When traveling abroad, be sure to get the most out of your money by gaining a better understanding of foreign currency exchange. There are many resources for exchanging money and making purchases abroad, but many include hefty fees or restrictions. Make sure you understand all of the advantages and disadvantages of each currency exchange option, so you can avoid dealing with any unforeseen charges after your trip. The easiest way to exchange currency may not always be your best option. You can choose to exchange your currency before leaving for trip or after arriving at your destination, but selecting the right one depends on where you exchange your currency.
Know what options for exchanging currency are available before you exchange so you can get the best exchange rate possible. These are the most commonly used currency exchange options.
Airport Kiosks and Foreign Exchange Desks – Although exchanging currency at the airport may sound convenient, it is best to avoid, given the outrageously high exchange fees. According to NBC News, airport kiosks can charge up to 20% in fees and have a much lower exchange rate compared to banks and private exchange companies. Exchanging currency at the airport should be avoided at all costs and saved only for emergencies.
Credit Cards – Before relying on your credit card abroad, first be sure to find out if it will be working internationally. If so, look into the potential fees that may apply while abroad. Some fees may include currency exchange fees, transaction fees, or service charges on cash advances. Overall, credit card companies get the best rates and can offer you an exchange rate closest to the official rate.
Debit Cards – Debit cards may charge foreign transaction fees and international ATM fees. Be sure to only use debit cards for cash withdrawals. If any complications arise from a purchase made using a debit card, your account is immediately debited, and it may take anywhere from a few days to over a week for the erroneous charge to be corrected.
Foreign Currency Cards – Prepaid foreign currency cards work like credit or debit cards. They are preloaded with a set amount of currency, which is deducted as the traveler uses it. However, there are many fees and restrictions that may apply, such as withdrawal and inactivity fees and withdrawal minimums and limits.
Traveler’s Checks – Traveler’s checks work like US dollars; you must find somewhere that will exchange the traveler’s check for the local currency. But unlike cash, traveler’s checks come with the added security of being replaced if lost or stolen. However, due to the declining use of traveler’s checks, they may not be accepted by some businesses.
Private Money Exchange – Private money exchange businesses or currency exchange businesses often compete with each other to provide the best exchange rate, so you have a good chance of finding a higher exchange rate. Some fees apply, and vary depending on the provider. Also, keep in mind that these companies are less prevalent in rural towns, so be sure to complete your transactions before traveling out of large cities.
Foreign exchange fees may seem inevitable when exchanging currency, but these options may help you avoid paying hefty fees.
No Foreign Transaction Fee Credit Cards – Unlike your current credit cards, which on average charge 3% of every dollar spent while abroad, certain international credit cards have no foreign transaction fees.
International Travel Cards – For inexpensive cash withdrawals, go for international travel cards or travel money cards. Cheaper than credit cards or debit cards, international travel cards are prepaid with a certain amount so you can make purchases or withdraw money as you travel. Some even have the option of carrying more than one currency.
Local Banks – Exchanging money at local banks is not only convenient, but also much less expensive than exchanging at airports or hotels. They also tend to give decent exchange rates.
NO to Cash Advances – Using your credit card as an ATM card requires you to pay a cash advance fee in addition to the cash advance APR, which can both add up to large sums.
YES to Local Currency – Always decline if given the opportunity to charge your purchase in USD. This may bring hidden transaction and conversion fees that will amount to much more than charging your purchase in the local currency. Insist that all purchases are charged in the local currency.
There are always financial risks involved with traveling internationally, which is why it is important to take extra precautions making exchanges, purchases, or withdrawals abroad.