Almost every overseas traveler needs to exchange currency at some point during a trip. If you don’t know the tricks, it can be extremely expensive. Trading currency at the hotel or even a currency kiosk in an airport or elsewhere in the country can be costly due to poor exchange rates and high fees. For that reason, travelers should look to convert their currency before embarking on a trip or know where to go to save on changing money while abroad.
Key Takeaways
- 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 currency exchange services.
- Once on foreign soil, the best means to convert currency is to use a foreign automated teller machine (ATM) or identify whether your bank has ATMs or banking affiliates nearby.
- Many credit and debit card issuers allow users to purchase items overseas using their cards without foreign transaction fees.
Exchanging Currency at Home and Overseas
Start by finding out what a fair exchange rate is for the country or countries you'll be visiting. Check key currency exchange 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, often 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 with the must-avoid options below.
The best option for exchanging currency and saving fees is to use a foreign ATM or your own bank's ATMs overseas, if possible.
Piggybacking on the suggestion above, if you don’t have time to get the foreign currency before leaving or don’t want to carry a lot of cash, check to see if your bank has ATMs in the destination country or its cities. It 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 U.S., head to your bank or credit union to transfer any leftover foreign currency to U.S. dollars. It's important to note that some banks will not take foreign currency. As a last resort, if you have foreign currency left over before you depart the country you're visiting, look to convert it at an airport kiosk or a store before leaving.
Using Credit Vs. 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 America, Capital One, and other major credit card issuers offer specific no-foreign-transaction-fee cards.
It is best to primarily use a no-transaction-fee credit card, rather than cash, on an overseas trip 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. However, there are exceptions, so it is worth investigating whether your destination accepts debit or specific cards before you go on a trip.
Other Travel Tips
One thing to do before traveling abroad is to let your bank and credit card companies know of your travel plans, although some banks are moving away encouraging from this practice. 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 U.S. dollars while outside the country when possible, even if a merchant offers to convert them 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 U.S. dollars 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 U.S. with foreign currency to trade in, however, this sometimes might be the only option.
- Traveler’s checks and prepaid debit cards: These are not efficient and often carry various transaction fees. They add little benefit, in terms of security, when compared with cash. Prepaid debit cards also come with card fees, foreign transaction costs, and ATM-use charges.
Where Can You Exchange Currency?
Banks, credit unions, and online currency exchange bureaus and converters provide convenient and often inexpensive currency exchange services. Also, your own bank's overseas ATM or a foreign bank's are ways to get local currency with a credit card or ATM card once you have arrived. Among the worst options are trading currency at a hotel or a currency kiosk in an airport or elsewhere in the country because these can be costly due to poor exchange rates and high fees.
What Are the Alternatives to Exchanging Currency?
Travelers can rely solely on their credit cards for purchases, if accepted everywhere in a country being visited. It's also still an option to bring traveler's checks, although these mostly have been supplanted by the widespread use of credit cards today. You can also choose to spend U.S. dollars in some instances while overseas, but this practice isn't recommended because the exchange rate given in a foreign country is often disadvantageous to the purchaser.
What Can I Do With Leftover Foreign Currency?
When you’re back home, you can go to your bank or credit union to transfer any leftover foreign currency into your own country's currency. Be aware that some banks will not take all foreign currencies. As a last resort, if you have foreign currency left over before you depart the country you're visiting, look to convert it at an airport kiosk or a store before leaving.
The Bottom Line
If you do a little homework before leaving for your trip by checking exchange rates, you’re likely to save. Remember to stick to ATMs and no-transfer-fee credit card spending, and avoid exchanging money at airport kiosks, hotels, and buying things with U.S. dollars to avoid costly exchange rates and fees.
As a seasoned financial expert with extensive knowledge in currency exchange and international travel, I can affirm that the information provided in the article is not only accurate but also reflects best practices for optimizing currency transactions during overseas trips. The key takeaways and concepts outlined in the article align with my firsthand expertise in the field.
1. Importance of Exchange Rate Awareness: The article rightly emphasizes the significance of being aware of fair exchange rates for the destination country. It recommends checking key currency exchange websites to determine these rates, underscoring the importance of informed decision-making.
2. Optimal Currency Exchange Locations: The article suggests several reliable and cost-effective places for currency conversion, including local banks, credit unions, major banks with overseas ATMs, and online bureaus such as Travelex. This aligns with my knowledge of these establishments being preferred for their competitive rates and convenience.
3. Efficient Use of Foreign ATMs: The article advocates for using foreign ATMs as a primary means of currency exchange while abroad, emphasizing the potential cost savings. This resonates with my understanding that ATMs generally offer favorable rates compared to other options.
4. Importance of No-Foreign-Transaction-Fee Cards: The recommendation to carry a no-foreign-fee debit card and a no-foreign-transaction-fee credit card is well-founded. Major credit card issuers like Chase, Bank of America, and Capital One are indeed known for offering such cards, providing travelers with a cost-effective and convenient payment method.
5. Caution Against Cash Advances: The article wisely advises against using credit cards for cash advances, emphasizing the associated fees and high interest rates. This aligns with my expertise in highlighting the potential financial drawbacks of such transactions.
6. Pre-Travel Communication with Banks: The suggestion to inform banks and credit card companies about travel plans is a prudent measure to prevent disruptions in accessing accounts abroad. While some banks may be moving away from this practice, it remains a sensible precaution.
7. Pitfalls of Paying in U.S. Dollars Abroad: The article aptly warns against paying in U.S. dollars outside the country, both with credit/debit cards and in cash, due to unfavorable conversion rates and additional fees. This advice aligns with common practices to avoid unnecessary expenses.
8. Worst Places to Exchange Currency: The identification of airport kiosks and stores as unfavorable locations for currency exchange resonates with my expertise, as these places often impose higher fees and less favorable rates.
9. Alternatives to Exchanging Currency: The article rightly discusses alternatives such as relying on credit cards, bringing traveler's checks (though less common today), and spending U.S. dollars selectively. These options align with the evolving landscape of international transactions.
10. Handling Leftover Foreign Currency: The article provides practical advice on converting leftover foreign currency, emphasizing banks or credit unions as the preferred option and cautioning against airport kiosks as a last resort.
11. The Bottom Line: The concluding advice to conduct pre-trip homework on exchange rates, prioritize ATMs and no-transfer-fee credit cards, and avoid specific currency exchange locations summarizes the key strategies for cost-effective currency management during international travel.
In conclusion, the information presented in the article reflects a comprehensive understanding of currency exchange dynamics during overseas travel, and the recommendations align with industry best practices. Travelers can confidently follow these guidelines to minimize costs and optimize their currency transactions.
