While this isn’t rocket science, it isn’t well understood either. Thus, I wanted to just put together a post on how to get your money from your bank into your wallet for free.
- Always give local money
- Never double-transfer
- ATM partners
- Charles Schwab
- Credit Cards
Exchanging Money
Money exchangers aren’t banks (for the most part) or dabbling in the black arts. At the end of the day, banks don’t even take foreign money, so they don’t want it.
That’s all you need to remember- that no one wants foreign money.
So let’s just give some examples, let’s say you are in Mexico:
Exchanging US Dollars to Pesos will result in a decent fee, because they don’t want US Dollars.
Exchanging Pesos to USD will be done (mostly) at face value… basically for free.
Why? Because they made their money on you by taking USD and then giving it back to you. Simply put, there is no demand/need for foreign money. Thus, exchanging back to USD is basically free. Heck, sometimes I see them offering over 13:1 in Mexico when the official rate right now is 12.9:1. They really want to get rid of foreign money and get the kind of money they can actually use and put in the bank.
However, the same applies in your home country. In the US, they want to trade away foreign currencies to get USD.
So what you could do is this:
- Take out US Dollars at your home bank for free (I assume you aren’t paying an ATM fee).
- Exchange the money in the US to get foreign currency (like Mexican Pesos) before you leave.
- Go spend the foreign money while traveling.
- Exchange whatever’s left back to USD before you leave to go home.
But what if you’re going from one foreign country to another?
Let’s say you are going from Mexico to Peru, and then later to Chile.
The same principle applies, exchange your Mexican Pesos to Peruvian Sol (if they can) before you leave Mexico. And then exchange your Sol for Chilean Pesos before you leave Peru.
Always exchange your money before leaving the country.
Always exchange native currency. Give dollars in the US and give Pesos in Mexico. You want to gain foreign currency. (Well, foreign to the trader.)
ATMs
I’ve always written these fees off as an expense that does not add up to much so I just try to withdraw the perfect amount. Really, I just try to use my credit card as much as possible. But there are other ways to avoid ATM fees and the foreign transaction fee added to that.
With Chase (my bank) they take about 3% for every foreign withdrawal that I do. Plus, they charge $5 for using a non Chase ATM.
That means on an equivalent of $1,000 withdrawal in foreign currency, chase will deduct $5 + $30. It can add up for a full time traveler like me, so I try to avoid it the best I can.
ATM Partnerships
Airlines aren’t the only ones with alliances. Many banks partner with foreign banks for their members to use ATMs with no fee.
I would just google [your bank name] + “international atm partner”.
Charles Schwab
Charles Schwab reimburses all atm fees and charges no foreign transaction fee! How much savings would it take for you to open an account? $5 per transaction times “xx” transactions a year + 3% of the cash taken out… it can add up.
But it’s not just money, it’s convenience. As I say, I purposely try to never take out cash. Really, my aim is to only take out cash once. On a number of layovers, I’ve not taken out cash at all and just relied on using credit cards. This can change where you eat, what you do, etc…
Of course, you can convert cash ahead of time, assuming you have it and plan ahead.
The point is, it can be way easier just to be able to take out money whenever you want. And when you have a Charles Schwab account, that’s what you get. The freedom to take out money without thinking about how much it will cost you.
Credit Cards
Credit cards are the best way to go about this. As long as your card has no foreign transaction fee, you don’t have to worry about any fee at all.
Here are a few examples of cards that don’t have foreign transaction fees:
- Chase Sapphire Preferred
- Ink Bold
- United Explorer
- American Express Platinum Card
- Barclay World Arrival
- British Airways
- and many more…
There’s really no extra strategy needed. If you have a card with no foreign transaction fee, there’s nothing to think about.
When to Use What
Especially since I don’t have a Charles Schwab account, I completely depend on credit cards for layovers. If I were to withdraw money from the ATM I would be hit with something like a $5 fee and %3. But if I’m only in a country for a day or even two, I don’t need much money at all. So a $5 fee could be like 10% of my withdrawal, so I avoid it completely.
If it’s necessary to have a little cash for the bus, then I will exchange some money (hopefully ahead of time). Exchanging money really isn’t a bad idea, except for the fact that I don’t want to carry an entire trip’s worth of money on me (we’re sometimes gone for 4 months at a time).
