Cash, Cheques, or Credit When Traveling Internationally

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After my recent trip to China, thoughts of how I should’ve best converted by hard earned US dollars into Chinese RMB were still in my mind and so I scoured the internet in preparation for my next trip out of the country, whenever it may be. The problem is quite simple, how do you get the most USD into the local currency without paying through the nose in fees, getting ripped off in the rate, or converting too much (in trying to save money) that I find myself blowing it on stupid trinkets in the airport on the way out? The answers essentially boil into four possible choices but in the ever changing environment of money, before making any decisions for yourself, verify that the fees I’ve listed are still current though the essential ideas will likely remain the same.

Credit Cards
Credit cards are usually the best option because the currency conversion is usually at the wholesale rate, not the retail rate you’d be expected to pay if you chose to exchange money at the airport, hotel, or bank. The credit cards also offer the same level of security internationally as you would expect domestically. The downsides are that some card issues will charge you a currency conversion fee as high as 3%, I tracked down a list of credit card currency conversion fees a few days ago – tops on the list was Capital One that had no fee.

Not everywhere takes credit card so your next best option is to withdraw cash from a local ATM. You get the benefit of exchanging money at the wholesale rate with the flexibility of using the local currency, the only downside is that you’ll probably be socked with an ATM fee (experts estimate a flat fee would be around $1-$5 where a percentage wuld be 1-2%), one that’s larger than the typical fee you may see in the US. Other tips, cleaned from a dated MSNBC article, include changing your PIN to something that’s only four numbers (a common limit internationally), and making sure you can find a PLUS (for VISA) and/or Cirrus (for MasterCard) ATM where you’re going.

Traveler’s Cheques
Like cash with some added security features, cheques are expensive options and only available on a limited basis. For the purposes of this article I only looked at American Express Traveler’s Cheques which seemed like a good option only if you didn’t have a credit card and didn’t trust yourself with cash. AMEX offers traveler’s cheques in foreign currencies but there is usually fee associated with purchasing them, $15 if you order them online (fee waived for Gold Card and Platinum Card holders) plus shipping and handling. As for the use of them, you may find it difficult to use cheques, especially at small local shops that won’t recognize them, and converting them at a local bank into currency may come with a small fee as well. For the added security, you sure get nickel and dimed all the way to your purchase. (AMEX Traveler’s Cheque FAQ)

Exchanging Cash
This is probably the worst option (though next to AMEX Cheques depending on how much) because your exchange rate will be retail, which is always going to be more expensive that wholesale. Also, no matter where you go to do the exchange, the exchanger is going to want to take a little piece and put it into his or her pocket. Banks and hotels are usually your best options, they will typically offer the best rates but keep yourself aware of the rates every day so you can tell if you’re getting ripped off. Also ask if there is a currency conversion fee associated with the conversion, sometimes there is and it’s not listed on the board.

Ultimately though, remember that we’re talking a couple percentage point differences between each of the options so ultimately it might not matter terribly, it’s just good to know where all the options stands in case you are put to a decision on the spot. Should you pull out a credit card or use the cash you have? Should you hit up an ATM or convert some money from USD at the airport? The differences will be minimal but that doesn’t mean you shouldn’t be smart about it.

If you have any tips you want to share about spending money internationally, please do share! I don’t do a lot of international travel so my experience is limited, I’d really like to here some seasoned travelers share their best tricks. Thanks!

{ 14 comments, please add your thoughts now! }

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14 Responses to “Cash, Cheques, or Credit When Traveling Internationally”

  1. Ronnie says:

    Having traveled around a lot, here are some things that I have noticed. I typically go to ATM’s. I’ve ran into problems in Europe and Asia where my ATM card was incompatible with the ATM machines, but if you hunt around enough you will eventually find one that works. In Japan, most ATM’s will not accept my card, but there are some that do. While I was in Cambodia, I couldn’t even find an ATM machine and in Vietnam I found that a lot of the ATM’s stop working at certain times. So, I usually take one credit card, one ATM card, and $1,000 to $2,000 in USD just in case I have trouble with my credit card or ATM card.

  2. plonkee says:

    I’d add to the travellers cheques that I’ve never seen them used to purchase anything other than in the US. I’ve travelled reasonably extensively – always on a budget – and as far as I’m concerned travellers cheques are just used to get local currency.

