When traveling abroad, the common dilemma is which method is best for exchanging currency. Is it better to exchange currency before leaving or when you reach your destination? Should you withdraw from an ATM abroad or exchange money for local currency? Or is there a better way?
Deciding where to exchange currency depends on whether the destination country accepts dollars, its financial and exchange policies, as well as the destination itself. It is also dependent on your financial provider and how they operate because each financial institution has its own operational policies, as well as its own exchange rates and fees. You will also need to look at its compatibility with financial institutions in the country you are visiting. The length of your trip also plays a role in determining whether it is best to exchange money at home or abroad.
In general, it is best to research what exchange rates are currently offered, along with the average commission costs associated with exchanging currency. You may find that in some places there are no commissions for exchanging currency, while other countries may have high commision rates. Having this information will help you make an informed decision. This guide will provide further important information to help you decide where the best place to exchange your money.
Withdrawing from an ATM Abroad
Most people use ATMs as their primary means of obtaining cash when traveling abroad. This is because they don’t like the idea of carrying physical currency when traveling. ATMs are a common way to get cash when abroad for a number of reasons:
- Exchange rates: Compared to local currency exchange kiosks, ATMs tend to offer better exchange rates. Of course, you may find kiosks offering exchange rates that are even more favorable than ATMs, but they are scarce.
- Availability: In today’s world, ATMs are widely available. There is usually one every couple of blocks in the populated locations. Reputable currency exchange kiosks are few and far between, whereas ATMs are commonplace (at least in most cities).
- Security: Walking around with cash in your pockets puts you at high risk of being robbed. If you lose your ATM card or if someone steals it, you can protect your funds by blocking the card, but it is paramount that you use your card wisely. The fee per transaction may not favor multiple withdrawals of small amounts in the same way as you might do at home.
When Not to Make ATM Withdrawals
You may find that exchanging physical currencies is a better option for you in the following instances:
- You live near a currency exchange kiosk or bank offering reasonable rates: This is an excellent solution, especially for smaller currency exchanges. This is a good option for short trips, lasting only a few days, as you can arrive at your destination stress-free.
- Your card is incompatible with the local ATMs: Most of the time, having a debit card allows you to make withdrawals globally. In some instances, smaller banks do not set up international arrangements, so it is worth checking before you travel for peace of mind.
- There is limited access to ATMs in the country you are visiting: Remote areas and islands usually have a few working ATMs and plenty of money changers that will charge you an arm and a leg to exchange currency. For these types of destinations, it is much easier to have local currency already in your pockets before you arrive.
- You will be making a large purchase: If you are planning to buy something and the total sum exceeds your card’s daily withdrawal limit, then using an ATM will not be the best option.
Why Exchange Currency at Home?
Regardless of which option you choose, at some point, you will need to pay a commission in one form or another to make a currency conversion. You may find paying the commission at an exchange kiosk to be less appealing than using your card. Saying that many travelers still prefer to exchange funds before traveling abroad as they can often get competitive exchange rates at their local bank. It is also more convenient to have local currency already converted before you arrive.
Converting your currency before leaving provides the opportunity to shop around for the best rate. This is even more applicable when visiting destinations with limited options to exchange currencies.
Having a little local currency as cash in your pockets, before you arrive ensures you are prepared for early minor expenses such as a taxi from the airport.
How to Shop for Currency Exchanges
Experts advise contacting the branches of large banks at your destination to enquire about exchange rates prior to traveling. Large international airports usually have many exchange kiosks where you can exchange funds for local currency, but expect inferior exchange rates.
The alternative option is using your card at an ATM to withdraw cash during your travels. Before you do so, ensure you notify your financial institution prior to departing to avoid theft protection protocols being activated to protect your account against card fraud. This will also avoid any delays in using your card abroad.
Exchanging your currency at an airport exchange kiosk when you land should be your last resort and only done in the case of emergencies.
Avoiding Paying Fees
Some expenses you may expect to pay when traveling abroad include currency conversion fees and foreign transaction fees, but here are some ways to minimize these costs:
Skip or Minimize Currency Conversion Expenses
If you are wanting to avoid the hassle of exchanging currencies you can choose to pay for most of your expenses on plastic. Be sure to contact the card issuer before you travel and ask them whether there are any restrictions when using your card overseas.
Tip: Write down the card issuer’s phone number and the card number in case it gets stolen or lost during your travels. Store this information somewhere separate from the actual card. That way, you will be able to call the Customer Service line and block the card quickly to limit the chance of fraudulent activity.
Avoid Credit Card Foreign Transaction Fees
The majority of credit cards charge a 3% foreign transaction fee on the purchases you make when abroad. These charges can quickly add up, so make sure you use a card that does not charge fees for foreign transactions. This way you can steer clear of unnecessary costs and potentially earn reward points.
Get the Best Exchange Rate Possible
The official exchange rate you see when looking at currency conversions is actually the interbank rate, which is only available directly to major banks. Whenever you use your card abroad, the local bank converts the transaction into the local currency and then takes some off the top for its services.
The Importance of Having a Contingency Fund
Having a contingency fund in cash is also worth considering, particularly for trips longer than seven days. Besides having your card, you should bring some cash along in case you run into problems drawing cash from ATMs.
Some of the things that could cause headaches when abroad are:
- Your card gets stolen or misplaced.
- The card becomes unreadable.
- You reach the daily withdrawal limit.
- There are no ATMs in the area.
- The ATM does not accept the card.
Tip: Don’t keep your cards and cash in the same place for safety reasons.
Final Tips for Better Travel Experiences When Abroad
When planning a trip, consider the following to make it as pleasurable, safe, and convenient as possible:
- Limit the number of withdrawals: This helps you minimize ATM fees and keeps your debit card secure from theft and loss.
- Bring the correct card(s) along. Some banks offer cards that feature zero foreign transaction fees or no ATM fees (some even offer both). Using one of these cards can save you a significant amount of money during international trips. If you had to choose between a card that offers zero foreign transaction fees or no ATM fees, it is best to go with the first one, as ATM fees are usually 1% to 3%.
- Beware of the Dynamic Currency Conversion: Some ATMs offer what is known as Cardholder Preferred Currency or CPC, where they ask you whether you want to be billed in the card’s original currency or the destination’s local currency. Always choose the second option to avoid poor exchange rates and potential foreign transaction fees.
With the Cashero app decisions about currency exchange are simplified, as you can exchange between USD, EUR, and GBP instantly and with no stress.
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