| Wise Debit Card | ◎ | Over 40 currencies (except Afghanistan, Belarus, Burundi, Central African Republic, Chad, Congo, Democratic Republic of the Congo, Cuba, Eritrea, Iran, Iraq, Libya, Myanmar, North Korea, Russia, Somalia, Sudan, South Sudan, Syria, Venezuela, Yemen) | Card |
| Bank (Mizuho Bank) | ○ | 2–21 currencies | Cash |
| Exchange Office (World Currency Shop) | △ | 21 currencies | Cash |
| Airport (GPA/Narita Airport) | △ | 34 currencies | Cash |
| Foreign Currency Delivery (Travelex) | ✕ | 31 currencies | Cash |
(As of March 2024)
Exchanging foreign currency typically involves a "currency exchange fee." This fee is charged as an additional cost to the actual exchange rate, usually on a per-dollar basis. The exchange rate fluctuates daily, but the exchange fee is set by each location. To avoid losing money due to exchange fees, it is advisable to exchange currency at the cheapest locations possible.
Let's now take a look at each method and location for currency exchange.
Foreign Currency Exchange with Credit Cards
If you have a credit card with an international brand like VISA, Mastercard, or JCB, you can use it for purchases in stores or online shopping, eliminating the need to carry cash. Additionally, you can withdraw the local currency you need from ATMs abroad using your credit card. This is called overseas cash advance. If you opt for a one-time payment for overseas cash advances, the exchange fee might be lower than exchanging currency at an exchange office, and it could turn out to be more economical. It's also convenient to use cash advances for situations where only cash is accepted.
When you use a credit card for purchases abroad, an overseas transaction fee will be added to your bill. Let’s take a closer look at this fee.
Overseas Transaction Fees for Credit Cards
How are the exchange rates determined for credit cards?
When exchanging Japanese yen for foreign currency at financial institutions, the exchange rates are called TTS (selling rate) and TTB (buying rate). Based on these, each institution sets its own market exchange rate known as TTM (market reference rate).
Credit card international brands add an overseas transaction fee to the market reference rate, and the amount is billed to the user. Let’s look at specific examples.
Epos Card: For purchases abroad, the exchange rate applied will be the one in effect when the transaction data arrives at the Visa settlement center in the U.S. After applying an overseas transaction fee of 1.63%, the rate is then converted to yen and billed. Starting from April 1, 2024, the overseas transaction fee will increase to 2.20% for data arriving at the Visa settlement center.
Rakuten Card: Rakuten offers four international brands: VISA, Mastercard, JCB, and American Express, with each having different exchange rate timing and overseas transaction fees.
| International Brand | Overseas Transaction Fee |
|---|---|
| VISA | 1.63% |
| Mastercard | 1.63% |
| JCB | 1.60% |
| American Express | 2.0% |
(As of March 2024)
Advantages and Disadvantages of Foreign Currency Exchange with Credit CardsCredit cards are convenient and widely accepted at international brand merchants abroad, but they have the following advantages and disadvantages:
| Advantages | Disadvantages |
|---|---|
| No need to carry cash | Some stores only accept cash payments |
| Overseas transaction fee may be cheaper than exchange office fees | Interest and ATM fees apply to overseas cash advances |
| Loss or theft compensation is available | Overseas transaction timing and fees vary by brand |
As explained, exchange rates and overseas transaction fees vary by credit card brand. When using a credit card abroad, it may be wise to choose a brand with lower overseas transaction fees.
Wise Debit Card
One of the new options for paying abroad or withdrawing local currency from ATMs abroad is the Wise (formerly TransferWise) Debit Card.
Wise is an international money transfer service that originated in London in 2010. It supports over 40 currencies in more than 160 countries and has become popular for being faster and cheaper than traditional banks, while maintaining high security. Wise has more than 16 million users, and its monthly transaction volume exceeds £9 billion (around ¥1.7 trillion).
