In order to complete my customs and immigration check in at Tobago Island I had to pay a fee, but in order to do that you need local currency. With that in mind I headed to the bank. After waiting for half an hour I got to the front and the lady said they would exchange at a rate of 6 Trinidad & Tobago dollars for each US dollar. Having armed myself with the knowledge the rate was at 6.75 on XE.com I declined. I then walked out of the bank and half a block down to talk to a local selling drinks and flip flops. He took me around the corner to another guy with a stand out of his truck and this guy offered me 7 to 1. When I exchanged $400 US this added up to over $50 in savings.
Is it always better to go to an exchange guy when in another country? NO! It all depends on the country. Some countries, like Trinidad & Tobago, you get the best rate from a local exchanger that might feel a bit shady. Other countries, like Grenada and other others that use the Eastern Caribbean dollar, the best rate is from a bank. Then you have a third set, like Turkey, when your best rate is from a Western Union office.
The key is to first know what the rate should be. I like to use XE.com to give me an idea. I know I usually don’t get all the way to that rate since it is for large sums of money, but it gives me an idea of what the rate should be close to. The next thing I do is look at the rate boards in a bank and exchange shops. As you spend more time in each country you start to find the best ways to exchange money.
Two things I do not do if I can help it are 1) I loathe commissions. If someone wants to charge me extra money to change money then I am out of there. I usually would rather get a bit lower of a rate then pay a commission. 2) I do not exchange my money at a bank in the United States before I travel. If you do this you will get the worst rate PLUS pay a commission. Double whammy.
Also keep in mind ATMs usually give good exchange rates, but watch the transaction fees as they can turn a good rate sour quick.