Outdoors Magazine

How to Get the Most Money for Your Money

By Everywhereonce @BWandering

Cambodian Cash

Of all the digital ink devoted to budget travel advice this one topic is strangely overlooked: How to avoid getting screwed when exchanging your money into a foreign currency. 

Traveling overseas almost always means paying for things in a currency other than your own. And while today’s travelers have more options than ever for obtaining local currencies, almost all of those options have costs.

Make a mistake converting your money and you can easily add 10-20% to the price of everything you buy. Here’s how to avoid doing that.

Pay with the right credit card

Our far and away favorite travel credit card is the Chase Sapphire Preferred. Because of this card we are flying business class in lay-flat seats all the way from Bangkok to New York this spring. We bought those seats with points earned through our Chase Sapphire Preferred card. It really is the best travel reward card around.

What we like most about the card is that its reward program allows you to convert Chase Points into any one of 11 different frequent flyer and hotel programs. That gives you tons of options to spend those points in a way that maximizes their value. We also love that we can pair Chase Sapphire’s features with sites like Hotels.com to get 20% or more off our hotel stays.

Chase Sapphire Preferred

In addition to all those benefits, the Sapphire Preferred Card doesn’t charge any foreign currency transaction fees. Many other cards charge 3-5% every time you make purchases in a different currency. You don’t have to pay those fees if you use the right card.

Now Chase Sapphire Preferred does impose a $95 annual fee (waived the first year), which may not suit everyone. But new card members earn a 40,000 point sign-up bonus that more than offsets many years of annual fees. We’ve typically been able to routinely redeem our points for airfare at a rate of $0.02 apiece (and sometimes as much as $0.04). That makes those 40,000 sign-up points worth at least $800 in flights and potentially a lot more.

But if all you need is a card that doesn’t charge extra for foreign currency transactions, there are plenty to choose from without annual fees. CapitalOne has a bunch of good options.

Use ATMs to get local cash

Automatic teller machines at your destination will almost always give you the best exchange rate you can possibly hope for. We never buy foreign currency before we arrive at our destination, and we’ve never been unable to get money out of a cash machine once we get there.

If you’re worried about whether your ATM card will work at your destination, take along some U.S. dollars as an insurance policy. You can always exchange them if you run into trouble with your cash card, but we’d do that only as a last resort.   

Use the right ATM card to withdraw cash

This ATM card reimburses your withdrawal fees at ATM machines around the world.

This ATM card reimburses your withdrawal fees at ATM machines around the world.

While cash machines certainly give you the best exchange rate, they can easily undo that benefit by imposing other hefty fees. Many impose foreign currency exchange fees of up to 5%. But that isn’t the worst of it.

In Vietnam we encountered banks that limited withdrawals to $50 and then imposed a $5 fee on each withdrawal. If your home bank levies its own $5 withdrawal fee and imposes a 5% foreign currency conversion charge you’re looking at paying $12.50 in fees for each $50 withdrawal. That’s a whopping 25% in fees for the privilege of accessing your own money.

Don’t do it!

Instead open either a Fidelity Cash Management Account or a Charles Schwab High Yield Checking Account. Neither charge fees for ATM withdrawals. But it gets even better than that. Both accounts refund fees charged by other banks at ATM machines anywhere in the world.

We have the Fidelity account and can attest to its awesomeness. So far Fidelity has reimbursed us for every ATM fee we’ve ever been charged.

Having said that, we think the Schwab account is probably even better. Fidelity charges 1% on each foreign currency withdrawal whereas Schwab charges nothing. Fidelity also only reimburses ATM fees when withdrawals are made at Visa, Plus or Star machines. Schwab reimburses for fees wherever their card is accepted.

Don’t let merchants charge you in your home currency

When you make a foreign currency purchase using a credit or a debit card you’ll often be asked whether you want to process the transaction in your home currency. Politely decline. The going fee for such point-of-sale currency conversions ranges from 3% to 5%.

Unless your card charges you more than that, and it shouldn’t charge you anything, there’s no reason for you to subsidize the merchant’s side business as an amateur currency arbitrageur. Ask to pay in the local currency.

A pet peeve of ours is that some unscrupulous vendors don’t bother to ask. They just run the transaction through in your home currency. That happened to us routinely in Spain. To avoid that it’s a good idea to get in the habit of asking to pay in the local currency when you hand over your card, although even then we still had a couple of merchants “mistakenly” transact in U.S. dollars.

Don’t let websites convert the currency for you either

Exchange Rate was 1.1828 on Jan 7

We’ve noticed that internet merchants have increasingly gotten into the business of screwing customers on exchange rates. The worst offender we’ve encountered thus far is Ryanair, a European discount airline that automatically converted my ticket price from Euros into dollars immediately after I entered my credit card information. The switcheroo would have been super easy to miss because I was literally one click away from finalizing the transaction.

Even worse, it took a bit of searching and a few more clicks to figure out how to undo the conversion. And when I finally pulled up the right screen I got a warning message saying that I “risked significantly higher costs” by processing the transaction in Euros.

Other information on that page, though, confirmed my suspicion. Ryanair was using a terrible exchange rate that, had I accepted it, would have increased my ticket price by more than 7%.

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