The Road to Avoiding Foreign Currency Exchange Fees

   “You can’t put off being young until you retire,
And however you bank your screw, the money you save
Won’t in the end buy you more than a shave.”
– Philip Larkin, Money

Traveling abroad and paying for everything on a trip used to be a lot more complicated. The first time my parents visited me in China, they brought travelers checks and a lot of US dollars to exchange. At the time, China was almost entirely a cash society — credit cards were rarely accepted.

And there are still a lot of countries that require travelers to use cash instead of credit. The last time I ran into this problem was in Myanmar, which requires cash for almost every transaction. They accept US dollars, but charge more than if paying in kyat.

In more developed countries it’s much easier to get by without cash. The last time I visited Montreal I used no cash at all — I paid for everything on the trip with my credit card. But even in places where credit card use is prevalent, there may be some destinations that require cash. On New Year’s Eve in Montreal, there were vendors selling hot chocolate and hot cider in the frigid evening, but I couldn’t buy any because I had no cash.

So, what are the options for traveling abroad and needing cash?

My advice is to do your research before heading off on your trip. Have a look at prices and whether most destinations on your list accept credit cards. And then budget accordingly.

Have your credit card handy as well as an ATM card that works abroad. Contact your credit card issuer and bank and let them know that you’re traveling. If you don’t inform them, they may lock your cards and you’ll be out of luck until you get it sorted out.

And bring some cash for emergencies. This is also a necessity if you need to pay for a visa on arrival as most countries only accept payment in US dollars. Don’t bother exchanging the cash beforehand unless you know you can get a favorable exchange rate. With any luck you won’t need to touch that cash at all.

Sign up for a travel-friendly credit card

I learned this lesson the hard way on my trip to Iceland. I had a credit card that wasn’t meant for travelers. I was charged 3% on top of every transaction. I could afford it at the time, but I wasn’t happy about it when I saw my statement.

After that, I enrolled with the Chase MileagePlus Explorer card. This made sense because I fly United more often as its hub is in Newark. Earning extra miles helps, and I earned enough to get a flight to Tokyo and another to return home a year and a half later.

I wouldn’t say that this card is for everyone, especially if you don’t fly United or Star Alliance partner airlines. But it offers what I need, mainly no foreign transaction fees. This can save a lot of money during a trip. And each transaction is charged at the current exchange rate.

The downside is the annual fee. But it comes with two lounge passes, which are so much more valuable when flying out of Tokyo’s Narita Airport. For those looking to avoid annual fees, there’s also CapitalOne — the rewards aren’t as good, but it’s free and doesn’t charge foreign transaction fees.

The only time I ran into a problem using a credit card abroad was in Vietnam. A lot of hotels and businesses accept international credit cards, but they sometimes tack on 2-3% before running the card.

Find a Better Bank

Traveling to Iceland taught me another lesson, which was to not use your ATM card abroad without checking the fine print. I had had that bank account for a long time because it was convenient. Then they charged $5 to use an out-of-network ATM plus a 3% foreign exchange fee.

When I returned home, I confronted the bank. I said that at the bank across the street I could get a higher interest payment, no foreign transaction fees, and up to $15 in ATM fees reimbursed. I asked if they could match the deal and was given a runaround about what they could offer me instead. I demanded my money and took it across the street to CapitalOne.

Without the fees, this is a great bank account to have when traveling abroad and needing cash. I never had to worry about whether I should take out more money right now to avoid ATM fees — I could always make another trip. The best part about using an ATM is that your currency is converted at the current exchange rate.

CapitalOne also has a travel credit card that doesn’t charge foreign transaction fees. The rewards are only mediocre after the initial signup bonus though. But it also doesn’t have an annual fee.

This year CapitalOne introduced an offer to reimburse credit card holders who sign up for Global Entry and TSA PreCheck. So, it balances out the lack of rewards points you can earn. They also now offer 10X rewards when booking with Hotels.com (you can also earn airline miles when booking on Agoda without using a rewards card).

Budgeting Cash

This is important even if you have a debit card that doesn’t charge fees abroad. You don’t want to end up with a hundred dollars worth of foreign currency a few hours before your flight.

I usually end up with about $20 or so remaining. I use it at the airport to buy some food, a drink, or even a little souvenir. Some airports have a nice selection of local snacks to bring on your flight.

It’s best to take out a few days’ worth of money each time you go to the ATM. It helps with limiting your spending and tracking what to budget for the rest of the trip. Of course, the amount will change if you decide to book a tour or eat a fancy dinner, but those expenses can be factored in with a little thought.

If You Must Exchange Money

If you must exchange your stash of US dollars, try to avoid doing it at the airport. Airport money changers have the worst rates around. Try to wait until you get into your destination and find a bank.

You may also be able to find fellow travelers on their way out who have too much local currency. There are even groups that may be near home with people looking to exchange their leftover foreign currency. You can get a better rate that way.

Of course, if you’re exchanging currency with someone you just met, be careful. Check the money and make sure it’s not counterfeit.

You’ve got a lot more options for paying while traveling abroad. Taking the time to do a little research about banks, credit cards, and what’s accepted in your destination of choice can reduce stress before the journey.

And if you want to avoid the credit and debit cards, you can try traveling with Apple Pay, Google Pay, or one of the other mobile payment options. They are being accepted at more destinations around the world to add to convenience. Avoiding foreign transaction fees with mobile payments abroad will require connecting a credit or debit card with no foreign transaction fees to the account.