If you’ve ever wondered whether you’re getting a good rate when you change cash last minute, just try this experiment.

Take your hard-earned dollars to one of those counters at the airport, convert it into another currency then back again, and you’re guaranteed to nearly halve your money.

Call me a chump, but I learned the hard way just how bad a deal these places offer when I completed this exercise during a work trip last month.

After checking in at Sydney airport, I paid exactly $100.34 to buy 384 Chinese yuan that I planned to use for shopping — then ended up being too busy to spend it.

When I got back home and tried to cash it back into Australian dollars, I got a shock when the currency exchange clerk offered me just over fifty bucks.

Sensing my outrage, she suggested I try my luck with a place in the city. Airports have a captive market, after all. But the place on George St was not much better, forking out just $56.

So where did it all go wrong, and how can I avoid this rip-off in the future?

THE BIG RIP-OFF

It turns out that there are two ways that airport currency exchanges rip us off: transaction fees and stingy exchange rates.

First off, the $100.34 became $90.35 when a $9.99 fee was applied. Then, the good people at Global Exchange Services applied an exchange rate of 0.2352 Australian dollars per yuan — 22 per cent more expensive than the official exchange rate of 0.1923 per unit on November 9.

When I changed the money back into Australian dollars five days later at Travelmate Money Exchange, a rate of 5.6422 RMB per dollar was applied. That’s 8.5 per cent more expensive than the official rate at the time, 5.2005 RMB per unit, plus a $12 fee on top.

SO WHAT’S THE ALTERNATIVE?

Pre-paid travel cards are all the rage, but working out whether they are actually the cheapest option is not straightforward.

While they offer the advantage of locking in an exchange rate before you travel, rates may be less advantageous than some credit cards, and they come with fees.

Bessie Hassan, a money expert at comparison website finder.com.au, said the certainty of knowing what exchange rate you were paying could help travellers to budget more efficiently during their trips.

“Travel money cards are useful if you want to lock-in a favourable exchange rate, if you need to load multiple currencies onto the card, and if you want to avoid currency conversion fee and ATM withdrawal fees,” Ms Hassan told news.com.au.

David Rankin of Sort My Money said prepaid travel cards were “definitely the way to go”, as they typically involved less fees than credit cards and more flexibility than cash.

“It also forces you to think about what your financial needs for the whole trip will be before you travel,” Mr Rankin said.

“This means you’ll be more likely to set and stick to a travel budget while you’re away. And you’ll be less likely to suffer from a financial hangover when you get back home.”

He said taking out cash posed the risk of attracting “a double-whammy of fees” if travellers withdrew more than they need and had to convert it into Australian dollars upon their return.

WHEN ATMS ARE BEST

According to consumer group Choice, travel money cards were unlikely to be the best choice for short trips abroad.

“If it’s a quick jaunt and your total spend outside of hotels and air travel will be limited to $1000 or so — and your ATM use will be minimal — a travel money card probably won’t be cost-effective,” Choice finance editor Andy Kollmorgen said.

Making 10 overseas ATM withdrawals worth $100 with an Australia Post card and then closing the account, he said, would cost $35, while spending $1000 using a Commonwealth Bank bank card, including two $250 overseas ATM withdrawals, would cost just $25.

PRE-PAID TRAVEL CARDS

ANZ Travel Card: $0 initial load fee, $3.50 overseas ATM fee, reload fee is 1.1 per cent of value purchased

Qantas card with Qantas cash: $0 initial load fee, $1.95 overseas ATM fee, $0 reload fee

Travelex Travel Card: : $0 initial load fee, $0 overseas ATM fee, reload fee is the greater of 1.1 per cent of initial load or $15

Source: Finder.com.au

dana.mccauley@news.com.au