Photo: Kenishirotie (Shutterstock)
If you’re leaving the country this summer, there are two things you should do ahead of time. First, make sure the tourist destination you’re visiting isn’t overrated. Second, make sure you exchange currency before you leave the country. I understand that when traveling abroad, the checklist of things to do can be both long and cumbersome. But if you let this task fall by the wayside, your wallet will feel the brunt of it the moment you step up to a foreign ATM.
The cheapest way to convert currency
As far as converting the currency goes, you’re not going to get a better deal on an exchange than at your own bank. For example, Bank of America charges their customers no fee on foreign currency exchanges over $1,000, and only charges a flat fee of $7.50 on orders below that figure. TD Bank has a similar $7.50 fee for currency exchanges, but with a minimum order amount of $250 and a maximum order of $1,500. Investopedia cites local banks and credit unions as typically having solid rates, as well.
Some banks, like Wells Fargo, have less enticing currency exchange options, though. They do not charge a flat fee, but instead give you a lesser return on the money you’re exchanging. After entering some figures into their currency calculator, it seems you can expect to pay anywhere from 4% to 10% on a currency exchange, depending on the currency. They note that these rates change on a daily basis.
Even though this isn’t as great of an option as the previously mentioned banks, it’s still most likely going to be a better rate than what you pay at the airport. Conde Nast Traveler explains, “it’s no secret that airport exchanges are an expensive option for trading in money. Most charge a fee or service charge of anywhere from $5 to $15, and the exchange rate you get can be seven to 15 percent worse than the standard bank rate.”
If you’re unsure how much currency to convert, check out the website Budget Your Trip for information on the average daily cost a person spends on food, transportation, and discretionary spending in any particular country. It’s a solid tool to get you started on your international travel budgeting. Additionally, it’s worth noting that in a pinch, there are a handful of countries that will accept American money, especially vendors in touristy areas. Typically there is a considerable mark-up to doing this, though, so the exchange rate will be far worse than if you had just converted your currency in the first place.
What to know when using your credit card abroad
If your prerogative is to avoid the hassle of exchanging currency altogether and just use your credit card while you’re abroad, there are a few things you should know. First, most banks will impose a foreign transaction fee. This typically is a percentage-based fee applied to each purchase you make overseas, commonly set at around 3%. If your options are either that, or the flat rate of paying for a currency exchange through your bank, the latter option is going to save you money (assuming you’re spending more than $250 dollars, and you’re able to secure a currency exchange at a flat rate of $7.50).
Second, a handful of companies issue credit cards with no foreign transaction fees, including Chase, Bank of America, and Capital One. These cards come in handy for the frequent international traveler, though it’s still a good idea to have some tangible currency on you, just in case.
