Should I exchange money before I travel? Definitely not. Learn how to buy foreign currency while traveling by knowing exchange rates, using ATM’s, credit cards, and currency exchange offices.
Some important questions first-time international travelers always ask, “Should I exchange money before I travel.” “How do I know the exchange rate?” “Where should I get cash?” “Should I use credit cards or debit cards?” In this post, I’ll answer all these questions, and more.
Let’s look at the many options accessing your money internationally – from worst to best:
Should I exchange money before I travel? – The Worst option: Travelers Checks.
It was very nice of your grandma to give you that $500 travelers check for your big summer trip, but good luck cashing it. Travelers checks have gone the way of dial-up internet, cassette tapes, and incandescent lights. That is, they all still exist, but nobody wants them. You should be able to cash them in a major city, but outside of that forget it. They are inconvenient to the point of uselessness, the worst way to access your money in foreign countries.
Should I exchange money before I travel? – The 2nd worst option: Ordering foreign currency from your local bank.
Your bank might provide this service, but there will be a cost. They might say the transaction is “commission free”, but that just means that they are taking it out of you on the exchange rate. No bank has time to ship currency around for nothing. And besides, you don’t need to be carrying a big stack of cash around for your whole trip. That’s a disaster waiting to happen.
Should I exchange money before I travel? – A Poor option: Bringing a stack of U.S. Dollars with you.
This is only a slightly better choice, as you will likely be able to exchange the dollars at a much better rate when you are overseas (pretty much the whole world wants US dollars). Again, you don’t want to be carrying a big stack of cash around for your whole trip. Too much risk of theft or loss.
Should I exchange money before I travel? – A good option for some purchases: Use a credit card with no foreign exchange fees that earns you travel rewards.
A frugal traveler should have several credit cards that earn flyer miles, and most of these cards do not charge foreign exchange fees, meaning a bill in a foreign currency is paid by the card at exactly the market exchange rate in US dollars, with no extra 3% fee tacked on. You should use a credit card for all significant purchases where fraud seems unlikely. I would define that as all your airline tickets, car rentals, most hotel stays, some tours, and any purchase from an upscale establishment that you would judge unlikely to skim your card. I would not use a credit card at small shops and restaurants for small purchases.
In some countries, credit cards are still not in wide use. For example, try paying for a big night out on the town in Laos with only a credit card. It will be pretty hard to do when the power/internet goes out to the whole town for 6 hours. To learn how to get the most bonus miles out of your credit cards, check out my page Nine Steps to Free Flights Worldwide.
Never use a debit/ATM card to pay for anything while abroad. Debit cards do not offer the same protections as credit cards. If your debit card gets skimmed, thieves can clean out your bank account, and you will NOT get that money back. If your credit card gets skimmed, you can flight the charges with your bank, and you are likely to get every penny back.
My credit card was skimmed at a shoe store in Stansted airport. We didn’t know until we checked the bill a couple of weeks later and saw $5500 in fraudulent charges. All we had to do was sign a legal document identifying which charges were fraudulent, and the bank refunded us all that money.
When paying a credit card charge abroad, always choose to PAY IN THE LOCAL CURRENCY. You will undoubtedly be offered the “opportunity” to pay in your own currency by a cashier with the credit card machine at some point. Just Say No. It is a scam that just adds a hefty conversion charge to your bill.
Should I exchange money before I travel? – The best option: Withdraw local currency from an ATM.
This is the easiest way to handle money while traveling. Nearly all developing countries, and some rich countries, are cash economies. You’ll want to get cash from an ATM every few days, and carry only the amount that you might spend that day on your person. Leave the rest in your hotel, locked in a safe if possible.
When you get cash from an ATM in a foreign country, you get that local currency at the exact market exchange rate of that day. You don’t have to worry about finding the “best” rate as you would when searching for a currency exchange kiosk. You got it.
Avoid ATM fees: In some foreign ATM’s, the local bank will charge you an ATM fee. Your American bank likely will also charge you a fee for using an “out-of-network ATM”. For that reason, it is in your best interest to get the maximum possible withdrawal amount each time you use the ATM. And FYI, maximum withdrawal amount vary wildly across the world, and are generally unrelated to your home bank’s maximum daily withdrawal amount.
