How to Avoid Paying Foreign Currency Conversion Fees Abroad

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When you travel internationally, besides flights, transportation to your hotel and visas, you have to worry about currency conversion fees. Once ATM fees, commission fees and foreign transaction fees are taken into account, more often than not, you can’t help but feel duped when exchanging money in foreign countries. So how can you reduce, or better yet eliminate, currency conversion fees when traveling abroad?

Use a Credit Card With No Foreign Transaction Fees

Depending on the credit card, foreign transaction fees can range between 1 percent and 3 percent of each transaction made outside of the United States. The good news is that many of the best travel cards on the market, including Chase Sapphire Preferred, Citi Prestige Card and The Platinum Card from American Express, waive foreign transaction fees. The downside is that businesses in some less-developed countries might charge a 3-percent fee for using a credit card, so you don’t end up saving money in those cases.

To check out a list of more cards with no foreign transaction fees, head here.

Pay Attention to Dynamic Currency Conversion

Even though you love your credit card that waives foreign transaction fees, you have to be alert when swiping it. Traveling to plastic-friendly countries offers another way of being scammed—dynamic currency conversion. When a cashier gives you the option to pay in U.S. dollars or local currency, you want to make sure you pay in local currency. Always.

Otherwise, you get a terrible conversion rate (which you often cannot compare to the fair rate on the spot). Dynamic currency conversion tacks on more fees, and that jerk cashier isn’t doing you any favors by charging you in U.S. dollars.

Travel With Cash

If you’d like to avoid credit card fees altogether, you can pay for items in cash. However, accessing cash abroad has its own set of nuances. For example, if you exchange money to local currency, avoid places that charge commission on top of offering subpar conversion rates.

Depending on the country, local banks typically offer the best rates but don’t forget to bring your passport. Most banks won’t exchange money without ID. If possible, travel with new, crisp bills and keep in mind that some countries, such as Thailand, offer higher rates on large bills ($50 and $100).

Withdraw Cash from ATM

Although withdrawing cash from an ATM typically results in the fairest currency conversion rates, the convenience carries a whole new pile of fees. First, your bank likely charges out-of-network ATM fees. Second, the card issuer imposes a currency conversion fee on the amount withdrawn.

And third, the ATM itself sometimes charges a withdrawal fee (but not always). You’re looking at paying an extra 3 to 5 percent. One way to minimize these fees is by using a credit-union debit card, which typically charges a lower withdrawal fee. If you travel abroad often, you might consider opening a checking account with a bank that reimburses ATM fees, such as Charles Schwab.

In Conclusion

When exchanging money abroad, there are many ways of getting scammed. Truth be told, you won’t spend your life savings on international exchange fees, but minimizing those fees will leave more money in your pocket to pay for other things, such as bus tickets, food or postcards.

For a list of credit card reward cards that give you other benefits while you travel, head here.

 

What’s your strategy for saving money when exchanging currency abroad?

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