Travel Money: Buying Foreign Currency Made Easy

Planning a trip abroad? You'll need to get your hands on some foreign currency. The best way to do this is to visit your bank or credit union before you leave and exchange your money there. This way, you can avoid the unfavourable rates and high fees that are often imposed at airport kiosks and other exchange counters. If you're a frequent international traveller, consider using an international banking app such as Wise or Revolut to manage your money. These apps make it easier to hold multiple currencies and transfer money to accounts in different countries.

Get cash from your bank before you leave

One of the best ways to get foreign currency for your trip is to visit your bank or credit union before you leave your home country. This will help you avoid paying ATM transaction costs abroad and may even get you a better exchange rate. Depending on your bank, where you live, and which country's currency you need, some currencies may be available for same-day exchange. Other, less frequently requested currencies could require a few days or more advance notice.

Some banks, such as Citibank and Bank of America, may not charge a fee for exchanging currency and will provide options such as conducting the transaction online or even mailing you the currency. If you need amounts of $1,000 or more, most banks require you to pick up the currency in person at a branch.

It's a good idea to call your local bank first to see if they have the currency you need. Not all branches exchange currency, and exchange rates between banks can vary greatly. Remember that you won't get the exact exchange rate you see online, as banks add a profit margin to these transactions.

If you have a checking or savings account with your bank, they will exchange your dollars into a foreign currency before and after your trip. This means you won't have to rush to spend your remaining foreign currency before returning home and can convert it back to your home currency when you get back.

Avoid airport kiosks

Airport kiosks are convenient, but they are not the best option for exchanging foreign currency. Here's why you should avoid them:

Poor Exchange Rates

Airport kiosks often offer unfavourable exchange rates compared to other options. Their rates are typically much lower than what you would get from your bank at home. For example, if your bank offers an exchange rate of £72 per $100, an airport kiosk may only give you £67 per $100, resulting in a loss of £5 for the same amount of money.

High Fees

Airport kiosks may also charge higher fees for their services, which are sometimes hidden within the unfavourable exchange rates they offer. These fees can add up quickly, especially if you are exchanging a large amount of money.

Alternative Options

Instead of using airport kiosks, it is recommended to plan ahead and exchange your currency before your trip. Here are some better options:

• Local Bank or Credit Union: Visit your bank or credit union before leaving to exchange currency. They usually offer better rates and lower fees. Some banks may also buy back any leftover foreign currency when you return.
• Online Currency Converters: You can order foreign currency online from services like Currency Exchange International and have it delivered to your home. While the exchange rates may not be as good as your bank, it is still a better option than airport kiosks.
• Foreign ATMs: Once you reach your destination, use your bank's ATM network to withdraw cash in the local currency. This is often the best option as you can get competitive exchange rates and low fees (typically 1% to 3%).

By avoiding airport kiosks and planning your currency exchange in advance, you can get better exchange rates, lower fees, and more value for your money during your travels.

Pay by card, but watch out for foreign transaction fees

Paying by card is a convenient way to pay for things when travelling, but it's important to watch out for foreign transaction fees. These are fees charged by your credit card issuer for transactions made outside your home country and can add up to a significant amount over the course of your trip. The fees are usually around 1-5% of the purchase amount, but some cards charge as much as 3%. So, if you spend $1000 on a card with a 3% foreign transaction fee, you'll pay an extra $30 in fees.

There are a few ways to avoid paying foreign transaction fees. Firstly, you can apply for a credit card that doesn't charge these fees. Several popular travel credit cards, such as the Chase Sapphire Preferred Card and the Capital One Venture Rewards Credit Card, offer this perk. Alternatively, you can exchange your money for local currency before you leave home, although this may be less convenient and you could still be charged fees by your bank or currency exchange store. Finally, you can open a bank account that doesn't charge foreign transaction fees, such as the Schwab Bank Investor Checking account. This account also reimburses ATM fees, which is useful if you need to withdraw cash while travelling.

Pay in the local currency

When travelling, it is generally best to pay in the local currency. This is because of dynamic currency conversion (DCC) fees, which are applied when you choose to pay in your home currency. These fees are often hidden within the overall price, making it difficult to identify any unnecessary charges. By opting to pay in the local currency, you can avoid these hidden costs and save money on your trip.

When paying with a card, always select the local currency option. This will ensure that you are charged the current exchange rate, which is typically based on a globally recognised floating rate. Additionally, some credit cards may charge foreign transaction fees, which can add up to 2-3% of each transaction. To avoid these extra costs, consider using a credit card designed for international travel, which often does not include foreign transaction fees.

If you need to exchange cash, it is recommended to do so at your bank or credit union before your trip, as they usually offer better rates and lower fees. Ordering foreign currency online or through a mobile app is also an option, although the exchange rates may not be as favourable, and delivery charges may apply.

When abroad, using your bank's ATMs is the best way to withdraw local currency. Competitive exchange rates and low fees can be expected, but it is important to use your institution's app to locate the nearest ATM to avoid unnecessary charges. If your bank does not have any in-network ATMs or branches in the country you are visiting, you may have to use your debit card at a local ATM, which will likely incur additional fees.

Know your ATM fees and limits

When travelling, it's important to know your ATM fees and limits to avoid any unexpected charges. Here are some tips to help you navigate ATM fees and limits when travelling abroad:

• Understand the different types of ATM fees: There are several types of fees that you may encounter when using a foreign ATM, including foreign transaction fees, out-of-network ATM fees, and currency conversion fees. Foreign transaction fees are typically charged by your bank for currency conversion and can range from 1% to 3% of the total withdrawal amount. Out-of-network ATM fees are charged by your bank when you use a non-network ATM outside your home country, usually a flat fee of $2 to $5 per withdrawal. Currency conversion fees are charged by the ATM for converting transactions into your home currency and can be as high as 7%.
• Choose a bank with no foreign ATM fees: Consider opening an account with a bank that doesn't charge foreign transaction or ATM fees, such as Capital One 360 or HSBC. These banks may also have international ATMs or partnerships with foreign banks to reduce or waive withdrawal fees.
• Use a travel credit card: Instead of withdrawing cash from ATMs, consider using a travel credit card that waives foreign transaction fees. This can help you avoid ATM fees and the need to carry large amounts of cash. Popular options include the Platinum Card from American Express, Capital One Venture Rewards Credit Card, and Chase Sapphire Preferred Card.
• Use your bank's ATM network: If your bank operates ATMs worldwide, such as HSBC, use those ATMs whenever possible to avoid additional fees. If your bank doesn't have international ATMs, check if it's part of a fee-free ATM network. You can usually find this information on your bank's website or app.
• Pay in local currency: When given the option, always choose to pay or withdraw in the local currency. Your bank may offer a better conversion rate, and you can avoid hidden currency conversion fees charged by the ATM.
• Withdraw larger amounts less frequently: While it's not advisable to carry large amounts of cash, you can reduce the frequency of ATM withdrawals and associated fees by planning your budget in advance and withdrawing larger amounts at once.
• Use your debit card for cash back: Instead of paying ATM fees, use your debit card to get cash back at stores when making a purchase. This option may not be available at all establishments, but it's worth asking during checkout.
• Compare fees: Before your trip, research the fees charged by different banks and ATM networks in your destination country. This will help you make informed decisions about where to withdraw cash and minimise fees.

Frequently asked questions