How to Maximize Currency Conversion Abroad

by Nora Dunn
Resources updated 7/3/2023 by Transitions Abroad

Photo by Ted Campbell.

Between debit cards, credit cards, traveler’s checks, and other travel-centric financial products, you have a few options for carrying and spending your money while traveling abroad. And although most companies have (often obscene) relatively transparent fee structures, currency conversion rates are another story. In this article, you will find much of the information you require to effectively manage your money abroad and to maximize currency conversion rates in your favor.

The underlying theme for managing your money abroad is to be proactive about calling your financial institutions before you depart and to find out exactly what charges apply in the various scenarios you anticipate finding yourself in. Below are some guidelines for various financial products and what you need to be aware of.

Debit Cards, ATMs, and Currency Conversion Abroad

There are three fees to watch out for when using an ATM in a foreign country:

Your bank’s foreign ATM fee: If your financial institution doesn’t have a branch where you are traveling, you’ll be at the mercy of an ATM belonging to a private company or other financial institution. In this case, your bank will probably charge a per-transaction fee for using the Interac/Plus system (for example) to access your funds.

The foreign ATM’s fee: Many foreign banks and almost all private ATMs will charge a fee of their own for your use of their ATM machines.

Currency Conversion fees: To add insult to injury, you can additionally be hit with a currency conversion fee; usually charged by your home bank and expressed as a higher-than-market rate (the bank pockets the extra few cents on each dollar). It is often minimal in comparison to other currency conversion fees (e.g.: those charged by credit card companies) but is still worth investigating and tracking.

Here are some tips for managing the use of ATMs and your debit card while traveling:

• Call your home bank to find out what their foreign ATM and currency conversion fees are.
  
  
• In preparation for your trip, write down your bank’s contact information and fee structure so you can contact them if there is a discrepancy.
  
  
• You may wish to open an account specifically with an institution that has branches abroad, as you could reduce expensive foreign ATM and currency conversion fees. The more exotic your destination is, however, the lower the chance is that your bank will be there.
  
  
• Sign up for online banking and regularly check transactions on your account to ensure all charges are as expected and no fraudulent activity is happening. (Online banking privileges will also help you to manage expenses and bills from the road).
  
  
• When you need to use an ATM, withdraw larger amounts to pay fewer fees. Unless the currency in your country of travel is fluctuating wildly, don’t try to play the rates to your advantage; the per-withdrawal ATM fees (which often involve a double-whammy from the foreign bank as well as your local bank) will usually outweigh the currency conversion fees.
  
  
• Some banks charge nothing for debit purchases (as opposed to ATM cash withdrawals), and the vendor may allow you to take extra cash out as part of your purchase transaction. This may be a way to access your cash without paying the hefty ATM fees.
  
  
• For extra security, don’t leave all your cash in the account attached to your debit card. If it is stolen, you don’t want your robbers to have access to all your coffers. Instead, leave only the minimum balance required to reduce any of your bank’s fees (often a $1,000 balance will negate monthly fees), and transfer money in from a separate online account when needed.

Credit Cards and Currency Conversion Abroad

Credit cards are one of my favorite ways to pay for expenses abroad since they provide me a record of purchases, I avoid the per-transaction ATM and debit charges, I don’t have to carry large amounts of cash on my person, and depending on where I travel, just about everybody takes Visa. In addition, if the card is stolen and fraudulent purchases are made, I am usually not liable to pay for them (if instead my debit card is stolen, I have little recourse for fraudulent ATM withdrawals).

Traveling with a credit card is also something of a necessary evil since it is required to reserve accommodations, book plane tickets, place security deposits on rental cars, and make most online purchases. And if you travel with the right card, your consistent use of it might even pay for your next flight.

But the credit card companies still have a few tricks up their sleeve in the realm of currency conversion rates. Here is what you need to know, and how best to manage your credit card abroad:

• Research your credit card of choice thoroughly, as the currency conversion fees vary widely — as much as 10% — between the best and worst cards.
  
  
• Some merchants will charge an extra percentage for using a credit card. Be sure to ask about these fees, as they can tack on an additional 10% to your purchase.
  
  
• Use your credit card judiciously, as unsuspecting credit card users are targets for fraud. If you enter a PIN code, protect it from being seen; and if you sign for your purchases, watch the vendor to ensure they aren’t double-swiping or otherwise taking down your information for later use.
  
  
• Advise your credit card company of your travel plans in advance of your departure. Otherwise, purchases made from a foreign location may trigger their system’s fraud mechanism and the card could be frozen – even if the purchaser is you. (This is a common occurrence, sometimes even when preemptive calls are made. The more specific you are in your advisories, the less this will happen).
  
  
• When a merchant offers to charge you in your home currency for the purchase, it is usually best to decline, since they often use a higher-than-market currency conversion rate, and it doesn’t necessarily negate your credit card’s foreign currency fees. In the end, such a transaction could cost you up to an additional 6% overcharging the expense in the local currency and allowing your credit card to do the conversion.
  
  
• Do not insert your credit card into pay-phones for long distance calls! Not once but twice have I been desperate/dumb enough to do this (I was in a pickle at an overseas airport both times), and I paid up to $150 for five minutes of conversation.

To get an idea of the scope and variety of credit card fees, please refer to this comparison of credit cards with no foreign transaction fees. There are plenty of sites that compare credit card features in general but you should always investigate their overseas transaction fees on currency conversion to get the most for your money.

Cash Currency Conversion Abroad

Rarely will travelers (especially long-term travelers) carry enough cash to get them through an entire trip. However, having some cash on hand is always a good idea. Here are a few tips for managing your cash abroad:

• Don’t convert your cash at the airport, as the booths there don’t offer favorable currency conversion rates. Instead, find a local bank or currency conversion booth away from the airport.
  
  
• Beware of locals who offer to change your money for you; they’re getting something for playing the middle-man, and you’re the one paying for it.
  
  
• When negotiating a purchase, be sure to ask if they offer a discount if you pay cash (even if you always planned on paying with cash). Often if the vendor knows they are getting cash, they will be more flexible with price.

Financial Travel Products

TravelMoney Cards — Perform a search for “Visa TravelMoney Card”, and you will find a number of providers (American Express also offers similar services). They are pre-paid “credit” cards that you can use anywhere Visa (or Amex) is accepted. Here are the details:

• You pre-load the card directly from your bank account. You can do this continually throughout your trip if you wish, sometimes with a reload fee.
  
  
• Zero fraud liability.
  
  
• Money management tools, both online and via the mobile app for some cards.
  
  
• The card is not linked to your bank account or credit rating (and is protected by signature and PIN), thus offering security if it is stolen or lost.
  
  
• You are subject to prevailing currency conversion rates on the day of each purchase with the card, plus an additional charge of up to 3-7% transaction fee.
  
  
• Expect to pay a monthly fee of around US$5-10.
  
  
• Keep your eyes peeled for additional activation, re-load, or initial card purchase fees, e.g. a 2% reload fee.
  
  
• Use of ATMs involves the standard set of fees.
  
  
• You will be subject to minimum amounts.
  
  
• Beware of cash-out fees if you don’t use all your money and don’t plan to keep the card after your trip.

Nora Dunn is a Professional Hobo and Freelance Writer, who since 2006 has managed the conversion of about seven currencies back to her own Canadian dollars. You can read more about the latest currency she’s grappling with at www.theprofessionalhobo.com.