Many travelers assume that the best (and cheapest) way to change money overseas is to use an ATM at your destination.

The reason for this, is that with these transactions you’re almost always charged a professional ‘inter-bank’ rate. That rate is set by a multinational financial organisation like VISA, and your bank will typically add on a small percentage fee (around 1% to 1.5%) to the rate that VISA charges them. Some banks will also charge you a service fee for making an overseas withdrawal, and the local bank may charge you an additional fee for using their ATM.

There are advantages to withdrawing money via an ATM.

First there’s the convenience,and the safety of not having to carry cash with you. It is just much easier to transact at the ATM the same as you would back home.

Then there’s the fees. With a money changer, they could be charging you a fee as high as 10% on the transaction. Usually that fee is hidden in the exchange rate they’re charging you and not up-front as a separately listed commission. If you change a currency from a smaller country or unpopular tourist destination while you’re back home, its likely you’ll pay a hefty price to do so.

By contrast, even with currencies from smaller countries, the transaction at the ATM (excluding any fees the banks will charge you) is typically going to be a rate that is comparable to the current exchange rate.

That said, it is not always cheaper to use an ATM at your destination. If you’re changing a lot of money, the money that you can save in fees and charges, and by being offered a more competitive exchange rate, can really add up.

This is where one of my favourite money-saving tips from my books 101 iPhone Travel Tips and 101 Android Travel Tips will help you.

Currency by (free, $1.99) is one of the more popular exchange rate conversion apps for iOS and Android. It includes a unique feature that makes it easy to see if you’re being overcharged at the currency exchange booth. This makes it easy to quickly make accurate comparisons of the deals offered by different money changers without having to do any (or much) math in your head.

The Currency by XE app allows you to you compare the exchange rate being offered at the booth to the professional money market exchange rate, so you can determine roughly the fees you are being charged.

Tap on the Tools menu and select Rate Advisor. Next enter the amount you paid in your currency in one box and the amount you received in foreign currency in the other box. Then you click on calculate and Currency by XE tells you the difference between what you received and the professional market rate. The lower the difference, the better the rate you have received.

Ask the service attendant at the currency exchange booth how much you’ll receive for the transaction, then plug the numbers into Currency by XE and determine if you’re paying excessive exchange fees. (Be aware that you’ll never get the professional money market rate. This is the rate that banks and financial institutions get when dealing with one another in large transactions. It is not a consumers’ rate.)

While you could just compare the exchange rate you’re being offered with that displayed for those currencies in any iPhone currency exchange app, the Currency by XE app will account for any fees that you might pay. It also displays the difference between the currency exchange booth and the professional rate in percentage terms and in dollar terms. This is easier to understand than a straight exchange rate comparison. You simply look at numbers provided by the Currency by app and compare that with the percentage your bank will charge you for using an ATM (typically around 3%) and add any bank withdrawal fees, and you can quickly see how good the deal you’re getting is.

As you can see from the iPhone screen capture above, the rate offered on my currency exchange equated to around a 2% fee. That’s a deal that is far better than provided by my bank (3% + $5 transaction fee).

There are other factors that I take into consideration when changing my money. For example, sometimes I would prefer not to deal with the person that is offering the best exchange rate.

When I travel, I’m mindful that I’m putting money into the local communities, and that I’m supporting individual business and families with my choices.

In that respect, often there will be someone (say at a local market) that I would rather earn the commission from me. Even in these cases, I still use the Currency by XE Exchange Rate Advisor tool to ensure I’m getting a good rate and this feature has become one of my favourite currency tools.

You can find many more power travel tips like this in my books: iPhone Travel Life, Android Travel Life, 101 iPhone Travel Tips and 101 Android Travel Tips.

Currency by XE – (free, $1.99) Download here (iPhone | Android)