# AUD to USD currency exchange



## SCWatson1996 (Apr 21, 2015)

Hey guys and gals.
Please save me from dying of stress.

*Background:*
I'm moving from Australia to the U.S. on the 20th of July with an F1 Visa.
I currently have $17,000 AUD, and will have $20,000+ AUD by July.

I have my savings on an Australian account which gets 4.95% interest P.A. 
I only started placing my funds on this account in December 2014, so the most amount of interest I will have received by July will be a few hundred AUD, as a ball park estimate let's say: $500 AUD. 

In July, once I have arrived in the U.S. I will open a U.S. bank account and transfer all my currency onto it (obviously in USD).

*Question:*
I am worried that the AUD will continue to fall between now and July.

Should I A: Keep my money in AUD on my Australian bank account until July when I can transfer it into USD onto my newly opened U.S. bank account? _thereby taking the risk of the exchange rate becoming worse between now and then, but knowing that I'll be able to slightly cut my loses with that $500 AUD of interest.
_

Should I B: Transfer the $17,000 AUD I have now to USD onto a travel card. So that I can sleep easy knowing that I at least have some money in USD, in the unfortunate event that the AUD further weakens between now and July. 

Should I C: Do option B, but instead of transferring it to a travel card, I transfer it into a check written out to myself in USDs. 

Or is their a another option I'm not aware of? 

*Additional info:*

Current AUD - USD exchange rate: 0.77AUD - 1.00 USD

Commonwealth Bank's current exchange rate for writing a check in USDs: 0.7283

Cost of writing a check: $30 AUD.

Ozforex travel card current exchange rate: 0.7608



All advice is greatly appreciated.


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## BBCWatcher (Dec 28, 2012)

SCWatson1996 said:


> In July, once I have arrived in the U.S. I will open a U.S. bank account and transfer all my currency onto it (obviously in USD).


Why? Are you planning never to spend another Australian dollar? The U.S. certainly doesn't think you're staying permanently in the United States if you have an F-1 visa. 

To answer your question _exactly_ we'd really need to know how much you expect to spend in the United States and whether you'll be receiving any income in the United States.

However, you seem to be prone to classic "buy high, sell low" psychology. U.S. dollars are not "on sale" right now. Do you rush to your grocery store to stock up on cans of peas when the price of peas increases? That's what you're proposing to do.

I can't predict what the exchange rate will be in the future. However, I do know that U.S. dollars are not a _particular_ bargain right now in Australian dollar terms when considering historical rates. I also know you're getting 4.95% interest in an economy that reported 1.7% inflation in the fourth quarter of 2014, and that's _damn_ good.

Since neither of us can predict the future, one perfectly sensible, logical approach is to "dollar cost average" into U.S. dollars. Here's how that'd work.

Let's suppose you expect to spend US$5,000 in the U.S. before a U.S. dollar income kicks in, so that's the amount you want to aim for since that's the minimum you'll have to convert, assuming no emergency. As I write this you have almost exactly 3 months until your move, or about 12 weeks. So here's one approach:

1. Take the US$5000 figure and convert it to Australian dollars, and you get about AUD7200.

2. Take 7200 and divide by 12 and you get AUD600.

3. Every week for the next 12 weeks, on the same day of the week at the same time, convert AUD600 to U.S. dollars.

That dollar cost averaging approach means you'll automatically be buying more U.S. dollars when their price is lower and fewer U.S. dollars when their price is higher. The net result is you'll get more U.S. dollars as the exchange rate bounces around, and you should end up with US$5000 or more.

Yes, there is a possibility that the Australian dollar could crater in the next 3 months, but that's not actually very likely.

Note I'm assuming that you can convert AUD600 per week without transaction fees -- that's there's a reasonable, low cost way to convert such that dollar cost averaging is relatively cost-efficient. That Ozforex rate looks much better than Commonwealth Bank's rate (and fee), obviously.

