Since I frequently write about life abroad, being a digital nomad, and exploring various destinations worldwide, I receive numerous inquiries regarding access to travel funds. “Do you open a local bank account?” “Where should I store my money back home for easy access?” “Should I convert currency before I arrive?”
However, the critical question is how to avoid travel fees associated with obtaining or exchanging money, as well as fees incurred when using a credit card.
The options for accessing your travel funds have condensed into a few straightforward choices. In most locations, it’s advisable to carry some cash and retrieve the remainder using your ATM card, opting for a debit or credit card whenever feasible. Additionally, leverage a credit card for significant expenses (such as local flights, trains, rental vehicles, or lodging) and scenarios that require protection in case something goes awry (like a local excursion).
The challenge is that banks relish fees as much as airlines do, irrespective of whether the transaction demands any effort on their part. If you’re not vigilant, these fees can accumulate to equal a night’s accommodation every few weeks, impacting your budget.
I will elaborate on the major impactful strategies, but here are ways to circumvent novice travel blunders that could cost you a significant amount–money that could instead be spent on enjoyable activities.
1) Ensure that you only utilize credit cards that do not impose a foreign transaction fee.
2) Use ATMs for foreign cash, avoiding currency exchange kiosks, but minimize local fees.
3) If feasible, obtain a debit card that rebates local fees or at the very least doesn’t charge them on their end either.
4) Always refuse the bank’s fraudulent “currency conversion” offer and consistently charge expenses in local currency.
5) Steer clear of dubious ATMs and have contingency plans in case your card is swallowed, misplaced, or stolen.
6) Aim to use credit cards that provide some form of travel rewards. This way, your vacation isn’t a rare occurrence.
Let’s delve into these aspects in detail so you can become a savvy traveler in the future and retain more of your own funds while traversing foreign countries.
Avoid Travel Fees Imposed by Credit Cards
When I initially began acquiring branded travel credit cards, at least half of them charged some form of foreign transaction fee with every use, which is purely a theft move that rewards you with nothing. Fortunately, most of these cards have eliminated foreign transaction fees, as it resulted in a significant customer loss.
It seems strange that a card designed for travelers would penalize you for doing so, yet that remains the situation with some. The most notable offenders include the Southwest card from Chase. It’s still beneficial to acquire for the sign-up bonus and to check one bag for free on this diminishing airline, but it’s advisable to keep it in a desk drawer whenever you’re outside the U.S.
Otherwise, scrutinize the fine print especially if it’s an entry-level card with no annual fee. These are typically the ones most likely to hit you with an additional 2.5% to 3% charge if you mistakenly use them abroad. This includes some (but not necessarily all) cards affiliated with JetBlue, Alaska Airlines, and Marriott Bonvoy (“Bold” version).
Certain cash-back rebate cards do this as well, negating any cash you received back. Some debit cards can double charge you. Notably, the one from Paypal offers a less favorable exchange rate than banks do, plus it imposes a foreign fee on top. They even applied a “foreign transaction fee” when I swiped their card in Panama, despite Panama using the U.S. dollar!
Retrieve Your Cash From ATM Machines
I’m shocked by how often I encounter advice articles and tour company guidelines suggesting that travelers withdraw some foreign currency from their bank prior to departure. This is a surefire way to ensure you start off in a deficit before even landing!
In almost all cases, you’ll receive a superior exchange rate from an ATM at your destination compared to what you’d get in your home country. You’ll also secure a better rate from that machine than from any local currency exchange booth, regardless of what they claim about “no commission.” (They profit from the transaction spread, so there’s little incentive to offer you the actual bank rate.)
The sole occasion to utilize an exchange booth is when you need to convert money back because you’re departing. In that case, losing a little to obtain cash you can use elsewhere is worthwhile. Traveling with Albanian lek or Vietnamese dong isn’t ideal.
Keep in mind to consolidate your withdrawals to minimize fees and avoid withdrawing excessive cash for a brief trip, especially if you’ll be in