Better To Change Money Abroad Or At Home

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Americans are getting ready to travel again as part of the pent-up consumer demand from the pandemic. If your next vacation is going to take you to another country, you may want to know how to get foreign currency without paying extra fees.

Undeniably, when traveling internationally, it's important to watch out for currency exchange conversion fees, foreign transaction fees and other costs. Currency exchange rates are complicated and are constantly fluctuating as part of the everyday rush of global commerce. One bank, merchant or currency exchange location could give you a slightly better deal on currency exchange rates, just based on the daily ups and downs of the markets.

Of course, it can be easy to overspend in a foreign country. At least in part, this is because spending money in foreign currency may feel different. The prices at stores and restaurant menus may not feel as real as they do in U.S. dollars. It can also be exciting to see and use the colorful foreign banknotes and interesting coins that you may not experience in your everyday life. But, if you're not careful, you could end up paying more than you bargained for.

In general, some methods of getting cash and making purchases will give you a better deal than others when you're ready to take your next international trip. Here are a few tips and insights on how to enjoy your international travels while minimizing currency fees.

1. Get Cash at Your Bank Before Leaving the U.S.

One of the best ways to minimize currency exchange fees is to get some cash from your bank or credit union in the U.S. before you depart on your trip. Depending on which country (or countries) you're visiting, most major U.S. banks will have foreign currency available to sell to you. For example, Wells Fargo offers 70 currencies for use in more than 100 countries, and Bank of America exchanges currencies for more than 100 countries.

You may be able to get currency in cash at your local bank branch, or order currency online or by phone to be delivered to your home. Depending on your bank, where you live and which country's currency you need, some currencies may be available for same-day exchange. Other less frequently requested currencies could require a few days of advance notice or longer.

If you can plan ahead, there's a good chance you can get cash at a more favorable exchange rate by dealing directly with your bank in the U.S. before you travel.

"Customers who order currency through their own bank can ensure the money they receive is authentic and that they have received the best, legal rate," says John Sellers, rewards executive at Bank of America. "As these rates are constantly changing, Bank of America uses a variety of factors to determine its exchange rate—including market conditions and rates charged by other financial institutions," he says.

Depending on where you do your banking and your overall relationship with them, you may qualify for special rewards or perks on foreign currency exchange.

"By ordering your currency in advance through your bank, you may also qualify for extra perks or benefits," says Sellers. "For example, Bank of America Preferred Rewards members receive a discount of up to 2% on online and mobile foreign currency orders, plus free standard shipping," he says.

2. Avoid Currency Exchange Kiosks at Airports

If you don't have time to get cash at the bank before your trip, it can be tempting to get foreign currency at an airport kiosk or currency exchange counter. These places offer convenience, but their exchange rates are typically much less favorable than your bank at home.

For example, if you are traveling to the United Kingdom and your bank would have given you an exchange rate of £72 per $100, the airport kiosk may give you only £67 per $100, costing you extra money in the form of fewer pounds for your dollar. If you had made that exchange back at your home bank, you'd have an additional £5 in your pocket.

Airport kiosks may also charge higher fees, which sometimes are hidden within the poorer exchange rates they offer for converting your dollars to euros, pounds, pesos or another currency. If you are traveling on short notice and need some foreign currency in cash at the airport, then it could be worth paying the extra costs for the sake of convenience. If you can plan ahead, try to avoid airport kiosks and other exchange counters in heavily touristed areas—their business is based on charging extra for being a convenient, last-minute option.

3. Pay by Card, but Watch Out for Foreign Transaction Fees

Once you arrive at your destination country, you may choose to conserve your foreign currency cash and try to make payments with your credit or debit card as much as possible.

But this can pose another problem: foreign transaction fees. Depending on your bank and what card you have in your wallet, your credit card or debit card might charge a foreign transaction fee of up to 3% on every purchase in other countries.

This means that if you go out for dinner in London, Paris or Tokyo and spend the equivalent of $100 at the restaurant, your bank or card issuer will add an extra $3 fee to the cost of your meal. If you spend a total of $5,000 on a trip, and get charged a foreign transaction fee of 3% on every purchase, it would amount to $150 of extra charges.

How can you avoid foreign transaction fees? Do your research and read the fine print of your bank and credit card accounts before you travel. Call your bank and ask if they charge foreign transaction fees.

If you have time before your trip, you may want to open a new account with a credit card that doesn't charge foreign transaction fees, especially if it's a good travel rewards credit card.

4. Pay in the Local Currency to Avoid Currency Conversion Fees

Some merchants will let you choose whether you want to pay for your purchase in the local currency or U.S. dollars.

This doesn't happen with every purchase. But sometimes, after swiping your card, the merchant will present you with a screen offering you an option: You can either pay the amount in the equivalent of U.S. dollars or pay in the local currency amount.

If you ever find yourself in this situation, you should always choose to pay in the local currency. If you choose to pay in dollars, you'll be charged an extra currency conversion fee. You'll also likely get a poor exchange rate. The merchant's point of sale system may make it seem like it's a convenient choice to pay in dollars instead of the local currency, but it will ultimately cost you more. Just pay in local currency when using your card.

5. Know Your ATM Fees and Limits

If you want to get cash from an ATM in another country, check to see if your bank has ATMs in your destination city—you may be able to avoid costly ATM fees. Keep in mind that your bank may charge you a fee for using an out-of-network ATM. That's on top of any local fee being charged by the foreign ATM. The exchange rate that you get from a foreign ATM is likely to be a better deal overall than what you would get from an airport kiosk, but ATM fees can add up, so make sure you're taking out enough cash to be worth the fee.

Check with your bank before your trip to ask about the daily ATM withdrawal limits on your account. If your daily withdrawal limit is currently set too low, consider asking your bank to raise that limit so you can withdraw what you need while traveling.

Keep in mind that some international ATMs limit you to a lower amount of cash withdrawals than your bank allows. Even if your daily withdrawal limit is $500, the foreign ATM network or bank may only permit you to withdraw $300 or $400. Plan ahead to make sure you have enough cash during your trip.

"Do a little research before you travel and see if your U.S. bank offers free or discounted international ATM withdrawals," says Sellers. "This way, you're minimizing your ATM fees while maximizing your cash out. This is also where ordering your foreign currency ahead of time can be beneficial, because it means cutting back on ATM visits, which could also reduce your incurred fees," he says.

6. Use International Banking Apps

If you're a frequent international traveler, consider using an international banking app to manage your money, such as TransferWise (now known as Wise), Revolut or others. These apps make it easier to transfer money between countries and hold accounts with multiple currencies.

For example, with a multiple currency account, you can keep some money in various currencies. It's helpful if, for instance, you frequently travel to Canada or Mexico, or if you love to go on vacation in Spain every summer. This helps you avoid the volatility of currency exchange rates, since you'll always have some money ready for your next trip.

Bottom Line

Before you plan your next exciting international trip, give some thought to how you're going to get cash and how you want to pay for everyday purchases. Understanding currency exchange fees, foreign transaction fees, ATM withdrawal limits and other aspects of making payments in foreign currencies can help you save money, save time and enjoy your travels to the fullest.