That said, I'd be very tempted to hang onto that 4.95% of interest for as long as possible and focus more on reducing the conversion cost. I took a quick look, and I see that there are at least two Australian credit cards with zero annual fee and zero bank-levied foreign transaction fees: the Bankwest Zero Platinum MasterCard and the 28 Degrees Platinum MasterCard. Either of those cards would work very well for you -- MasterCard is widely accepted in the U.S., even for daily spending like groceries. (But do not use either card for cash advances or to withdraw cash from an ATM. And do set them up for automatic full balance payment if possible, or at least never carry a balance on them. You'll also likely need to set up a "travel notice" with the card issuer to let them know you'll be in the U.S. so that they don't decline the charges when U.S. charges start appearing.) Then just bring a _bit[/b] of U.S. dollar cash -- maybe dollar cost averaging as I suggested over the next 12 weeks, finding the best cash conversion deal you can, but probably not so much -- and you're all set. You're making 4.95% on your money right now, you can dollar cost average to buy cheaper U.S. cash over the next 12 weeks (just for your cash needs), and you've got a 0% way to tap into additional Australian dollars -- which will automatically be dollar cost averaged, too, because you'll spend them only as you need them. That combination is a perfectly reasonable approach in the circumstances, I'd say._


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## SCWatson1996 (Apr 21, 2015)

Hi BBCWatcher. I'd like to sincerely thank you for your reply, very detailed, well thought-out, and researched. I have obtained a 'Qantas cash card' (travel card), which has no fees other than a 3% conversion fee. (Note: Ozforex card also has a 3% conversion fee). 


I've done the math, and figured out that the Qantas Cash Card with its 3% conversion fee ends up cheaper than going to my local bank and having them write checks in USDs. Because when I inquired the AUD was $0.78, but they were going to write the check at $0.72 AUD. 

So if I do your idea, I'm $23.96 USD per $600 AUD better off, by putting it on the travel card, rather than into checks. 

Once again, thank you for your contribution, I will take your advice!


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## BBCWatcher (Dec 28, 2012)

That 3% is still very expensive, though -- I'm not necessarily suggesting you do that (or do much of that) since 3% plus loss of interest is still a lot to pay to protect against the possibility the Australian dollar might fall. Did you look into those two 0% cards available in Australia?


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## BBCWatcher (Dec 28, 2012)

There's another option available to protect against currency fluctuations, if you wish.

Let's suppose (as I hope) you land in the United States, holding either the Bankwest Zero Platinum MasterCard or the 28 Degrees Platinum MasterCard -- those wonderful 0% conversion cards that are well suited for your U.S. adventure. After a couple weeks in the United States you figure out that you're going to be shopping every week at the Walmart next door and spending at least US$50 per week there for the next 6 months. Just no question about it -- this is shopping you would do anyway, regardless of form of payment.

....But you're nervous about the exchange rate, for whatever reason. Maybe the Australian dollar has risen in value, and you want to lock in what you think is a good exchange rate. Or maybe you just can't sleep well at night taking even a bit of currency risk. Whatever the reason, one option you have is to go to Walmart and buy some of their gift cards. You can buy Walmart gift cards using your credit card, and then you can use those gift cards only at Walmart to pay for your groceries and other shopping at Walmart. (Many other stores also sell gift cards, and sometimes you can even get a bit of a discount off face value if you shop around.)

That's one approach available to you to lock in a particular exchange rate as long as you can reasonably predict your future spending patterns. I wouldn't recommend doing that until you fully understand what your spending patterns are likely to be, and I wouldn't recommend buying _too many_ gift cards.

You can really drive yourself crazy with this stuff, though, and I wouldn't. The best thing you can do is drive down the transaction cost of the foreign exchange as much as possible, and 0% conversion is fantastic. Start with that at least. Then, if a modest gift card strategy layered on top of your 0% credit card makes sense to you, go for it.

A gift card is basically a store-specific cash advance. Your credit card company treats it as a regular store purchase, like a bottle of milk or a pair of jeans. The store obviously likes selling gift cards because you've committed to spending in their store -- and sometimes people lose the cards. They also don't have to pay any interest to you on the value of the card. Also, people tend to spend more when they have gift cards versus cash-in-hand. Again, I wouldn't recommend overusing a gift card strategy -- proceed with some thought and caution -- but it's an excellent weapon in your arsenal for hedging against foreign currency risk.


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## SCWatson1996 (Apr 21, 2015)

Update: I called Qantas today, I inquired more about the 3% fee, it turns out that the 3% fee only applies if you withdraw money in the incorrect currency (e.g you're in England and you use an ATM, but you've only got AUDs on your card, it then charges you a 3% conversion fee). 

