Currency Exchange and Credit Cards Abroad

Traveling abroad means spending abroad.

Even when your tour covers hotels and meals, you’ll still want pocket money for gelato in Italy, pastries in France, and frosty bier in Germany. In Europe though, keep in mind that many smaller establishments are cash only, and shops may enforce minimums for credit and debit cards.

Once upon a time, Americans ventured abroad with traveler’s checks or stacks of carefully concealed twenties and hundreds. Now, the ATM has killed the traveler’s check market for international travel. So what do you do?

Debit and Credit Cards for Foreign Exchange

Today’s traveler withdraws local currency from ATMs on arrival and pays larger transactions with credit cards.

Maximize each cash withdrawal so you pay fewer fees. Start by withdrawing the maximum and note how long it lasts. You want your cash to last to the airport, but not beyond: You’ll lose money converting back into dollars. Remember that coins can add up in Europe and Canada, so don’t dismiss a pocketful of change as inconsequential – it might buy you dinner!

For detailed advice on using your debit card overseas, see our article on ATMs in Foreign Countries.

Do Your Research - Debit and Credit Cards Fees

Research your fees for debit and credit cards well ahead of departure. Both may face foreign transaction fees and/or currency conversion fees, usually based on a percentage of the total transaction. A debit card may be subject to a flat transaction fee as well, especially if the ATM is out of network. Consider applying for a better credit card. Some banks such as Charles Schwab reimburse the cost of some or all ATM fees. Some banks have relationships with overseas banks, reducing fees. Seldom can you exchange currency for free, but it pays to know rates and fees.

Pay in the local currency, not dollars, with your credit card. The alternative, called Dynamic Currency Conversion or Cardholder Preferred Currency, will cost you in the exchange rate and fees.

Options Places to Exchange Overseas

Besides the favored ATM/credit card one-two punch, what are other options to exchange currency?

You can buy foreign currency in advance at your local bank. Order online or by phone and pick up in person. This may be more expensive than an ATM on arrival, but you can cover that first taxi ride and meal when you’re tired from flying. You can also order currency online and have it delivered to you, but the fees for this are generally discouraging.

Traveler’s checks are less common and accepted than in the past, but some travelers carry a few for emergencies.

No need to bring much U.S. currency, but some backup dollars can be handy in a pinch, in case there’s a blackout, a strike, the machine runs out of cash, or your card stops functioning.

Ever see a line at the exchange kiosks in airports and tourist areas? Nope, because they are a bad deal. They are notorious for high fees and poor rates and should be a last resort.

Prepaid travel credit cards come with very high fees, so they are seldom recommended.

A credit card cash advance is also a last resort. The transaction will incur a high fee, and you’ll start paying interest immediately.