Where to Exchange Currency Without Paying Huge Fees

You’ve been saving for months to go on vacation, but that getaway abroad may not be as affordable if it costs you to spend your money.

Currency exchange — turning your dollars into cash you can use where you’re traveling — is a complex and potentially costly business, with all manner of fees and charges. But with a bit of knowledge and preparation, you can make sure you’re getting the most out of your dollars.

 

Plastic is best

Before we go on, we should say that you can avoid these annoying costs entirely if on your trip you use a no foreign transaction fee credit card. If you have time before you leave, and think you can be responsible about it, consider applying for one and using it whenever possible. Just don’t use it at ATMs, because that’s a cash advance and you’ll be hit with fees and interest right away.

There are also some banks that charge no foreign transaction fee on their debit cards.

Where to exchange currency

At home or abroad, you have many options for exchanging currency, but some will cost you more than others.

A GOOD DEAL

  • Withdrawing cash from an in-network ATM. Your bank or credit union might have international branches and machines, or partner with an institution in that country, where you can use your debit card to take out cash with low (1%-3%) or perhaps even no fees. Check, and if it turns out you will have to pay some international transaction fees, make fewer trips to the ATM, withdrawing larger amounts when you do.
  • Ordering cash through your bank. Your bank or credit union might sell foreign currency. If so, you can place an order online, by phone or at a branch location, and in a few days that currency will be there for you to pick up. You also can have it delivered to your home, but that often comes with a delivery charge. Ordering cash through your bank is a good option because the exchange rates a bank offers are a little better than those elsewhere because of the preferred borrowing rates it enjoys. The savings get passed on, in effect.

AN OK DEAL

  • Ordering cash through a currency converter. A number of websites will sell you foreign currency and deliver it worldwide. But exchange rates here are less favorable, and the delivery charges will further eat into your funds.
  • Buying traveler’s checks. The draw here is security, with the ability to order replacements if the checks are lost or stolen. But peace of mind comes at a cost, mostly in terms of convenience: You have to find a business that accepts traveler’s checks (the numbers are declining), or make time to exchange them at a bank.

LOUSY DEAL

  • Exchanging cash at airports, hotels or Travelex counters. Convenient, yes — you can’t miss them. A good deal? Hardly ever. Exchange rates are poor, and fees are numerous and high. This really should be for emergencies only.
  • Using a prepaid debit card. These cards can come loaded with fees, and your standard-fare prepaid debit card will likely charge for international transactions and ATM withdrawals. Moreover, prepaid cards aren’t required to have fraud protection in the same way as credit or debit cards.
  • Withdrawing cash from an out-of-network ATM. Again, this is a convenient option, but you could end up paying surcharges to both your bank and the ATM owner and a foreign transaction fee.

More tips that can save you money

Here are some other exchange-related things to know, as well as a travel tip that can keep you from having to turn to a more expensive plan B.

Avoid purchasing in dollars. Many businesses will offer at the register to perform your transaction in U.S. dollars, so that you know what you’re paying and don’t have to do math in your head. But this “courtesy” — known as a Dynamic Currency Conversion — can run as much as 6% of the purchase. Avoid this fee by requesting to be charged in local currency.

Beware the “no commission fee” money changers. Both low commission fees and good exchange rates are necessary for cheap currency conversion. There’s a subtle difference between the two, though: The commission fee is a charge paid to whoever’s handling the money, and means that you have to pay more than the posted exchange rate. The exchange rate is how many dollars you trade in to get a certain amount of foreign currency. Often, sellers who brag about charging no commission fee will give you a terrible exchange rate.

Ensure you’ll be able to access your accounts. Let your bank know where and when you’ll be traveling, so that it doesn’t put a protective hold on your account. If you don’t already have a card with an EMV chip, the global standard for payment security that the U.S. is just now adopting, request one so that your card will be accepted by more machines. And perhaps change your PIN, as some international ATMs support only 4-digit numbers.

Again, the best way to make your dollar go the furthest while traveling abroad is to make purchases with a credit card or debit card that charges no foreign transaction fee. Otherwise, staying within your bank or credit union’s network — and avoiding the easy alternatives — will keep you from paying too much to exchange currency and spoiling your getaway.