Initially a money transfer service, Wise now offers a multi-currency account that lets users hold and manage multiple currencies, along with a linked Wise Debit Card. The Wise Debit Card can be used in over 150 countries with more than 40 currencies, making it perfect for frequent travelers and business trips.
With a multi-currency account, you can make payments without converting your funds, avoiding exchange fees. If you don't have the required currency, Wise automatically converts the money at the lowest available fee, which starts at just [NumberWiseFee]%.
If you want to withdraw local currency, the Wise Debit Card allows free withdrawals up to twice per month, with a limit of ¥30,000. After the third withdrawal, a fixed fee of ¥70 per transaction applies, making it a cost-effective option for withdrawing cash.
Advantages and Disadvantages of the Wise Card
Here are the advantages and disadvantages of the Wise card.
| Advantages | Disadvantages |
|---|---|
✅High convenience with delivery to your home or Travelex stores ✅Wide range of currencies available (31 currencies) ✅Payment via cash-on-delivery or credit card | ❌High exchange fees ❌Not suitable for urgent needs as delivery takes time ❌Delivery delays may occur due to weather conditions ❌Orders under ¥100,000 incur a shipping fee of ¥1,000 (as of March 2024) |
While the Wise card requires a one-time issuance fee of ¥1,200, it has no annual fees like a credit card, making it cost-effective. It supports around 40 currencies, covering most major currencies. With the Wise card, you can withdraw up to ¥30,000 free of charge from ATMs after arriving abroad, so there’s no need to rush to exchange currency before departure. For those who travel or go on business trips frequently, it's definitely worth considering.
Foreign Currency Exchange at Banks
The foreign currency exchange service at major Japanese banks has been shrinking due to the increasing use of cashless payments. Let’s use Mizuho Bank as an example to explain the current state of foreign currency exchange in Japan.
Mizuho Bank announced that it would end all foreign currency exchange services at Haneda Airport’s exchange shops by the end of February 2024 and at Narita Airport’s exchange shops by the end of March 2024. Additionally, 18 foreign currency exchange ATMs in Tokyo, Chiba, Kanagawa, and Osaka will also close by the end of March. Currently, foreign currency exchange at Mizuho Bank is only available at select branches and currency exchange ATMs.
Bank Exchange Rates
Let’s compare Mizuho Bank’s exchange rate with the market reference rate (TTM). Note that these exchange rates are only for reference, and they do not guarantee the rate at the time of the transaction.
For example, if you exchange ¥30,000 for USD on March 18, 2024, the rates are as follows, with an additional exchange fee of ¥1 added to the market reference rate:
Market Reference Rate (TTM): 149.32 JPY/USD
Mizuho Bank TTS (foreign currency selling rate): 150.32 JPY/USD
Thus, if you exchanged at the market reference rate (TTM), you would receive 200.91 USD. However, if you exchanged ¥30,000 at Mizuho Bank, you would receive 199.57 USD. The difference is 1.34 USD, which, when converted at the market rate (149.32 JPY), is equivalent to 200.08 JPY. This difference is the hidden exchange fee embedded in the exchange rate.
Advantages and Disadvantages of Foreign Currency Exchange at Banks
Here are the advantages and disadvantages of exchanging foreign currency at banks:
| Advantages | Disadvantages |
|---|---|
✅Banknotes are thoroughly checked, reducing the risk of counterfeit notes ✅Foreign currency exchange ATMs are available during bank hours | ❌The desired currency or denominations may not be available ❌Not all branches provide foreign currency exchange services |
Currency Exchange at Exchange Bureaus
When thinking about foreign currency exchange, many people might first think of exchange bureaus. Popular examples include Daikokuya and Mitsubishi UFJ Financial Group's World Currency Shop. Let's examine the exchange rates, advantages, and disadvantages of exchange bureaus.
Exchange Rates at Exchange Bureaus
Similar to the example with Mizuho Bank, let’s compare the exchange rates and TTM (market reference rates) at Daikokuya and World Currency Shop when exchanging ¥30,000 for USD.
