When traveling abroad, savvy travelers shop around for the best deals on flights and accommodations. But mapping out an efficient plan to exchange currency can also lead to significant savings on your trip. Plan ahead to avoid overpaying for the currency you need to get around in another country.
Why exchange currency?
Carrying local currency is a smart move for travelers. Not every vendor will accept cards, meanwhile your plastic may charge a foreign transaction fee on every purchase. You don’t want to be caught in the position of needing funds in a foreign country without the means to access them.
If you opt to carry some spending cash while traveling, exchanging currency is a necessary part of the process, whether you’re actually trading physical dollars or withdrawing funds from your account as foreign currency.
The key is to do it in the most cost-effective manner, and before you actually take your trip.
Where to exchange U.S. currency before your trip
Many banks and credit unions allow you to exchange U.S. currency for a relatively minimal cost, or none at all, and in the manner that best suits your needs, including online, through a bank’s mobile app, in a branch or over the phone. Bigger banks, such as Wells Fargo and Bank of America, typically offer more of these options than smaller banks or credit unions.
Other, non-bank entities, allow for currency exchange. AAA members, for instance, can visit a AAA branch and exchange currency for no added fee.
Whichever path you take, exchanging currency through a bank prior to your trip can limit costs and give you certainty that you’re receiving actual currency.
“This method is one of the best for obtaining currency because there are no fees, and you’re guaranteed genuine currency,” said certified financial planner Joel Ohman.
The days leading up to an international trip are often hectic. A particularly convenient option is to have foreign currency delivered directly to your home. CitiBank charges $5 for next-day delivery on transactions under $1,000 and Bank of America charges a $7.50 delivery fee, though the fee is waived on orders of more than $1,000.
Before you hit the confirm button though, double check that the exchange rate is reasonable. You can often find costs embedded directly into a less-than-ideal exchange rate.
Compare the rate you’re being offered to the exchange rates from a competing national bank or at Exchange-Rates.org before committing to the transaction.
Where to exchange U.S. currency in a foreign country
We recommend you skip the airport currency exchange, as tempting as it may be, and find an ATM within your bank’s network. Typically, you’ll be able to withdraw the local currency with more competitive exchange rates and lower fees than what you’d be able to secure at a kiosk.
If your bank is international, you could also find a local branch at your destination.
Where to exchange foreign currency back in the U.S.
Typically, the best option to turn leftover currency back into greenbacks is to head back to your local bank or credit union.
Many are willing to buy select foreign currencies. However, there are often limitations on their buyback programs. For example, you might only be able to exchange paper currency, leaving you stuck with coins.
What to avoid to exchange your currency for cheap
While it’s convenient to exchange currency right before or after hopping on a flight, it’s also very easy to significantly overpay. The reality is that airport kiosks tend to have outlandishly unfavorable rates. You could be hit with a $5 to $15 fee on top of an exchange rate that’s 10 to 15 percentage points more expensive.
Traveler’s checks are another financially inefficient option worth avoiding. While a traveler’s check might provide refund options, a litany of transaction fees can often eat away at your funds.
If you’re lost as to whether you’re getting a good deal, it helps to take a look at the exchange rate.
“Know the most recent rate before you request and on the day of your payout,” said Mark Stewart, CPA at Step by Step Business. The rate will vary depending on the currencies and it typically changes by a few cents day to day.
Should you use currency or a bank card?
A bank card, also called a debit card, is an option in many countries. Typically, you should carry both a bank card and some cash. Debit cards protect you from fraud—if someone runs away with your wallet and you report the theft to your bank within two days, your liability for any fraudulent purchases is limited to $50.
But, before you pull out the plastic for all of your purchases abroad, check for foreign transaction fees. Many cards carry a transaction fee of 1% to 5% on purchases in other countries. If you find that your card has a high foreign transaction fee, you could open a new checking account (and thus get a new debit card) with a bank that doesn’t.
Pros and cons of using your bank card while traveling abroad
Here’s what you need to know about using a bank card while traveling abroad.
Let’s start with the pros:
- Convenience. Paying with plastic is often more convenient than carrying around paper currency, taking the time to count it out for every purchase and doing the math to double check your change.
- Fraud protection. Debit cards offer fraud protection, which can keep your money safe while traveling.
- Rewards. There are a few debit cards that offer travel rewards, although you’re more likely to rack up rewards via a credit card.
Now for the cons:
- Payment mismatches. Not every merchant will accept credit payment methods.
- Foreign transaction fees. Cards with foreign transaction fees can lead to additional costs on your trip.
- Replacement difficulty. If you need a new card while traveling, it may be hard to find a local branch or receive one via mail.
Frequently asked questions (FAQs)
While it’s challenging to completely avoid currency exchange fees, it is possible to minimize your costs. One way to minimize currency exchange costs is by skipping the airport kiosks and exchanging currency with your bank or credit union.
Typically, it’s cheaper to use an ATM to get the currency you need. Currency exchange kiosks often come with relatively high fees for travelers.
Many international banks will exchange U.S. dollars for the local currency. If you want to be extra safe, check out your options online rather than assuming a particular foreign bank will exchange currency.
The currency exchange rate represents the value of one currency against another currency. Currency exchange rates fluctuate regularly. Before exchanging currency, finding the official rate online will help you determine the costs tacked on by the bank.
— to www.usatoday.com