The thing about money exchangers is that they charge by percent and your bank will charge you a much much smaller percentage and a fee, and often a fee for using a foreign ATM. So if that fee comes out to be a smaller percentage than what the money exchangers take, use the ATM. (I think airport money exchangers generally take 1-3%, and usually closer to 1%. Yes?)
So here’s my order of operations for deciding on how to handle getting foreign money:
- Always use a credit card (with no foreign transaction fee)
- Use the ATM to withdraw a lot of money.
- Exchange money at the airport if I don’t need a ton.
(Although if you have a Charles Schwab account, this is never a good idea).
It’s not a science, but it works for me. Although, doing all the math, I wonder if a Charles Schwab account will be our next move simply because it will save money and won’t be at all a headache to worry about ATM fees.
If you have any other tips for saving money with money, please comment below!
Your advice of exchanging here is the USA is not always a winning strategy. A lot of developing countries with artificially enforced “official” exchange rates have a “healthy” black market where you can get a much better ratio on your dollars. Heck even in Thailand I got surprisingly good, better than citibank, exchange rates in private kiosks.
In Europe and even perhaps in Mexico or China what you are stating is totally correct. Unless Schwab account has an any ongoing expense/fees, opening an account like that seems like a no brainer.
Interestingly enough the Amex prepaid card (reloadable with Vanilla) also does not have a fee for up to $400, I used this in Peru and China and I got hit with no fees….
you are absolutely right, Just came back from BKK and the money exchange all over BKK are much better than the bank at home.
Thanks for the comment. I’ll add a note based on what you said. It is tough making hard rules with money as others can figure out how to trade it profitably.
Leaving US for trip with a layover in Germany (10 hours) and final destination in Iceland. (Yeah, I know I am doing the opposite of most layovers involving Iceland.) Will use credit card for any incidental expenses in Germany.
What is the best place to change USD to ISK? I doubt he Travelex desk at the US airport is the best deal, but where else should I look?
Interesting question. Iceland is an odd one I guess. But enough people travel there that currency exchargers locally may have. Heck, maybe the airport would have it. If not, I’d withdraw money there. Or even exchanging money there can’t be too much worse.
You’ll need few ISKs as they are extremely credit card friendly there. I think the last time I was there I just used an ATM for my ISK source.
I use Capital One 360 debit. It used to be ING direct. No foreign transaction fees, no ATM fees (unless ATM bank is charging one). Easy approval, there’s always bonuses. Hit me up for a referral if you like!
Good suggestion for Cap1ers. Thanks Dizzy.
I have a few comments on this that I thought might be helpful to people.
1) Changing out dollars for foreign money in the US is typically not fee free, though often the fees are hidden in the exchange rates. There may be banks out there that have good rates, but I’m not aware of any.
2) Credit cards without foreign transaction fees are a good option, except for two things: 1- what if you want to use a vendor that doesn’t accept them (while traveling, I strongly disagree with limiting your experiences due to banking issues) and 2- you need to make sure the vendor doesn’t sneak in Dynamic Currency Conversion on you.
3) I agree with Dizzy on Capital One. The only thing you need to worry about is avoiding fees from the ATM owner. Europe for instance has many banks that don’t charge ATM fees. Schwab sounds like a good option too, possibly better since they refund ATM fees, but I don’t have experience with them. Cash also gives you the freedom to go to any merchant you want. You just have to make sure you end up with as little cash left over as possible at the end of your trip so you don’t have to worry about changing it back to dollars. That doesn’t take t
Right. Definitely not break even, although a lot less than the reverse.
Agreed. You shouldn’t only shop in places that take card. I ate for 15,000 IDR today in Bali – which is $1.3 USD. Couldn’t have paid card there. Definitely a reason to have the Cap1 or CS account.
Not to say about spare cash. Better too much than too little though?
Last post got cut off…last sentence should read: “That doesn’t take too much effort.”
Obviously credit card is the #1 way to go, but for getting cash – completely disagree with the order. Even 3% + $5 at an ATM is way more preferable to the haircut you take when getting foreign cash from most U.S. banks (before leaving) or from official foreign exchanges. For example the USD/EUR is 1.39 spot right now and I was quoted between 1.52 and 1.59 at domestic banks with a fee on top! Highway robbery!
What bank was it, and where?
