Yesterday United Airlines and Travelex announced their new partnership, enabling you to earn miles with the United MileagePlus program when you exchange currency with Travelex. It’s common to find Travelex booths at the airport and other touristy locations, but don’t be fooled! Even with the opportunity to earn some extra miles with your transaction you will be overpaying for your foreign currency.
I strongly recommend that if you need foreign currency you should wait until you arrive at your destination. Ideally you’ll pay with a credit card that has no foreign transaction fees or use a debit card that waives the third-party ATM fee. Charles Schwab has a great online bank if you need a debit card like this, since it has no other fees associated with it but does require you to open a linked brokerage account. Even if you were to use your regular debit card and withdraw money from an ATM at the airport, where you risk a worse exchange rate, that’s probably better than using Travelex.
Why? It’s simple. Manning a booth with dozens of currencies — plus setting aside funds for promotional activities like issuing frequent flyer miles — costs money. ATMs are relatively cheap to operate, and debit and credit cards provide revenue to banks that issue them in other ways. Low fees for exchanging currencies are a kind of “service.”
As a result, it’s no surprise that Travelex often has the worst exchange rates available, even if there’s no explicit fee tacked on top. Travelex is currently offering United MileagePlus members a temporary improvement of 1% in their exchange rate that doesn’t do much to improve the situation. USD 1,000 gets you about EUR 798, plus 1,000 miles. Compare that to the current rate published by Google, which suggests USD 1,000 should yield EUR 876.
What we learn is that Travelex pockets the difference of EUR 78, and you would not want to pay that much even for 1,000 miles. Using a credit card with a 0.50% exchange rate spread, a similar transaction would only cost you $5.