After my plane landed in Hungary, I quickly learned three important lessons.
The first was that Uber is banned in Hungary, so I’d have to take a taxi into Budapest. The second was that I’d have to pay for the taxi in cash. And the third was that Hungary doesn’t use euros (which I had plenty of) but rather Hungarian forints (which I had none of).
Fortunately, I knew that airport currency exchange kiosks tend to have bad rates and high fees, so I withdrew forints from an ATM.
Using an ATM upon arrival is a good way to obtain foreign currency, but it’s not the only approach. Here are your best options for exchanging money before or during a trip abroad (so you never feel stranded in a Hungarian airport).
1. Take out cash from an ATM
Accessing an ATM can be one of the most cost-effective ways to get your hands on local money.
“It will cost you to change your money no matter how you do it, but the best way to do it is to withdraw cash from an ATM in your destination country,” said Peter Koch, financial blogger at Seller at Heart.
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 handbags.
Finally, make sure to tell your bank you’ll be out of the country so you don’t get locked out of your account.
2. Buy foreign currency from your bank or credit union
Not everyone wants to wait until they arrive to get local currency. When traveling to a new country, you might feel more confident if you already have a few euros, pesos, or forints in your pocket.
If that’s the case, consider purchasing foreign currency from your bank or credit union before you depart. 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 71 pence — or 0.71 pounds — per U.S. dollar) on July 10, 2018. According to Google, the market rate that same day was only slightly higher at GBP 0.75, so Bank of America’s exchange rate wasn’t bad.
Note that the bank also charges a flat fee of $7.50 for all foreign currency orders under $1,000. But by getting 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,” said 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.”
3. 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.
That said, you might find worse rates at these websites. For example, Travelex offered an exchange rate of GBP 0.68 on July 10, 2018 — a less competitive rate than Bank of America’s.
Travelex also charges a delivery fee on orders under $1,000. For example, 100 euros will cost an extra $9.99 for standard delivery. You can, however, opt for in-store pickup.
Before you choose an exchange website, call your bank or credit union to compare offers. Then, you can choose the option with the lowest overall cost.
Whatever approach you take, make sure to start the process well in advance of your trip, as Desir suggested. You don’t want the money to arrive at your home address when you’re already halfway across the Atlantic.
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,” said 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.”
By planning 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.
Pro tip: Rely on 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. When I traveled in England a few years ago, for instance, I never had to take out pounds. Instead, I relied entirely on my credit card and racked up rewards points along the way.
Brennan has had similar experiences, and he advised against taking out a large sum of foreign currency, particularly if you’re traveling in Europe.
“My advice is to forget about exchanging money, other than for a small amount to start you off and have in your wallet,” he said. “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, Capital One Venture Card, or Uber Visa 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.
Track 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, from foreign transaction fees to an expensive Hungarian taxi ride you didn’t see coming (whoops).
But there are ways to prepare for the unexpected and save more of your hard-earned money. Check out this guide for surprising ways you’re busting your budget when you travel — and advice on how to save instead.
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