You're idea with the gift cards is good, I'll be sure to keep it in mind. 

The more I think about it, the more I'm liking your dollar cost averaging idea, especially now that I know that the Qantas card has no fees, and that they offer good exchange rates (today the AUD is $0.78, and Qantas is offering $0.74). 
The Qantas Card should arrive in the mail next week, upon which I'll probably start the dollar cost averaging plan. It will be something like $20,000 divided by 12 = 1,666 per week.


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## BBCWatcher (Dec 28, 2012)

Do they charge you 0% if you use that card for retail purchases in the United States (in U.S. dollars) instead of withdrawing cash at an ATM (or getting a cash advance at a bank)? In other words, they don't mark up any transaction beyond what the Visa or MasterCard network foreign exchange rate is? That'd be OK if so. Otherwise, 3% markup is nothing special. It's still an AUD600 markup (plus loss of interest), guaranteed. That's a lot to pay to lock in what could be, after all, a less than attractive exchange rate when you're spending. (Remember, the Australian dollar could go up, too!)

Are you really going to spend AUD20,000 in the United States any time soon/quickly? When I was a student, even counting inflation, that was rather a lot of money. I'm really not wild about your locking in an exchange rate on _all_ that money, and with a guaranteed 3% plus loss of interest cost. That sounds to me like too much "insurance" at too high a price, basically.

Go get one of those 0% cards pronto if the Qantas card doesn't match it, even if you have to get a co-signer (such as a parent) and, thus, get a supplemental card that _you_ pay off every month. That 3% savings would really add up....

....Answering my own question, it looks like the Qantas Travel Money Card indeed charges a 3% currency conversion markup, above the MasterCard network rate, on every transaction, including retail purchase transactions. Yes, you get one Qantas frequent flyer point per Australian dollar you spend overseas, but that's poor compensation for the 3% markup. The 28 Degrees credit card is still a 0% markup card for retail purchases.

I see another attractive option in Australia, even if you cannot qualify for a credit card: Citibank Australia's Plus Transaction account. (That account, specifically.) If you open one of those accounts at Citibank Australia they'll issue you a Citibank debit/ATM card with a Visa logo. That Citibank Visa card then lets you withdraw cash at fee-free ATMs in the U.S. with no currency markup (beyond the Visa network rate). Fee-free ATMs in the U.S. would include all Citibank ATMs, and there are many of those in many parts of the U.S. You can _also_ make retail purchases using that card, again with 0% markup beyond the Visa network rate. You should be able to periodically transfer funds from your existing bank account to the Citibank Australia account using Internet banking, to keep funds available to that Citibank ATM/debit card if you don't want to move all your funds to a new bank. In Australia you can use your Citibank ATM/debit card at Westpac/St. George ATMs free of charge. Many retail stores in the United States, particularly grocery stores, will also let you charge a higher amount to your ATM/debit card when you make a purchase and with no additional fee, and you receive the balance in cash. (Usually they set a $50 or $100 limit above the purchase amount, but if you're pinched for cash and don't see a fee-free ATM around, and you could use a can of soup anyway or whatever, it's a good way to withdraw cash.)

Citibank Australia would also probably let you open a U.S. dollar account in Australia -- though take a close look at their currency rates and markup when you convert. But that'd be a decent idea. Then you'd be able to open a Citibank account in the United States (get a fee-free one) and use Citibank Global Transfer service to move the converted U.S. dollars to Citibank in the U.S. if you wish, free of charge at that point. If you insist on converting money now, that'd almost certainly be a much cheaper route than using a 3% travel card.


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## BBCWatcher (Dec 28, 2012)

As a follow-up, Citibank Australia indeed offers a U.S. dollar account, held in Australia, that you can add to a Citibank Australia Plus Transaction account. It looks like they'll charge about 1% to convert from Australian dollars to U.S. dollars, but please check that. The only disadvantage I see is that you cannot dollar cost average fully because the initial opening balance required on a U.S. dollar account is AUD10,000. So you'd likely have to convert quite a bit all at once, unless they can give you a month or two to hit that target after account opening. Or let you count an Australian dollar deposit toward that minimum balance, and that looks likely.

