International travel, whether for business or pleasure, carries with it an inherent need for preparation. One of the biggest concerns for the unseasoned traveler is how to obtain the different types of currency that need to be used in a foreign county. The simplest solution is not always the best for your bottom line when it comes to fees and the possibility of being scammed. There are several ways to exchange currency, either before you leave or after you arrive, and all come with their own risks associated with them.
TUTORIAL: Banking: Debit Cards and ATMs
The most advertised way to pay when traveling internationally is to purchase traveler's checks. American Express and AAA.com are the most popular places to offer these financial instruments and come with reasonable rates. While easily available, travelers checks carry the burden of having to keep physical money on your person at all times. The risk of accidentally losing them or worse, having them stolen, is a huge deterrent. In addition, many retail stores in foreign countries do not accept travelers checks.
Before leaving the country, visiting the bank and exchanging currency there is a quick and easy solution. Bear in mind that exchange rates fluctuate on a daily basis so if you purchase it too far in advance, it may not hold the same value when you finally leave the country. The other downside to using a bank is essentially the same problem with traveler's checks, carrying large amounts of cash can lead to difficult situations.
Opening an account in a foreign country is generally not advisable unless you travel to that country often. Foreign countries have many of the same procedures as domestic banks when it comes to necessary forms of ID. You will need a drivers license, social security card, passport and birth certificate handy in order to fill out an application. Many foreign banks will also do a credit check which can take weeks to complete so if you need money immediately, you will have to make other arrangements. (For related reading, see The Importance Of Your Credit Rating.)
If you don't want to carry large amounts of money with you, there are currency exchanges available once you arrive in the foreign country. They are generally small kiosks set up in areas with a lot of traffic, particularly tourist traffic. While the location and accessibility is convenient, the fees and possibility of being scammed are higher. Usually they will list their fees and prices but vendors will often take advantage of the unwary customer who doesn't understand the foreign currency. Finweb.com suggests asking for a receipt and not allowing yourself to be rushed will help you avoid trouble.
Depending on the hotel, currency exchanges can be done directly by the front desk there. They may not list their fees or exchange rates however, and can be the most expensive way to get money. Airports will also have an exchange on location and while their fees can be high, they are more reputable than kiosks. (For related reading, see 6 Factors That Influence Exchange Rates.)
In today's global economy, many banks operate internationally and accounts can be easily accessed through ATMs. The fees can be a small as 1%, and are available any time of day or night. ATMs eliminate the need to procure large amounts of foreign currency in advance, although multiple transactions can be pricey if your bank charges a withdraw fee in addition to normal exchange expenses.
The Bottom Line
Before rushing out and exchanging currency, decide what is best for you in your given situation. Knowing the different options available will help you decide which route is the most convenient, safe and economical for you.