One exception to all this advice is the dreaded “Euronet Worldwide” ATM. These miserable garbage machines seem to be spreading like wildfire. They are most commonly found in airports BEFORE you clear passport and customs, and in front of popular expensive hotels. They don’t work quite like normal ATM’s which just give you the correct “market rate of the day”. Instead they charge massive transaction fees, AND will give you a “choice” of rates, with scaremonger wording like “Would you like a guaranteed rate of blah-blah-blah, or a non-guaranteed rate to be determined later?” If you choose the “guaranteed rate”, the only thing that is guaranteed is that you just got screwed. Amsterdam has banned these, and hopefully other cities will soon.
There are a handful of banks that do not charge out-of-network ATM fees. A High Yield Investor Checking Account through Charles Schwab eliminates all foreign transaction fees, AND offers ATM rebates. Seriously, Schwab charges you NO FEES, and they REFUND YOU THE OTHER BANK’S FEE!! Their ATM card is accepted worldwide. I have had their ATM card for two years and I love it. All travelers should get one.
Contact your bank before you go on travel. Tell them where you will be going, and ask them to not block your card for what they may construe as a suspicious foreign activity.
The old fear of a foreign ATM “eating” your card is mostly non-existent. It’s never happened to anyone I know. It IS very common for a foreign ATM to “spit out” your card and refuse to accept it. When this happens, you should not panic. Just move on to another ATM from a different bank. You may have to try several before one works. Remember which one worked and stick with that bank the rest of your time in country.
Be aware of how widely disbursed ATM’s are in the country you are visiting. In rich countries, you will find an ATM in every tiny town. In developing countries, ATM’s may exist only in the capital city. Ask around. You may need to load up on cash BEFORE heading out to that beautiful beach town 8 hours away.
DONT use a credit card to withdraw cash from an ATM if you can avoid it. You’ll be charged a hefty cash advance fee of 3-5%, AND immediately start accruing a high interest rate on the cash you withdraw, likely in the 25-30% range!
There are ATM’s in ALMOST every country in the world. Some notable exceptions;
- Eritrea – A few ATMs, but none will work with foreign cards. Bring USD
- Iran – Plenty of ATMs, but none will work with foreign cards. Bring USD.
- Japan – Many Japanese ATM’s do not accept foreign cards. Find a 7-11 convenience store. Their ATM’s will work.
- North Korea – No ATMs. Your tour guide will exchange money for you.
- Somalia – At last count, they had one ATM. Better hope it likes your card.
- Venezuela – has a corrupt monetary policy by which the government sets a laughably poor official exchange rate for the Bolivar. If you used an ATM in Venezuela you would be throwing away 99.9% of the value of your dollar. Your only option here is to enter the country with all the USD you need for your trip and exchange it on the black market within Venezuela.
- Zimbabwae – As of 2018 Zimbabwae is literally running out of cash, and you cannot get any cash out of their ATMs. You MUST bring all the US Dollars you will need for your time into the country when you arrive. The US Dollar is the accepted currency in Zimbabwae. You will need small bills, and can find people to break larger bills into ones for a small tip.
Know the exchange rate.
You need to know the up-to-date exchange rate before you pull cash from that ATM. You can download the XE.com app to your phone that will track whatever currency you will be needing. I like to create a cheat-sheet of the exchange rate expressed in the foreign currency. For example, my sheet for Ugandan Shillings would look like this:
5,000 UGX = $1.32
10,000 UGX = $2.64
50,000 UGX = $13.20
100,000 UGX = $26.40
After looking at the sheet for a day or two, I’ll have it memorized, and no longer need it.
How to buy foreign currency from an international currency exchange kiosk:
If you are travelling from country to country, you’ll eventually be exchanging money. You’ll find yourself at a border with a stack of cash from the country you left, and you’ll want to exchange it for the currency of the new country you’ve arrived in. It is important to keep your wits about you when doing this, or you can easily get fleeced.
- Step One: Try to avoid currency exchange in the first place. Don’t withdraw $300 worth of Euros the day you are leaving Europe. Try to plan it so you spend your last bill as you get on the plane/bus/train to the next country. Also, be sure to spend all your coins over the last day or two in country. No exchange desk accepts coins, and you don’t want to be carrying around a bag of loose coins for months.
- Step Two: Calculate the exchange rate. You should use the XE app on your phone to calculate the exchange rate between the currency of the country you are leaving and the country you are entering. Do this before you cross the border. Know what number you “should” be getting. Of course all currency traders are there to make money, so you should expect to lose a small percentage when exchanging. 2%-5% is reasonable. 10%? No way!
