Figuring out the best way to pay for purchases while traveling internationally can be complicated, especially when a different currency is involved. There are numerous factors to consider, such as the prevalence of credit card acceptance, your expected spending, the likelihood of returning to that country, and more.
While I don’t believe there’s a definitive right way to handle payments for international purchases and currency exchange, I do believe there’s an incorrect approach. In this article, I want to provide some general advice on making purchases abroad, and I’m also open to any suggestions others may wish to share.
Here are some of my top suggestions for making transactions abroad as smooth as possible, listed in no specific order…
Utilize credit cards that have no foreign transaction fees
Whenever feasible, I opt to make purchases abroad using credit cards. It’s true that credit card acceptance can vary greatly around the world, yet it has improved significantly over the years. Why do I prefer credit cards when I can?
– There are numerous fantastic credit cards with zero foreign transaction fees, which enable you to receive a fair exchange rate on your purchases.
– Using a credit card offers excellent purchase protection (in case you need to contest a charge), reduces the chance of cash theft, and allows for exact payments.
– Nowadays, credit cards offer great rewards, especially for purchases made abroad; for instance, many cards provide bonus points for dining and travel, which can represent a significant portion of your expenses while traveling.
Just keep in mind to steer clear of dynamic currency conversion when using a credit card. In simpler terms, when paying via credit card and given the choice between purchasing in your home currency or the local currency, always opt for the local currency. Choosing your home currency often results in hefty fees.
Withdraw funds from bank ATMs upon arrival
I always take out some local currency when I arrive at my destination, even if I’m in a country where credit cards are broadly accepted. Cash can be useful during any trip at various times.
I consistently withdraw cash in the same manner — I locate an ATM when I arrive, ideally one from a local bank, and use the ATM card linked to my U.S. checking account. This method is both convenient and cost-effective:
– There’s typically a small fee for each ATM transaction, which is minor compared to the charges you would incur at currency exchange locations.
– Assuming you choose to decline dynamic currency conversion, you should receive an exchange rate that’s very close to the actual rate between currencies.
– It’s important to note that many banks will reimburse ATM fees with certain account types, so if you travel internationally often, it might be worth it to open such an account; this benefit is available not only with accounts that have high minimums (like Chase Private Client and Citigold) but also with simpler accounts at some banks, like Charles Schwab.
One challenge can be deciding how much cash to withdraw. After all, there’s often a fee for each transaction, so how do you determine how much cash you should obtain at the start of a trip? Since my bank reimburses ATM fees, I generally withdraw cash in smaller amounts. This approach helps me avoid ending my trip with a surplus of cash, while also reducing the risk of theft.
If your bank does not waive ATM fees, you may prefer to withdraw a larger sum at once.
Exchange currency at your local bank before departing
Some individuals feel more at ease obtaining cash in a foreign currency prior to starting their journey. Personally, this is not something I have ever done, and I don’t see the necessity for it. ATMs are typically available upon arrival, and I prefer to minimize the amount of cash I carry, as it’s just another potential target for theft.
However, if acquiring cash before your trip makes you feel more comfortable, just visit your local bank, and they should be able to provide you with foreign currency at a reasonable exchange rate. There is generally a small fee associated with this service, but you will obtain a fair conversion rate instead of an inflated one.
Make sure to take care of this well in advance of your departure, as sometimes the cash may need to be ordered from another location, meaning it won’t be available right away.
This may be more effort than I choose to exert, but everyone has their preferences…
Avoid using currency exchange kiosks
Generally speaking, currency exchange kiosks are significant scams, whether they are located in airports or within cities. They are ubiquitous and allow you to swap cash in one currency for cash in another.
This entire operation usually relies on consumers lacking knowledge, as the markup is often 5-10%, or even higher than that.