Exchange Rate

Kristina, I think you have answered your own question. Nobody can predict what exchange rates will do, if they could, they would be making lots of money on the currency exchanges (and not giving free advice here!). The pound exchange rate is likely to be on a roller coaster until the UK leaves the EU (about 2 years), and possibly some time thereafter. This is definately "living in interesting times" as nobody knows what the economic system is going to be.

But, for the normal mortal, what you pay the banks for exchanging money will probably eat up any gain or loss for advance purchase, plus you will not be able to use the money in the meantime (no savings interest).

exchange dollars for pounds when we get to London

That is not the cheapest way. The cheapest option is:
1) Get money out of a cash machine (ATM) when you get to your destination using your normal ATM card.
Or using a credit card to pay directly (DO NOT use a credit card in an ATM).
2) Exchange physical bank notes - you will pay more because a human being has to do the handling.
3) Get the currency before you leave - the most expensive option.

The actual cost of option (1) depends on what your bank or credit card company charges you for a foreign transaction. And always tell your bank where you are going, so they don't block your card for a suspicious transaction.

Any time you a plan a trip in the future to a country with a currency other than your own, you have entered into the wonderful world of currency speculation. A few months ago, someone on this forum was crowing about buying GBP at $1.30 US for an upcoming trip. But if he had waited until now, he could have got them for $1.25.

If you don't already have a 0% foreign transaction fee credit card and the same for an ATM card (both with no annual fees), then find them now. You may save you as much as 3% or so. Use the search function at the top of the page to find various brands of cards that fit the bill.

Actually, how you get your cash depends on your situation. Find out how your bank handles overseas transactions and whether or not they have a partner bank in the UK whose ATMs you can use without extra fees (eg. Bank of America customers can use Barclays ATMs). Then make a small international transaction with your card and compare the exchange rate the bank (or credit card or whatever) against the actual rate (you can look it up online). If it's close, you're good to go (Visa or Mastercard only - no one takes Discover or AMEX, no matter what they try to tell you). If it's not a good rate of exchange, find a different card. This may seem silly, but when I first went to London, I had two banks, both with Visa. One gave me a rate close to what I would expect while the other was a good 20 points higher. It is definitely worth checking into. When I complained to the one with the high rate, they claimed it was Visa's fault (but obviously not since my other card was a Visa as well and the rate was fine). I'm a bit more savvy now, and here's what I do. I figure out about how much of the local currency I will need for my trip, rounding up generously. I keep an eye on the rate for a while before I go. When it's at a low point, I go and get some cash. There are two options for this. If you have Bank of America, you can get $1000 worth of foreign currency with no fees. But even better is a little exchange place in a mall near me. They will exchange any amount for $5, and the rates are the same as you will see on the internet. I just recommend shopping around and seeing what the best option is for you.

Yesterday, the pound briefly went up due to a court ruling in the UK about the Brexit process. Without going into the details of that, it is just an example of how exchange rates can fluctuate. The whole Brexit process will be long and drawn out, and will have further twists and turns, and as a traveller, there is no point trying to guess its effect on future exchange rates. I personally never try to guess them for any country that I visit. In a number of trips to the UK I have seen the pound at all sorts of levels relative to my home currency (the Australian Dollar). You cannot control the exchange rate, but you can control your spending. I just accept whatever the current rate is. So when I travel, I worry about my spending not exchange rates.

I do not mean to be contrary, and I have no animosity for the previous poster, but I feel I must point out a few things for the larger community:

*Find out how your bank handles overseas transactions and whether or not they have a partner bank in the UK whose ATMs you can use without extra fees (eg. Bank of America customers can use Barclays ATMs). *

Yes, for some banks, if you use an affiliated ATM you can save fees. but that is only if your bank charges you a fee. If your bank charges no fee, then generally not a problem, few European ATMs charge a fee. Bank of America typically chrges you a $5 fee for an out of network ATM, many banks and credit unions do not. Bank of America has another problem in that when you do use your ATM card at an ATM in Europe, they will charge you a 3% Foreign Transaction Fee (FTF)

Then make a small international transaction with your card and compare the exchange rate the bank (or credit card or whatever) against the actual rate (you can look it up online). If it's close, you're good to go (Visa or Mastercard only - no one takes Discover or AMEX, no matter what they try to tell you).

