You’ve been careful to spell out a budget for all of your international travel expenses, but did you remember to include the cost of exchanging your currency? Rates can vary greatly and can put a big dent in your plans—especially for those on a tight budget.
By following these tips and doing a little advanced planning, you can get the best currency rates every time you travel and spend all the money you save on a much more enjoyable activity!
Never Assume
You know what happens when you assume, right? I’ll assume you do—if not, the wisecrack answer can easily be Googled.
Many believe that exchange rates are the same no matter where you go to convert your dollar into pounds, euros, pesos, etc. However, this is not the case at all; fees fluctuate greatly, and it will pay to do a little comparison shopping.
The Worst Place to Exchange Money
While the airport is probably the most convenient place to exchange your currency, especially those little kiosks that tempt travelers every day with their ease of use, the companies that operate them are the only ones winning here. They take a huge cut from your hard-earned cash and leave you wondering if you weren’t just robbed blind.
Do you really want to pay that much for a little convenience?
Another common error many travelers make is to convert their money before leaving their home country. This is also convenient, as it lets you arrive at your destination ready to spend. It may even seem like it should come at a lower cost—but it doesn’t.
Most major banks and travel agents will exchange your money for foreign currency, and there are even online services that are willing to deliver any one of 75 foreign currencies to your door overnight. Unfortunately, these seemingly trustworthy sources almost always charge some of the worst exchange rates.
For example, if the wholesale rate of exchanging your money is about $300, a major metropolitan bank is likely to charge you $345, while your travel agent might charge about $315, and an online service would typically charge around $320 or slightly more. That’s a big difference, enough to pay for a decent meal in many travel destinations.
Your Best Option: An ATM
Many people are shocked to learn that using a debit card at an ATM in a foreign country is usually the least expensive way to exchange money. With over two million ATMs around the world, located at most international airports and across seven continents—even Antarctica—this is also a convenient option.
The two major ATM networks, Plus and Cirrus, also have ATM locators available online, allowing you to verify that you’ll be able to find one when you reach your destination.
Here’s what you’ll want to do in order to ensure you can use your debit card:
- Make sure that your debit card belongs to an international network, either Cirrus (run by MasterCard) or Plus (run by Visa).
- Your PIN should only use digits. Most overseas machines do not recognize an alphanumeric PIN. Change your PIN to a numbers-only one if it isn’t already.
- Find out the fees your bank will charge on your debit card transactions while you’re out of the country. The average transaction fees are $3–5 in addition to 1–3% of the amount of the withdrawal. While you won’t get the wholesale rate, it usually comes close. Some banks charge more for international transactions, so it’s important to verify your bank’s policy before leaving to make sure the fees aren’t exorbitant. If they are, consider opening another account with a bank that has reasonable charges, at least for the duration of your trip.
- Once you’re out of the country, remember to make a few big withdrawals instead of frequent smaller withdrawals. Don’t get too much out, though, as you don’t want to be stuck with lots of foreign money when you return home. If you have to convert it back, you’ll pay the fees again. Of course, if you plan to return to the country you visited in the near future, you can save it for future trips—assuming that country doesn’t change their form of currency, as occasionally happens.
Credit Card Options
Paying with a credit card is usually the next best option for securing a favorable exchange rate. American Express, Visa and MasterCard only charge the wholesale exchange rate plus a 1–2% conversion fee on purchases. Many banks issuing Visa and MasterCard will add an additional fee, though, so it’s important to contact them to find out how much it will be.
While using a credit card as a form of payment overseas is slightly more expensive than getting cash out of an ATM, they can sometimes be a better option for large or important purchases due to the consumer protection that comes with them in case of a dispute.
Avoid using credit cards to withdraw cash from ATMs, as you’ll typically be charged several fees, including the wholesale exchange rate, the conversion fee and either a 2% cash advance or $10, whichever is higher.
When using your credit card to obtain cash, the issuer will also begin charging immediate interest, with the rate varying depending on your card. This is one habit you never want to get into, at home or abroad.
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If you do a little research before taking your trip, you’ll be able to save loads of money by avoiding the traps that most tourists fall into. Know thy destination and know thy bank, and thou shalt do just fine.