DaikokuyaAs of March 18, 2024, the exchange rates at Daikokuya are as follows. At Daikokuya, an exchange fee of ¥2.77 is added to the market reference rate.
Market Reference Rate (TTM): 149.32 JPY/USD
Daikokuya TTS (Foreign Currency Selling Rate): 152.09 JPY/USD (Tokyo Station Front Store)
If exchanged at the TTM (market reference rate), you would receive 200.91 USD. However, at Daikokuya, exchanging ¥30,000 would yield 197.25 USD. The difference is 3.66 USD, which is equivalent to ¥546.51 when converted at the market reference rate (149.32 JPY/USD). This hidden fee is the exchange fee embedded in the rate.
World Currency ShopAs of March 18, 2024, the exchange rates at World Currency Shop are as follows. At World Currency Shop, an exchange fee of ¥2.8 is added to the market reference rate.
Market Reference Rate (TTM): 149.32 JPY/USD
World Currency Shop TTS (Foreign Currency Selling Rate): 152.12 JPY/USD
If exchanged at the TTM, you would receive 200.91 USD. However, at World Currency Shop, exchanging ¥30,000 would yield 197.21 USD. The difference is 3.7 USD, which is equivalent to ¥552.48 when converted at the market reference rate (149.32 JPY/USD). This hidden fee is the exchange fee embedded in the rate.
Advantages and Disadvantages of Currency Exchange at Exchange Bureaus
| Advantages | Disadvantages |
|---|---|
✅Many stores located near stations ✅Open on weekends, offering high convenience ✅A wide variety of currencies available | ❌High exchange fees |
Currency Exchange at Airports
Many travelers find themselves exchanging foreign currency at the airport due to lack of time before departure. However, as mentioned earlier, with Mizuho Bank closing all its foreign currency exchange shops at Narita and Haneda airports, travelers need to pay closer attention to their exchange options in the future.
Exchange Rates at Airports
Let’s examine the exchange fees at GPA exchange bureaus operated by Narita Airport Group.
As of March 18, 2024, GPA’s exchange rates are as follows. GPA adds an exchange fee of ¥2.7 to the market reference rate.
Market Reference Rate (TTM): 149.32 JPY/USD
GPA TTS (Foreign Currency Selling Rate): 152.02 JPY/USD
Exchanging at the TTM would yield 200.91 USD for ¥30,000. However, at GPA inside Narita Airport, you would receive 197.34 USD. The difference is 3.57 USD, which is equivalent to ¥533.07 when converted at the market reference rate (149.32 JPY/USD). This hidden fee represents the exchange fee embedded in the rate.
Advantages and Disadvantages of Currency Exchange at Airports
| Advantages | Disadvantages |
|---|---|
✅High convenience for exchanging currency just before departure ✅Wide range of currencies available (GPA offers 34 currencies) | ❌High exchange fees ❌May be crowded during peak times due to high demand ❌Limited hours—closed during late night and early morning |
Currency Exchange via Home Delivery
Home delivery foreign exchange services allow you to order foreign currency online and have it delivered to your home. One of the most well-known providers of this service is Travelex.
Exchange Rates for Home Delivery
Let’s analyze Travelex’s exchange rates for comparison.
As of March 18, 2024, Travelex applies an exchange fee of ¥3.31 to the market reference rate.
Market Reference Rate (TTM): 149.32 JPY/USD
Travelex TTS (Foreign Currency Selling Rate): 152.63 JPY/USD
Exchanging at the TTM would yield 200.91 USD for ¥30,000. However, using Travelex’s home delivery service, you would receive 196.55 USD. The difference is 4.36 USD, equivalent to ¥651.03 when converted at the market reference rate. This represents the highest exchange fee among the options compared here.