Yes, when your transaction clears, you can go online and see what it cost you in US Dollars, then compare to the interbank rate on Oanda or other currency exchange sites (not the Bank of America site) Again, it will be dependent on if your Card charges a FTF, some cards charge a 3% fee, others none, you can figure this out well before you travel. As for cards, Visa and Mastercard are more popular, AMEX is accepted in the majority of places, especially whare there are tourists (have one, have used it dozens of times), Discover, yes, much less often.

If it's not a good rate of exchange, find a different card. This may seem silly, but when I first went to London, I had two banks, both with Visa. One gave me a rate close to what I would expect while the other was a good 20 points higher. It is definitely worth checking into. When I complained to the one with the high rate, they claimed it was Visa's fault (but obviously not since my other card was a Visa as well and the rate was fine).

Yes, find a different card, but it is not "Visa" or "Mastercard" but the card issuer and it is not the "exchange rate", All the Networks have very good exchange rates (the interbank rate) it is your card issuer (Bank of America, or Chase, or Capitol, or United, etc..) that determine what fees you are charged, again, the most common is the 3% FTF, find a card that has no FTF.

I figure out about how much of the local currency I will need for my trip, rounding up generously. I keep an eye on the rate for a while before I go. When it's at a low point, I go and get some cash. There are two options for this. If you have Bank of America, you can get $1000 worth of foreign currency with no fees.

Generally, getting currency in the US will cost you at least 5% over interbank rate. Bank of America (or any exchange place may charge you "no fee", but they make it up in the exchange rate. As an example, today the Pound is running $1.25 interbank, at BoA, it will cost you $1.3041. The euro, interbank, $1.11, BoA: $1.1736. The euro is just over a 5% premium, the Pound less, just over 4%, but that is likely lag in the dropping rate.

But even better is a little exchange place in a mall near me. They will exchange any amount for $5, and the rates are the same as you will see on the internet.

I can not give any argument any way, except to say that they need to make a buck. they make some of it in the $5, but likely, like BoA, they get some back in the exchange rate.

An ATM card with no fees is still the best source of cash, it will cost you just under 1% in network fees, providing you avoid the few ATMs in Europe that charge a fee for withdrawal and you avoid Dynamic Currency Conversion (DCC)

Credit Cards are also a good method, providing you have a no FTF card and you avoid DCC.

Right now we have the additional complicating factor of the upcoming election. Depending the outcome, the dollar could take a nosedive relative to the € and £.

Paul,

Thanks for the clear and concise post. Everything you stated is what I always say, just more precisely stated. :-)

We travel to Europe, South America, Asia and more quite a lot and this is my plan on currency.

1) We rely for most of our foreign currency needs using ATMs
2) I usually take a backup of about $300 US cash, just in case for some reason my ATM didn't work. That happened in Copenhagen and I was so glad that I had the cash.
3) Depending on where we travel to, I will buy some foreign currency in the USA. I have found that Wells Fargo and Bank of America both have exchange rates that are better than my local bank and others. You must have an account with one of those banks to use that service. You can order via your local bank (BOA or Wells Fargo) We purchased several hundred dollars of Japanese Yen, since most ATMs in Japan don't accept US ATM cards.

Something I just learned is that one of the perks for many US-based banking institutions is free international conversion. For an upcoming trip, I'm handing off some cash to my brother-in-law who is an employee with one of the large, national chains, and he will stop in at a branch and have the conversion done ahead of time at no fee. Ask around with friends or family who work at banks to see if they have this option. Not everyone will have the connection available but boy am I glad to have stumbled across the info!

That would be handy. Anyone trying this should verify that they are getting the official exchange rate as well as no fees on the transaction. It's easy enough to say, "No conversion fee" and then charge the customer an extra 3 cents or more for each euro being purchased. It's not a fee if they are just using their own exchange rate, but it comes out to the same thing for the customer. It's obviously still better than getting the disadvantageous exchange rate and being charged a fee on top of that.