    If you’re going to use a card abroad you should let your card provider know so that they won’t think that you are an identity fraudster when you attempt to withdraw money from a cashpoint in Bratislava – yes this happened to me and required an expensive international phone call to fix.

  3. Rupert Huelsey says:

    Intersting article … concerning ATMs: you may want to look at partnerships bigger US banks have internationally: I am B of A customer and on my recent trip to Germany I found out that they are partnering with Deutsche Bank. And here comes the nice surprise: they don’t charge you any fees if you use one of Deutsche Bank’s ATMs to get cash!

  4. Amber says:

    What I’ve done in the past is exchange just enough carry money before I leave the States, that way if I have an extended period of time that I’m chilling at the airport and I want something to eat I don’t have to change money first or find a place that takes plastic. I generally just take cash with me and find a good place to exchange it locally. It usually seems to balance out the same once you factor in the fees. When I went to London, my credit cards didn’t charge any extra fees for using it overseas, since then they do. The atm is a last resort because of the fees involved incurred both by my bank and the bank I’m doing business with.

    I have heard nothing but horror stories surrounding travelers checks so I don’t even consider that an option. It’s not worth me spending a good chunk of the day (8 hours was the worst I heard) waiting around to get it changed into local currency.

    I also call the credit/debit card companies related to the cards I’m taking and let them know I may be using them out of the country. Especially since they can’t get ahold of me to verify that it’s really me using it.

  5. tinyhands says:

    I’ve always operated on the principle that it’s wise to change a little cash before you arrive in your foreign destination, just in case.

    As for bringing USD to foreign countries, also a good idea, but make sure they are crisp, clean, brand new bills. Exchanging cash is, as you mentioned, generally the least favorable option, but when you need it you don’t want your bills rejected as suspected counterfeits by someone who isn’t intimately familiar with USD. (Likewise, don’t exchange your USD with anyone who you suspect might give you counterfeit foreign currency.)

  6. Credit cards are the best. Once, when staying in London, my wife and I were at a hotel that ended up being just a little scummier than we had hoped for. Additionally, and take this for what it’s worth, there were people smoking pot right outside our window. That was both good and bad, I guess you could say.

    So we left and went to the hotel right across the street. Well, the first hotel nicked our card for the lost night. I disputed the charge and won. Paying with a credit card made the dispute possible.

  7. Chris says:

    Interesting. I do not travel outside the country often. Last time I did, many years ago, I had to find an ATM that would accept my card. When I did, it gave me US cash! I then had to exchange it at a local exchange booth.

  8. Foobarista says:

    Of course, there’s always “convert at Bank of the In-laws” 🙂 this is what we mostly do nowadays.

    When I was living in China, I had enough friends locally that I could convert at the “street rate”, although this is dangerous for tourists. When I was working there, I even sold RMB to a few Westerners since I was paid in RMB and had to pay my rent in USD.

    Since 99% of transactions in China are done in cash, using non-cash instruments is a real pain…

  9. Amanda says:

    I’ve traveled a great deal internationally, and I think travelers cheques are generally very antiquated. Not only are there various fees involved, but it’s a pain to have to go to a currency exchange and have them converted. On a recent trip, we took my mother in law to the UK, and she brought a bunch of travelers cheques. Of course, she forgot to exchange on a Saturday when we were there, and on Sunday all the places to do so were closed. I think using ATMs is much more efficient and probably less costly overall.

  10. Tim says:

    Rupert, this is not entirely true. if using BofA w/in global alliance network you do not get an atm fee; however, you still get charged 1% currency transaction fee imposed by VISA or MASTERCARD. If it does not show up, it is automatically deducted from the exchange rate for that date. if using BofA debit card, you will see it listed separately as an INTL CURRENCY FEE.

    you should be warned, that if using credit card for cash advance, interest will start to accrue immediately without a grace period unlike purchases on the credit card.

    the rule of thumb is use credit card for purchases; use atm/debit card for cash. this is based off of the immediate interest rate accrual for credit cards and the fact you get more protection on purchases and in case of an unscrupulous merchant who may illegally use your credit card. debit cards you could lose everything, whereas credit cards you will probably lose nothing.