Once converted to U.S. dollars you can then transfer those U.S. dollars free of charge to a Citibank account in the U.S., U.S. dollar for U.S. dollar. Citibank U.S. even runs periodic account opening promotion campaigns -- search online to see what's available when you arrive -- with $100 to $400 payments when you open an account and do certain things (like use your debit card 6 times to make purchases, or whatever).

This approach probably doesn't work too well if you land in a place in the U.S. that doesn't have a Citibank near by, so that's something to check. Citibank Australia may be able to help put you in touch with Citibank U.S. to streamline account opening a bit.


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## SCWatson1996 (Apr 21, 2015)

The $20,000 is my budget for tuition, and living expenses (keeping in mind that I cannot work in the U.S. on an F1 visa). 

My plan is to open an American bank account as soon as I get there, so any travel card fees in relation to in-store purchases or ATM withdrawals shouldn't matter too much, because I'd offload all my funds onto the new bank account.

I'm moving to Redding, CA, it's a small city, the only major bank is BOA, and there's about half a dozen small banks/credit unions. 


I'll read up on some of your suggestions from your last two posts tomorrow, and get back to you.

Cheers.


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## BBCWatcher (Dec 28, 2012)

There are no Citibank branches in Redding, California, but there are two Citibank-operated ATMs plus several more fee-free ATMs for Citibank cardholders (mostly "MoneyPass" logoed ATMs). You don't typically need to visit a physical Citibank U.S. branch to open an account -- you can do that by telephone or online, and Citibank Australia may be able to help a bit.

A 3% markup (versus 1% or 0%) is actually quite a bit of money -- from AUD400 to AUD600 extra cost on AUD20,000 -- so I'm not sure what you mean. When you convert the currency from that Qantas travel card you pay a 3% penalty, on every dollar. That's not actually attractive given the lower cost currency conversion alternatives readily available to you, with or without credit.


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## ForeignBody (Oct 20, 2011)

If you are earning 4.95% pa in Australia I would leave as much behind as possible. You will struggle to get much more than 1% pa here on accessible savings.


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## SCWatson1996 (Apr 21, 2015)

I'm going to call Citibank and ask them if I can open a U.S. bank account from one of their Melbourne branches. I'll let you know what they say. ('ll also inquire about their Australian USD account that you mentioned). 

Regarding the 3% conversion markup, I'm sorry I didn't explain myself clearly. What I meant to say is, I called Qantas, and they explained to me that there is no 3% fee for doing standard conversions, the 3% fee only applies if I withdraw money from an ATM, and I have the wrong currency loaded on my Qantas card.


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## SCWatson1996 (Apr 21, 2015)

Update: I called Citibank, they cannot open a U.S. bank account from an Australian branch, however they do offer an Australian account in USDs (they call it an investment account), there is no load fees, and no conversion fees, however the initial load must be a minimum of $10,000 AUDs, and to transfer off of the account, is $25 per transaction. 

So this account could be good if I want to convert my money all at once, but it would not work for the 'dollar cost averaging' idea.


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## BBCWatcher (Dec 28, 2012)

SCWatson1996 said:


> Regarding the 3% conversion markup, I'm sorry I didn't explain myself clearly. What I meant to say is, I called Qantas, and they explained to me that there is no 3% fee for doing standard conversions, the 3% fee only applies if I withdraw money from an ATM, and I have the wrong currency loaded on my Qantas card.


That information you got over the phone does not match their fee disclosure on their Web site. I would trust their written fee disclosure.

Regarding Citibank Australia, you skipped the part where I recommended the Plus Transaction account. That's the account that gives you a 0% debit/ATM card, for no markup cash withdrawals (at fee-free ATM machines) and no markup merchant spending at any store that accepts Visa. (Which is just about everybody selling something in the U.S. now.) That's a good thing to do, all by itself.

With respect to converting some of your Australia dollars to U.S. dollars ahead of time, you can _additionally_ open a Citibank Australia U.S. dollar account if you wish. Ask Citibank Australia if your Plus Transaction account balance (in Australian dollars) counts toward the minimum balance requirement.

The $25 fee for transfers is only applied when you transfer those U.S. dollars to a bank that's not Citibank. Citibank Global Transfer, the online service available through Citibank Australia to send U.S. dollars to your Citibank U.S. account (once you land), is free of charge.