Advantages and Disadvantages of Home Delivery
Advantages and Disadvantages of Home Delivery
| Advantages | Disadvantages |
|---|---|
✅High convenience with delivery to your home or Travelex stores ✅Wide range of currencies available (31 currencies) ✅Payment via cash-on-delivery or credit card | ❌High exchange fees ❌Not suitable for urgent needs as delivery takes time ❌Delivery delays may occur due to weather conditions ❌Orders under ¥100,000 incur a shipping fee of ¥1,000 (as of March 2024) |
When Is the Best Time to Exchange Currency?
Even with credit or debit cards, having some local currency on hand is essential. The ideal time to exchange Japanese yen for foreign currency depends on individual circumstances. Below are the pros and cons of the different timing options for currency exchange:
Before Travel
Exchanging currency before departure allows you to carefully compare exchange rates and plan ahead.
| Advantages | Disadvantages |
|---|---|
✅Time to research and select favorable exchange rates ✅No language barrier when exchanging in Japan | ❌Carrying large amounts of cash poses a risk |
On Departure Day (at the Airport)
Exchanging currency at the airport is convenient but comes with higher exchange fees and potential time constraints.
| Advantages | Disadvantages |
|---|---|
✅High convenience ✅Reliable options with low risk of counterfeit bills | ❌High exchange fees ❌May experience long lines during peak times |
After Arrival (in the Destination Country)
Exchanging currency after arrival is an option but requires careful selection of exchange locations for safety and favorable rates.
| Advantages | Disadvantages |
|---|---|
| ✅Sometimes lower exchange fees compared to Japan | ❌Risk of poor rates or unsafe exchange points |
When Do You Need Cash?
While cashless payment systems are becoming widespread in developed countries, there are still situations where only cash is accepted. Common scenarios where cash is needed abroad include:
Tipping at hotels or restaurants
Buying transportation tickets
Purchasing from local shops or street vendors
Even in advanced nations like those in Europe, some restaurants may require cash payments. Therefore, having a small amount
Pros and Cons of Using Cash Abroad
Although some travelers may prefer to avoid carrying cash altogether, striking a balance between cash and card usage is key to smooth travel. Below are the advantages and disadvantages of using cash while abroad:
| Advantages | Disadvantages |
|---|---|
✅Easy to pay tips ✅Convenient in cash-only establishments | ❌Vulnerable to theft or pickpocketing ❌No insurance for lost cash ❌Unused foreign currency incurs fees when re-exchanged into yen |
Carrying large amounts of cash is not advisable due to the risk of loss or theft. It’s best to carry a combination of credit/debit cards and a small amount of cash.
Potential Issues to Watch Out for in Currency Exchange
To avoid troubles when exchanging foreign currency, consider the following tips:
Use reliable locations for currency exchange, such as banks or airport counters, and avoid questionable street vendors.
Research exchange rates and fees beforehand.
Always collect and check receipts immediately after exchange.
Exchange in smaller amounts and avoid exchanging large sums at once.
Being cautious and planning ahead is critical when exchanging currency abroad.
Key Points to Remember:
Choose a Reliable Exchange Counter:Ensure the exchange location has reasonable fees and transparent rates.
Verify Amount and Receipt Immediately:Before leaving the counter, confirm the received amount and compare it with your receipt.
Avoid Large Transactions in One Go:Multiple smaller exchanges reduce risk and help you manage your money better.
Summary
In this article, we explored the most cost-effective and recommended methods for foreign currency exchange. Even in developed countries, there are still situations where cash is indispensable, such as at cash-only establishments or for tipping.
Key Points to Choose the Right Currency Exchange Method:
Compare exchange rates and fees against the market reference rate before exchanging.
Consider using tools like the Wise Debit Card, which offers low fees for cash withdrawals abroad.
Exchange locations and methods significantly impact the amount of foreign currency you receive, especially in a yen-depreciating economy. By combining the right exchange method with strategic use of cards, you can save on fees and make your trip more cost-effective.