    traveler’s checks are a bit hit or miss. contrary to what amex and the like state, they are not like cash and are not everywhere you want to be, because stores and people can refuse to accept them. they are good for the built in insurance if lost, but unless there is an amex office or brand office, you may get hit with a fee. if getting them, get them at your home country. you are charged a fee for the insurance part of the traveler’s check, so you have to decide if it is more than your credit card or atm company charges. i do not recommend getting foreign currency traveler’s checks. you get hit with two fees if you do not use all of them (the fee to foreign currency plus reconversion upon return). it’s better to keep in home currency that way you can deposit any extra into your bank account when you return home. again, though, you will normally get a worse rate for converting cash rather than getting atm or credit card cash.

    you simply need to do your research on the country you are going to. some countries, you can’t use a credit card to save your life. others, you get raped converting cash (i.e. Italy as I am in Italy at the moment). currently there is nearly an 8% difference between getting cash from an atm versus using cash or travelers checks to get euros. that is not a few percentage point difference.

    Other hints: make sure, if you are american, to have a 4 digit PIN and that the first digit is NOT a zero. a first digit as zero in many places do not count as a four digit number. notify your card company of your travel plans so they don’t lock your credit or debit card when you most need it (i.e. long weekend in the states and your bank is not open) due to suspicious activities. ensure you get your credit card toll free number or collect telephone number for overseas (i.e. those 800 numbers aren’t always set for collect calls). some companies have toll free local numbers in foreign countries. be aware of your daily atm withdraw limit. a weekend can be considered one day, which sucks if you need money over a weekend, especially a long weekend. banks and credit card issuers will increase your daily cash withdrawal limit temporarily or permanently upon your request. temporary increases are generally good for 24 hour periods. permanent increases normally require written request and sustained higher account balances over 6-12 months or longer. since i’m overseas a lot, i’ve requested permanent cash withdrawal increase daily limit. caveat though is that the normal limits around $400 per day is a safety net if your card gets stolen and someone uses your card to withdraw cash (i.e. it minimizes your initial loss until you can contact your company). for me, i’ve been in too many instances where i’ve wanted to withdraw more than the daily limit and calling is a hassle. also, some merchants will give you a better deal if you just use cash rather than credit card.

  11. Weekly Roundup – 05/18/07

    Here’s a quick look at some of the articles that caught my eye over the past week:

    JLP has an interesting post on how much it costs to drive a mile.
    Jim talks about the best way to spend money overseas.
    Flexo has information on comparing a lump…

  12. kitty says:

    I usually use credit cards and ATMs. Ever since my credit card got demagnitized in Spain, and I found out that not every merchant is willing to type in the number manually, I take an extra card just in case. Either another credit card or a debit card that can be used both in ATM or to buy stuff. I am a bit paranoid about responsibility if my card gets stolen, so the debit card I take is from account where I usually keep a small amount of money, not the one I normally use.

    When I go to Western Europe I rely on cards exclusively. In some countries, like Russia it is a bit difficult. So when I go there I just take cash. One pecularity of Russian exchange booth is their refusal to accept any marked or worn-out bill. So now when I go there I check every single bill I got from an ATM in the US to make sure they look “new”. I had a problem there once, but luckily I had other bills. My friend wasn’t this lucky – most of her bills weren’t sufficiently new. After visiting a number of the exchange places and banks she found one willing to exchange her $100 bill (that she got from an ATM in the US) for 90% of the value.

    One point about interest accural on credit card cash advances. If you can wait a few days for the money, and you have a relative in the US you can trust, you can call and ask them to send the money to the bank right away. It is tricky because the check has to arrive before or on the same day the charge is posted. I did manage that once, but you need to have enough time to do it.

  13. Anonymous says:

    😀 🙂

  14. Tommy says:

    I’ve been doing research on this very subject for our July in Europe trip and found out that Paypal’s Debit card only charges you $1 (plus the exchange fee I would imagine) to use any ATM, even globally.

    The only hitch is that they only allow $400 per day withdrawls (which you should theoretically be able to remove, but the instructions are a little different than what I see in my account).

    Also, while your cash sits waiting to be spent, it earns almost 5% interest.

    As for credit cards, I’m going with a Capital One Visa that has 1% cash back on everything so as to negate the 1% exchange fee.

    Also, my wife and I will each have about 200 euros in socks just in case 🙂

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