Is It Better To Save In Dollars Or Rupees For International Travel?
Many banks, online forex platforms and travel card issuers offer competitive rates and discounts during peak seasons.
When planning an international trip, one common question that often arises is whether you should start saving money in Indian rRupees or start converting to US dollars in advance. But the right choice depends on the current domestic currency value and the travel timeline.
Even though the US dollar is one of the strongest currencies in the world but the exchange rate keeps fluctuating. The value of the Indian rupee against the dollar changes every day. If you convert too early and the rupee strengthens later, you may lose money.
For example, if you buy $1 at Rs 86 today but it drops to Rs 83 in two months, your early conversion costs you extra.
When you are saving in rupees, you continue to earn interest and returns on that money. Whether your money is in a savings account, fixed deposit, recurring deposit, or even in a short-term mutual fund, it keeps growing.
But once you convert to dollars and keep it as cash or in a forex card, that money stops earning any return, without giving you any benefit.
In addition to this, you can get better forex deals closer to your travel date. Many banks, online forex platforms and travel card issuers offer competitive rates and discounts during peak seasons.
Another reason why you should not save in dollars is that storing physical dollars at home for months increases the chances of misplacement or theft. Even if you load a forex card early, the money simply lies idle and does not earn any return.
Saving in dollars only makes sense if you frequently travel to the US or to countries that use dollar-pegged currencies. Every time you convert money, you incur charges such as forex fees, exchange margins, GST on conversion, and service fees.
If you convert small amounts multiple times, you end up losing more due to repeated charges. Therefore, it’s advisable to convert into one or two larger transactions rather than many small ones.
Saving in dollars in advance could be more beneficial if your travel destination is the US. Otherwise, for trips to Europe, Japan, the UAE, or any other country, you’ll ultimately need the local currency of that destination.
This means you first convert INR to USD, paying a conversion fee, and then convert USD to local currency, paying another fee. This is called double conversion and makes your money more expensive.
If you are planning to build a fund for an upcoming foreign vacation, it’s advisable to keep a close watch on the fluctuations in the exchange rate of INR against the US dollar. A weaker rupee may need you to revise your budget as it may require you to spend more on airfare, hotels, shopping and other expenses abroad. Booking in USD or other foreign currencies will become costlier, leading to an increase in your overall budget.
So, it’s advisable to plan your savings for a foreign travel, keeping exchange rates and your travel destination in mind. You can easily build a fund for your foreign travel through savings in Indian rupees with proper planning and regular monitoring of exchange rates.