You need not necessarily visit a physical Citibank branch in the United States. Citibank should be able to open an account for you by telephone or online in the U.S. However, even if you do need to visit a physical branch, you'd have the opportunity to do so in California. Just not in Redding itself. There's no particular rush to open a Citibank U.S. account since your Citibank Australia 0% ATM/debit card would let you tap into your Plus Transaction account containing Australian dollars.

Got all that?  Sure beats a 3% markup -- that's just a bad, expensive idea in the circumstances.


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## Bellthorpe (Jun 23, 2013)

I can't find it right now, but a year or two back the Australian Financial Review published a review of cards for travelling, and rated the Qantas card as the most expensive proposition of them all. 

My wife and I travel a lot, with homes in two countries. We leave our money where it is, we don't try to outsmart the system and move it where the exchange might be best. We have as much chance of being wrong as of being right. I have a US check account and a US credit card. If and when I need more money in the US than I have I move some from Australia. Ditto in France.


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## BBCWatcher (Dec 28, 2012)

Some universities accept credit or debit cards to make tuition (and other school fee) payments, and some with 0% markup on their end. If both are true, that Citibank Australia Plus Transaction account debit/ATM card would be a good solution.

Redding, California, has 5 colleges and universities, so I won't try to guess. 

I think what Bellthorpe and I are saying is that 3% is an awfully expensive fee simply to take an early guess on the future exchange rate, a guess that has an equal chance of being wrong as it has being right. In other words, on that Qantas card you're paying 3% for the "privilege" of flipping a coin. That doesn't seem like a great idea. What we both recommend is you start by reducing your foreign currency conversion cost as much as possible, and there are some good solutions (Citibank Australia, 28 Degrees, etc.) to do that. Then, if you wish, you can do some mild currency hedging, and there are a few different ways to do that. For example, if your university accepts Visa debit cards and does not charge its own markup, why not start to pay your tuition bill that way using a Citibank Australia Plus Transaction account Visa debit card, starting even before you arrive, in, say, 4 equal tuition installments? If they need you to fax or mail a Visa card number and signature, no problem, you can do that.

On edit: I did check Simpson University as a random choice among the 5 colleges and universities in Redding, just to pick an example. Yes, indeed, Simpson University gladly accepts Visa cards to make tuition payments, and they don't appear to add their own markup. They also will accept partial tuition payments in installments, either before or after you arrive. If after you arrive, there's a fee to enroll in their installment plan. That's one example, but that's probably pretty typical. All Visa cards, including Citibank's, have a daily and/or monthly charge limit, so just make sure you know what that is, converted into U.S. dollars (and slightly reduced from there to make sure it's under the Australian dollar limit) so you can advise your university on how much to charge how often.


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## SCWatson1996 (Apr 21, 2015)

BBCWatcher said:


> That information you got over the phone does not match their fee disclosure on their Web site. I would trust their written fee disclosure.
> 
> Regarding Citibank Australia, you skipped the part where I recommended the Plus Transaction account. That's the account that gives you a 0% debit/ATM card, for no markup cash withdrawals (at fee-free ATM machines) and no markup merchant spending at any store that accepts Visa. (Which is just about everybody selling something in the U.S. now.) That's a good thing to do, all by itself.
> 
> ...


You're right, I've read the Qantas PDS and it's vague on that point. 

I live a couple hours out of Melbourne, on Monday I'll travel in, and visit a Citibank branch to discuss with them the Plus Transaction account, as well as the USD account. 

On Tuesday the RBA (Reserve Bank of Australia) is likely to announce interest rate changes, which is likely to make the AUD fall (It has surged to 0.80 today), so I want to sort this all out before Tuesday. 

In regards to opening a U.S. Citibank account, if I can't do it over the phone, I could easily go to one of their Sacramento branches. 

- Simon


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## SCWatson1996 (Apr 21, 2015)

BBCWatcher said:


> I think what Bellthorpe and I are saying is that 3% is an awfully expensive fee simply to take an early guess on the future exchange rate, a guess that has an equal chance of being wrong as it has being right. In other words, on that Qantas card you're paying 3% for the "privilege" of flipping a coin. That doesn't seem like a great idea.


Yeah I can't deny it. 
And on top of that, using travels cards comes with more risks, because you're not protected by federal legislation which applies to normal banks.


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