- Step Three: Find out from locals beforehand what options you will have for exchanging your cash. For example; if you are leaving South Africa with a stack of Rand, there is no urgency to exchange that cash with some creepy guy running up to you at the border. The S.A. Rand is the most widely accepted currency in Southern Africa, and you can exchange it in many banks in all of the neighboring countries. For a different example; lets say you are leaving Rwanda with a stack of Rwandan Francs. You better exchange those Francs near the border. Rwanda is a tiny country, and few people travel there, so very few currency exchange kiosks are going to carry its currency. You’ll struggle to exchange that cash in Nairobi or Dar Es Salaam. So, you’d better make a deal with whomever you find at the border.
- Step Four: Window shop the currency rates of the exchange kiosks. You can’t expect to get the EXACT market exchange rate off XE. Those exchange kiosks exist to make a profit. It’s up to you to decide how much profit seems fair to you for the service they are providing you. If you know you should be getting 100 dirhams for your shekels, and a kiosk is offering 98 dirhams per shekel, you are losing 2% of your money in that transaction. That’s not too bad. A 5% loss would be about the most you should accept. And since you did a good job budgeting your ATM withdrawals, you’ll never be exchanging more than $100 worth of cash right?
- Step Five: When you make the transaction, WATCH YOUR MONEY. Assume the exchanger is going to try to cheat you. Make it clear how much money you are handing him. Watch him count it. Watch him count what he is handing you back. Count it yourself. Count it twice. This is not the time to take a phone call or play minecraft. There are lots of money exchange scams, and there are lots of honest brokers. You never know which is which.
Protect Yourself from theft
Protect your cash:
I try to travel with the minimum cash necessary. If I know I have daily access to ATMs, I never carry more than two days worth of spending money. If I’m heading out into small villages for a week, I might have to carry a weeks worth of cash. Sometimes a weeks worth of my spending money equals an entire years income of a local. This makes me a target.
When I am in a hotel: I always use the hotel safe if there is one. If not, I use a number of hiding places:
- at the bottom of my disgusting dirty clothes drybag
- in a pair of folded up socks
- inside the frame of my backpack (not in an obvious exterior pocket)
- somewhere in the walls or ceiling of the hotel room
When I am moving from town to town; I keep everything in a travel pouch hooked on my belt loop, and hidden inside my pants. I can’t be pickpocketed. If someone wants to put a knife to my neck, they can have it.
Protect your bank accounts:
It is of the utmost importance to plan ahead for possible loss of cards or cash through theft. I recommend having:
- at least two checking accounts (with two separate ATM cards) so if one card is lost or stolen, you can still get cash. I have three accounts.
- at least two credit cards, so if one card is lost or stolen, you can still get a plane ticket home.
- at least $200 in either USD or Euros in emergency cash, because if all else fails, US dollars will be accepted by someone to get you what you need.
- Never access any bank account or credit card account on an unsecure wi-fi signal!
These items should be kept hidden in two different places. Perhaps put an ATM card, a credit card, and $100 cash in your daypack, and the other ATM card, credit card, and $100 cash in your hotel safe or on your person. When I am staying in a room with no safe, I hide my passport, cards, and cash in the strangest place I can find in the room. When I am traveling from city to city, they stay in a zipped, un-pick-pocket-able location somewhere on my body, never in a bag.
These are my strategies for protecting my money.
And here is my track record using these strategies: After traveling to 100+ countries; I’ve lost a grand total of $40. I was mugged at knife-point once in Quito, Ecuador. Luckily, I had brought with my only the amount of money I might need for the evening. I had $40 in one pocket, and another twenty in one of those tiny jeans pockets that is inside the regular pocket. The mugger held a knife to my neck with one hand, and went through my pockets with the other hand. He found $40, and a laminated copy of my passport (which he tossed on the ground). He didn’t find the other twenty-dollar bill. It was a very scary moment, and it affected me for a few months. But financially, it was nothing.
I’ve never had anything disappear from a hotel room. Never. Whether that is due to my excellent hiding places, or that maids are way more honest than anyone else in society, I’ll never know.
I’ve never been pick-pocketed. There have been a couple of attempts, which I recognized and headed off before they got close enough.
I’ve never had a bag stolen.
I have had a credit card skimmed. In a shoe store in Stansted Airport, London. They ran up $5500 in charges within 24 hours. I didn’t notice until weeks later on a rainy day in an internet cafe in Romania. I was panicked, like the feeling of all the blood leaving your body as I read my credit card statement. However, it all worked out fine, and the credit card bank refunded me every penny.
If you follow these tips, you’ll know the right answer to: “Should I exchange money before I travel?”
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