In financial news, you can often find the term "currency conversion". But not everyone knows the meaning of this phrase.
In a general sense, currency conversion is the exchange of one currency for the currencies of other states. It can be carried out both domestically and abroad.
Types of currency convertibility
There are freely convertible, partially convertible and non-convertible currencies.
Freely convertible is a currency that is exchanged in any country in the world. There are few such currencies in the world. This is an American and Canadian dollar, euro, yen and others. A freely convertible currency is a great advantage for the foreign economic activity of the state.
Partially convertible is a currency that is not exchanged in all countries. Thus, the Russian ruble is a partially convertible currency.
Non-convertible currency is the currency of the state, which is changed to foreign currency only with the help or with the permission of the central bank.
In addition, the conversion is external and internal, current, capital and so on.
External conversion is the ability to conduct currency exchanges by non-residents, while internal conversion is the same, only for residents.
The advantages of a freely convertible currency
If the monetary unit of the state is freely convertible, then this indicates the developed state of the economy of this state. The conversion of foreign currencies by market participants indicates that they trust it. And therefore, citizens of a state with a freely convertible currency have a fairly high standard of living.
Russia also seeks to make its currency freely convertible, at least so that settlements between states buying from the Russian Federation are carried out in rubles rather than in dollars or euros. Thus, this will increase the level of the economy and raise the ruble to a qualitatively different stage of development. In addition, the status of Russia with a freely convertible currency will also grow.
Currency conversion is cash and non-cash transactions
For cash transactions, it is assumed that the currency will be converted at a bank, exchange point or ATM by withdrawing money from a bank card. Cash conversion is very popular.
Meanwhile, non-cash currency conversion is often much more profitable than cash. This operation is performed, for example, in electronic wallets, in electronic payment systems, online in your personal account on the bank’s website, where an account is opened and, of course, using bank cards.
Currency conversion is one type of transfer of funds between accounts. In this case, money is transferred from one currency account to another, as a rule, in electronic form. To perform this type of operation, a lower commission will be required than with cash conversion, and in some systems the commission will not be charged at all.
How is currency conversion online
The so-called currency converters or currency calculators serve as a tool for online currency exchange. Thanks to them, the currency is automatically converted at the rate set by the Central Bank of the Russian Federation. All calculations are carried out in real time.
Converters can navigate by date. Thus, it becomes possible to make calculations based on the value of the currency as of a given date. Thanks to this function, the user can compare the calculation results and decide whether to convert the currency now or better to wait.
How to calculate the commission charged when withdrawing funds from a bank card abroad
Many Russians today prefer not to take all the cash on a trip abroad , but to pay with bank cards. This is really a very convenient and useful thing. The main advantage for tourists, probably, is its safety, since even in case of theft, the card just needs to be blocked, and then it will be impossible to carry out operations with it. With the help of bank cards, settlements are made, as well as currency conversion. These are transfers of the currency of one country (which is on your card) to another (which you currently need to pay by invoice or receive cash).
The main thing is to know for sure that you can pay with this card when traveling to a destination. It is also necessary to once again make sure that the card at the moment and during the trip will be valid.
In order to calculate what the commission will be, withdrawn from the account when making payments abroad, it is necessary to take into account the fact that a commission is charged for all transactions abroad. Banks sometimes do not charge this commission, or provide for a small fixed fee or a percentage of the payment amount.
Often people want to know before the trip how much they will receive when withdrawing money abroad. However, the bank probably does not know this, because depending on the time, place, conditions of partner banks, and the requirements of local legislation on the process of cashing out money, the amount may be different.