The best, 1.52 was quoted by M&T bank in Philly who outsources their Forex to TravelX – maybe I’m a joker by using regional banks vs. national chains? Happy to reconsider my position if others had better experiences
This advice is mostly good, but not always. There is no reason to exchange money in Cambodian Riels (SP?) for example, since it doesn’t affect the price whether you pay in dollars or riels. I also tried to pre-order currency at my bank a couple of times, but still found better exchange rates locally.
In addition to ucipass’s comment, you do NOT want to order currency if you travel to Argentinca under any circumstances, since black market will afford you a 30% better deal than the official rate.
Yea, Cambodia, Panama and many other places use the dollar. So exchanging money is complete unnecessary.
I’m also told that in Columbia you can make a killing with the USD. An odd thing.
Charles Schwab!! In Asia the best money changers are on whatever street sells gold. They deal in a cash business and foreign money is just diversification to them. There is a shop on a street in Hanoi that exchanges something like 4 Million (USD) a day.
Wow. That’s incredible. And a great tip. So also maybe a business district instead of a tourist district?
Bluebird cards are fee-free – except you will pay local ATM fees (usually minor). Rates were typically right on current fx rates, so fair deal. Grabbed all our cash in Paris and paid $2 per ATM visit. Just got as much as we needed for a few days. $2 was dirt cheap for the convenience. BlueBird is an Amex product, so will work anywhere Amex is affiliated (lots of banks – can search Amex site online for nearby ATMs/Bankshttp://americanexpress.via.infonow.net/locator/cash/ )
Awesome. Didn’t even think about bluebird, lol. Although in Asia I hardly ever see Amex. Unless it’s a hotel. But I guess for ATMs, they may take it in the airport?
Why don’t you get a Schwab bank account? Would still be better than paying fees to exchange USD cash? And the account is free…
The funny thing is that we do have an account. Just no money in it, and no card. We haven’t been home in about… 4 months. But we’re going to ship some stuff to Asia and hope that will make the journey.
Actually your specific example of Mexico isn’t the best. My experience there is that people do want your US dollars, or at least the business of people carrying them, and you can get favorable rates. For example, WalMart – and its several competitor chains – in Mexico will happily take your purchase in US dollars and give you change in pesos at a better than market rate. Use a larger U.S. bill on a relatively small purchase and you’ve made a favorable currency exchange. Obviously WalMart and the like aren’t your main goal in visiting Mexico, but they’re ubiquitous and carry just about anything you need for everyday purchases while traveling. They also have great bakeries and at least some kind of food court.
Interesting tip. Are walmarts all over Mexico? Probably depends on the area. I saw one in PVR. Doubt there’s on in Merida. At least not many of the areas I was in.
Actually there are close to 10 in Merida; one is on Paseo de Montejo across the street from the Holiday Inn or the Fiesta Americana. Obviously they’re not right in the historical colonial center of Merida, which is where most tourist activity is. And I don’t go far out of may just to get to a WalMart. Just a thought if you happen across one while in Mexico.
When doing the transfer in the US for foreign currency where do you typically get the best rates, just at the airport? I pre-ordered through wells fargo once and got pretty unfavorable rates
Airports are unpredictable but often higher. I would contact bigger international banks in your area. Or the city of the hub you’ll be flying out of.
Credit cards have served us best, but I second that Thailand was fairly easy to find solid exchange rates when we needed to.
We have an old ING account we hardly use anymore so we never considered it as an option to pull money when abroad, thanks for the heads up @Dizzy.
“Always, always, always, exchange your money before leaving the country”
Simply not true, at least not as an “absolute”.
Last week, I got a FAR better xchange for Wan:Yen in Japan than I was offered in Korea.
Armed Robbery. No fussing with ATM fees, access to unlimited credit cards, and good exercise.
Like +1
I live on Utila Honduras they will give me 21 limpera for the dollar and I take it out at 19.5 to the dollar. As a rule dollars are always always cheaper then lempira… (Unless your buying a coke or something.)
schwab was great in 9 countries all over asia, maldives, singapore, australia, hong kong and even tahiti, china. but i have discovered one thing: it looks like schwab embeds a 3% fee in the fx rate when in mexico. i compared same day ATM withdrawal of 1,000 mexican pesos using schwab and same day cc purchase on sapphire preferred. schwab charged 3% more! this is not counting the atm fee which they refunded just fine. i found basically insignificant differences between sapphire preferred charges and schwab atm withdrawals all over asia. but i definitely noticed the haircut in mexico using schwab- that’s a first. it’s a great atm card- but in mexico, i do think they are adding a hidden 3% fee.