There's nothing like coming home from a great trip abroad thinking that you were savvy about sticking to your budget only to be hit with unexpected currency-exchange fees on your bank statement and credit card bill.
For that reason, travelers should look to trade convert their currency before embarking on a trip. It helps if you have an idea of what a fair exchange rate is, so check key business websites first. The following are some of the best and least expensive places to convert currency:
- Local banks and credit unions usually offer the best rates.
- Major banks, such as Chase or Bank of America, offer the added benefit of having ATMs overseas.
- Online bureaus or currency converters, such as Travelex, provide convenient foreign exchange services.
Ordering cash online will likely include delivery charges and the exchange rate won’t be as good as with your bank; however, this is still a better option when compared to the must-avoid options below.
- Because of high currency-exchange fees, travelers should consider converting their currency before traveling.
- Banks, credit unions, online bureaus, and currency converters provide convenient and often inexpensive converting currency services.
- Once on foreign soil, the best means to convert currency is to use a foreign ATM or identify if your bank has ATMs or banking affiliates nearby.
- Many credit and debit card issuers allow users to purchase with no foreign transaction fees.
Exchanging Currency Overseas
Almost every overseas traveler needs to exchange currency at some point during their trip. If you don’t know the tricks, it can be extremely expensive. Trading currency at the hotel or even a currency kiosk in the country can be costly, which includes poor exchange rates and high fees. The best option for exchanging currency and saving fees is to use a foreign ATM.
Piggybacking on the above suggestion, if you don’t have time or don’t want to carry a lot of cash, check to see if your bank has ATMs in the destination country. They may even have banking affiliates there. A key tip is to use an ATM within the airport as soon as you arrive.
When you’re back in the US, head to your bank or credit union to transfer any leftover foreign currency to US dollars. It's important to note that some banks will not take foreign currency. As a last resort, if you have foreign currency leftover before you depart, look to convert it at an airport kiosk or a store before leaving the country.
Using Credit Versus Cash for Foreign Transactions
The world has become so digital that most people no longer walk around foreign countries with traveler's checks and money belts. That’s why you should take both a no-foreign-fee debit card and a no-foreign-transaction-fee credit card with you. The likes of Chase, Bank of American, Capital One, and other major credit card issuers offer specific no foreign transaction fee cards.
Also, it is best to primarily use a no-transaction-fee credit card as it will likely offer fraud protection; use currency only as a backup. You can replace lost or stolen credit cards, but lost cash can never be replaced. However, don’t use your credit card for a cash advance to receive foreign currency. Doing so means you’ll get hit with a cash advance fee and a high-interest rate that starts accruing immediately.
The widespread use and enhancement of technology have helped make using credit and debit cards possible in most parts of the world. "Most" is the operative word as some governments restrict the use of debit cards. Although the list is relatively small, it includes major names like Iran, Cuba, North Korea, Turkey, and Greece. Meanwhile, some countries are slow to adopt technology and may not be as credit card friendly as expected, such as Japan.
Other Travel Tips
One thing to do before traveling abroad is to let your bank and credit card companies know of your travel plans. That way, if you use your credit or debit card abroad, these companies won’t cut off access to your account due to concerns of fraud.
Also, avoid paying in US dollars when possible, even if a merchant offers to convert to USD for you. This includes paying with a credit or debit card. The merchant would likely convert at a rate that’s disadvantageous to you and charge fees. The same goes for paying with USD in the form of cash.
Worst Places to Exchange Currency
Some places that you should avoid for exchanging currency are:
- Airport kiosks and stores when heading to a country (not to be confused with airport ATMs): Plan ahead as airport kiosks generally charge some of the highest fees and have the worst exchange rates. When returning to the US, this might be the only option.
- Traveler’s checks and prepaid debit cards: These are not efficient and often carry various transaction fees. As well, they add little benefit, in terms of security, when compared to cash. As well, prepaid debit cards come with card fees, foreign transaction costs, and ATM-use charges.
If you do a little homework before leaving for your trip by checking exchange rates, you’ll save a pretty penny.