Figuring out how to exchange currency before you travel could save you a good amount in fees. Your local bank or credit union likely has the best exchange rates and lowest fees. If you want to wait until you get abroad, it’s usually more cost-effective to opt for an ATM than an airport exchange kiosk.
Read on to learn about:
- How to exchange currency when you travel
- Why to consider using a no-foreign-transaction-fee credit card
- Tracking your spending while you travel
How to exchange currency when you travel
Here’s how to convert money when traveling:
1. Buy foreign currency from your bank or credit union
2. Order cash through a currency conversion website
3. Take out cash from an ATM
4. Use an airport exchange kiosk (but only if you have to)
1. Buy foreign currency from your bank or credit union
If you want some foreign currency in your pocket before you arrive at your destination, consider purchasing it from your bank or credit union. Banking institutions typically have decent exchange rates, but you might have to pay a fee for the transaction.
Bank of America, for instance, offered a British pound exchange rate of GBP 0.71 (meaning 69 pence — or 0.69 pounds — per U.S. dollar) on Sep. 15, 2021. According to Google, the market rate that same day was only slightly higher at GBP 0.72, so Bank of America’s exchange rate wasn’t bad.
Note that the bank also charges a flat delivery fee of $7.50 for all foreign currency orders under $1,000. But if you get cash in advance, you won’t have to worry about tracking down an ATM upon arrival.
“One of the best ways to exchange money into foreign currency is by exchanging money at your local bank or credit union before your trip,” says Danielle Desir, founder of travel and personal finance blog The Thought Card. “The only catch is that oftentimes your local bank might not carry foreign currency, so it may take a few days to order the currency. If this is the case, plan ahead.”
2. Order cash through a currency conversion website
Banks aren’t the only places to exchange money. You also can conduct this transaction online through a currency conversion website, such as Travelex or OFX.
Compare your rates to your bank’s to see which one gives you more bang for your buck. As of the time of writing, for example, Travelex offered an exchange rate of GBP 0.74, a more competitive rate than Bank of America’s.
Also keep an eye out for any delivery fees. Note that these fees are usually waived if you order more than a certain amount. Some online currency exchanges also have the option of in-store pickup.
Whatever approach you take, make sure to start the process well in advance of your trip. You don’t want the money to arrive at your home address when you’re already halfway across the ocean.
3. Take out cash from an ATM
Accessing an ATM is another cost-effective way to get your hands on local money.
“It will cost you to change your money no matter how you do it, but [one of the best ways] to do it is to withdraw cash from an ATM in your destination country,” says Peter Koch, financial blogger at DollarSanity.
It’s a particularly savvy move if you have a bank with low or no foreign transaction fees. Charles Schwab, for instance, doesn’t charge a foreign transaction fee, and Ally Bank charges a low foreign transaction fee of up to 1%.
Charles Schwab is an especially smart option for frequent travelers, as it has locations around the globe and reimburses you for ATM fees worldwide.
That said, not all banks have such friendly terms. Santander Bank, for instance, charges the following fees:
- $6 for an international ATM cash withdrawal
- 4% of any transaction you make outside the U.S. using your debit card
- 3% of any transaction you make in foreign currency using an ATM card
Plus, some ATM networks charge high fees, which can be hard to predict. You typically will be able to review the fee on-screen before completing your transaction, though, so you can cancel if it’s outrageous.
It’s also a smart idea to take out cash at once, instead of making lots of small withdrawals, to prevent fees from adding up. On the other hand, don’t withdraw too much, as you’ll want to guard against the risks of pickpockets or lost wallets.
Finally, make sure to tell your bank you’ll be out of the country so you don’t get locked out of your account.
4. Use an airport exchange kiosk (but only if you have to)
When you get to the airport, you’ll likely see one or more exchange kiosks offering a variety of foreign currency. Despite what their signs might advertise, these exchanges typically have the worst rates and the highest fees.
“Definitely avoid airport currency exchange because you’ll likely get an even lower exchange rate,” says Nick Brennan, world traveler and founder of My UK SIM Card. “They know that they have a captive audience who may have left it to the last minute [and] are in a rush (but also excited about their vacation), and so [they] can get away with offering an even lower rate.”
If you plan in advance, you won’t be that worried traveler who’s susceptible to high fees because you didn’t get currency in advance. You also can arm yourself with knowledge by researching current exchange rates before you leave. That way, you’ll have a good sense of what’s a fair rate and what’s not.
Why to consider using a no-foreign-transaction-fee credit card when you can
Unless you belong to a traveler-friendly bank, chances are you’ll lose money during the exchange from U.S. dollars to another currency. Fortunately, there are lots of travel destinations where you barely have to use cash at all.
“My advice is to forget about exchanging money, other than for a small amount to start you off and have in your wallet,” says Brennan. “In the U.K. and Europe, you can use your debit or credit card for purchasing almost anything.”
You’ll save the most if you use a credit card with no foreign transaction fee, such as the Chase Sapphire Preferred or Capital One Venture card. Some cards also have extra perks for travelers, such as rental car insurance or trip cancellation reimbursement. Terms may apply.
Note that certain credit cards charge an annual fee, so make sure the benefits outweigh the cost. Plus, you have to be careful about staying within budget and not charging more than you can afford to pay off each month. Credit cards come with high interest rates, so carrying a revolving balance from a vacation could end up costing you more in interest than currency exchange fees would.
Tracking your spending while you travel
Although it’s easy to give in to the “treat yourself” mindset while you’re on vacation, be careful not to throw your budget out the window.
Travel often comes with unexpected costs, but there are ways to prepare for the unexpected and save more of your hard-earned money. This guide shares more tips on how to save money when you travel.
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