While hotel and airport exchange may seem convenient, beware of high transaction charges. When exchanging currency, I prefer withdrawing from an ATM. ATMs conversion rates are better than what the airports and hotels offer. Beware that your bank will charge a fee. However, the fee should still equal to a better deal than the airport.
1. Using a Credit Card
In most cases you can use your credit card just as easily as you would in your home country. Card issuers typically tack on currency-conversion fees of 2 to 3 percent for international transactions, you’ll get the best exchange rate and fees that are lower than those associated with exchanging cash.
Best for: The majority of your big purchases, hotel bills, and restaurant tabs. Basically, it’s convenient enough to use instead of cash wherever possible.
Exception! Don’t use it to take money out of an ATM — ever. You’ll be hit with hefty fees (up to $20 in transaction fees or 4 percent of the amount of the advance, along with any local ATM fees), plus you’ll be charged interest starting on the day you withdraw the money.
2. Withdraw Cash With an ATM Card
Depending on your bank, your debit card can also be used in international ATMs to withdraw local currency. Most banks tack on fees that can add anywhere from 3 to 8 percent. Some banks do have international branches or partners that will allow you to use your ATM card fee-free in most cases. Check with your specific bank about its policies. If you do have to pay international transaction fees, minimize them by withdrawing larger amounts less often.
Best for: All purchases, big or small.
Exception! If you use an ATM outside your bank’s global membership, you run the risk of incurring outrageous fees.
3. Exchange Cash at Your Bank
Most large banks sell foreign currency, and if you have a bank account, you can order cash over the phone or online; with a few days’ notice, it can be delivered to your local branch for pickup. Watch out for delivery fees on this option — they can be as much as $10, cutting into your take-home amount. Note: Some banks will waive this fee for their best customers, so be sure to ask before ordering. One thing to keep in mind is that exchange rates for banks tend to be slightly better than exchange rates elsewhere, as banks receive wholesale rates that aren’t available to the general public.
Best for: Those who want cash on hand before a trip.
Exception! If you have a premium bank account with a high balance, you’ll get a better exchange rate, making this deal more attractive.
4. Buy Cash Online
How it works: You can order currency in advance of your trip from websites like oanda.com, and they’ll ship it to your home using a secure two-day delivery service.
Best for: Having cash on hand for immediate purchases like cab fare or a bottle of water when you land; be warned that the high delivery fees eat into the bang you get for your U.S. bucks.
Exception! If you are looking to get large amounts of cash (say $1,000 or more), delivery fees can sometimes be waived if you ask.
5. Buy Traveler’s Checks
How it works: Travelers’ checks function just like U.S. dollars, except they can be replaced if they’re lost or stolen. Once you get to your destination, you still have to find a place that will exchange the checks for local currency, and you’ll pay any associated fees, which can add up to $9 per check. Bottom line: Not convenient.
Best for: Those who don’t want to use credit or ATM cards or carry large amounts of cash. Also, if you’re worried about theft and loss, this option comes with peace of mind — if, for example, your American Express traveler’s checks are stolen, the funds can be replaced anywhere in the world and usually within 24 hours.
Exception! If you’re going to China, traveler’s checks are an excellent value. Fees are low, and the exchange rate is regulated by the Chinese government, making this one of the safest and most inexpensive ways to exchange U.S. dollars for yuan (especially in more rural locations, which are less likely to have ATMs).
6. Buy a Prepaid Foreign Currency Card
These cards can be used just like credit or ATM cards, but travelers pre-load them with a set amount of money. This nifty convenience comes at a cost — numerous fees (for withdrawals, inactivity, and to close the card) and restrictions (withdrawal minimums and limits per day). If the card is lost or stolen, it can be easily replace; however, the company most likely won’t refund the money lost, and it will charge a fee for the replacement card.