Currency exchange rates affect more than just a country’s economy. They also affect personal spending and behavior. Failing to compare exchange rates can cost a significant amount of money when you are traveling, purchasing consumer goods, investing, and running a business.
Here are some of the top reasons for you to use sites like thecurrencyshop.com to compare the best exchange rates:
- Save money as a traveler
When you travel, you are most likely using a credit card or a debit card to pay for your purchases. Many banks offer cards that supposedly have no international transaction fees, which are an additional fee typically charged for transactions made abroad.
However, although a card may not charge you with an international transaction fee, they may have a hidden cost built into a quoted exchange rate, which is generally higher than the actual exchange rate, or what is referred to as the benchmark or the spot rate.
This hidden cost is where most banks make most of their profit. On face value, the difference between the quoted exchange rate and the spot rate may not seem like a lot, but it can add up. Before you travel, always make sure that you compare the exchange rates used by your card providers so that you can make informed purchases while you are abroad.
Additionally, knowing the exchange rates will help you know how much you can buy in your destination country. If your home currency is stronger, you can buy more. Otherwise, you might want to postpone your trip because things will get very expensive for you once you arrive at your destination.
- Get a full picture of the cost as a consumer
When you are buying a consumer good online or even as a visitor in a foreign country, you need to know what the exchange rate is so that you know how much your money is actually worth and how much you are really spending. For instance, it may be cheaper to purchase a particular product in another company compared to buying the same product in your home country.
Exchange rates also affect other aspects of your consumption. Here are some examples:
- When your home currency is stronger compared to another currency, imports from that country are cheaper for you, which means that you can buy more of their products. In contrast, when your home currency is weaker, you will have a lower purchasing power when buying products from a country with a stronger currency compared to yours.
- Oil contracts are all sold in USD. This means that when the USD is stronger against other currencies, oil imports are cheaper. It also means that gas prices fall, since more than 70 percent of the price of gas is dependent on the price of oil. This means that you can afford to purchase more gas for your personal consumption.
- Know when to buy or sell as an investor
In theory, if you are a forex investor, you buy a currency when it is weak and sell when it is strong. In reality, there really is no way to predict when the best time to buy a currency is.
As an example, most investors will buy USD when the US economy seems stable or growing, and buy stocks from American companies. However, a strong USD also means that US stocks are more expensive for investors.
If you already own stocks from foreign companies and your home currency is weaker compared to theirs, this is beneficial for you because your stocks are more valuable due to the exchange rates.
- Generate more revenue as a business
Multinational businesses, or even small businesses that source materials or sell their products in foreign countries are affected by fluctuations in exchange rates. Here are some examples:
- If you are a business owner from the US that sources your raw materials from Germany, for instance, you would most likely see lower profit margins when the euro is stronger. This is because of higher manufacturing costs for the more expensive raw materials.
- Building on the example above, if you also have employees that you need to pay in euros, your profit margin will also take a hit because labor costs are more expensive for you.
Conclusion
Exchange rates have a huge impact not just on the national and global economy. You, as a traveler, consumer, business owner, and investor, will also be affected by exchange rate fluctuations. This is why you need to take the time to compare rates before making any major decisions so you can adjust your plans accordingly.
