Getting the Most Out of Foreign Currencies When You Travel

February 25, 2013 - Christine Krzyszton

Depending on which resource you access, there are approximately 180 different currencies in the world. So, if you plan to visit several countries in any given year, as many of us do, you are presented with the challenge of how to exchange money, what to do with the money when you leave the country, and dealing with exchange rates. I asked several frequent travelers their tips on doing all of these and summarized them below.

Getting foreign funds on arrival:

Most travelers use the ATM at the airport stating that this is the most efficient way of getting local funds, securing immediate cash for transportation, liquid refreshments, and other incidentals. The alternative is to exchange money at the currency exchange booth. The jury is out as to which one has a better exchange rate but the ATM wins for ease of transaction and not having to carry large sums of cash to convert.

If you are carrying cash to exchange in a foreign country be sure the bills are in good condition. You should bring newer $100 US notes as they bring a better exchange rate in many countries. In some cases, older notes are not accepted due to certain year notes having been widely counterfeited. So, stick to newer notes. Some countries have separate exchange rates for $100 bills, $50 bills, and then all other denominations. I have only experienced this once in China where I got a slightly better exchange rate for the hundred dollar bills versus twenties. The bills should be in good condition, not torn, dirty or worn. If a corner is missing, forget it.

Before you travel, go to www.xe.com and determine the exchange rate for the currency you’ll need, calculate how much you will need to withdraw from the ATM and write it down so you don’t find yourself withdrawing too little or too much. You can also download a mobile app for Android, iPhone, and Blackberry on the XE web site.

Travelers checks are so…..last decade. They are often associated with high fees to cash them. They’re not accepted everywhere, and well, you CAN leave home without them.

Some travelers contact their bank before leaving for their trip and let them know which countries they’ll be visiting. This serves to avoid any problems retrieving funds with their ATM card in a foreign country. I never do but that may come back to bite me one day. It’s a practice that makes good sense.

Exchange rates:

As the incentives for using our credit cards continue, many of us will use credit cards for our purchases when possible. The first rule here of course is to use a card with no foreign transaction fees.

In Asia in particular we have to watch out for Dynamic Currency Conversion where the credit card charges are calculated in your home currency and the vendor (hotel, store, etc.) determines the exchange rate. Always make sure you are charged in local currency and let the banks apply the current exchange rate. For example, if you are in Taipei, make sure you are charged in TWD not USD. This practice is especially prevalent in western hotel chains. In China, Beijing in particular, I was a victim. I had no idea of such practices but fortunately for me it was a relatively inexpensive lesson. If you’d like to read more about DCC, there is an extensive thread on Flyertalk in the China Forum titled Using credit cards in China, the great rip-off. If you’re staying in any of the major hotel chains in Asia, you should read at least the last ten pages of this thread.

What to do with the funds when you leave the country:

One friend takes all of the currency he has at the end of his trip and applies it to his hotel bill. He said he has never had any hotel refuse it. I hope he remembers to keep enough for the taxi/train fare to the airport.

Personally I never cash in my foreign currency. Cashing in currencies means you’ve paid a premium at both ends of the conversion, acquiring and selling, a losing proposition. I put the money in zipper bags, label them, and file them in a little plastic bin. When I’m ready for my next trip, I pull out the currency I need and I have an immediate slush fund on arrival. If you travel infrequently, you may just want to keep the major currencies.

So, I’ve shared the money tips I’ve discovered. What are YOUR tips for managing your money when you’re traveling?

Christine Krzyszton lives in Northern Michigan and has been writing about her weekend adventures for over five years for weekly newsletters, a baby boomer blog and a regional men’s magazine. She is the author of How to see the World in a Weekend, available in print and KINDLE on Amazon.com. Christine currently has top status with three major airlines (AA, UA, and DL) and is working on a fourth (A3).

JB

I have experienced the double exchange rate in 3 countries in Africa, China and Honduras. I always bring bills newer than 2003 and as spotless and unfolded as possible. I plan to use the ATM when I first arrive in country (I do think it is cheaper) but I always bring a $100 USD. That said I added up all my ATM charges recently and realized I gave citibank over $200 and the local ATM’s at least $120 on maybe $12,000 in withdrawals – ouch! So I got motivated and signed up for a Charles Schwab checking account. No ATM fees anywhere ever and no minimum. As far as excess currency, i try and figure if I will ever go back – if not then I convert to whatever country I bounce to next. In NYC on 42nd near Grand Central is an OK foreign currency exchange. Don’t forget your VAT at the airport!
http://www.facebook.com/dee.roma.3 Dee Roma

I just returned from Milan, and I used my Chase Sapphire and Ritz Carlton (Visa cards, with no foriegn transaction fees) for practically all purchases. I can immediately review my credit card account and see the exchase rate (€ to $) on my activity. I did exchange $100 at the airport for €uros (what a rip off that was), just to have some liquid money for tips, incidentals, etc…..
M m

just remember you always lose no matter when and where you exchange. But when Hotels and flights cost little money who cares about about a couple pennies. The best way to pay best rate on exchange is on credit card with no foregin transaction fee.
http://www.facebook.com/dee.roma.3 Dee Roma

Mm agree there ! I also booked as many expenses while at home, with my credit cards, before I went abroad. I.E. bus tickets, museums passes, etc.
2tall4economy

I’m a bit of a FX junkie; I used to trade FX in my job and recently have visited about 15 countries in the past 2.5 years due to some global programs.

Your information is a great starter but it’s only directionally correct. If you don’t want to read all of it, the bottom line is never use cash in a foreign country unless absolutely necessary.

Some updates:

1) There’s a lot less than 180 currencies. There are ~180 *countries* per the UN, but many *countries* use the same *currency* (EUR and USD are good examples). If you take into account all of the pegged currency countries (UAE for example is based exactly on a USD, so it’s more or less using USD even though it’s not a USD bill) it’s even less. Taking the next step, there really are about ~15 major global currencies that are used in every country in the world. USD, EUR and JPY are generally accepted everywhere.

2) Using cash is almost always the worst way to pay expenses in a foreign country. FX fluctuates constantly – if you take cash out when you arrive and it goes down, you just made yourself poorer on your trip. If it goes up, you made a little money, but you’ll lose it in FX fees as you try to leave. Also, you’ll never spend exactly the cash you take out normally (but see below), so it will just sit on a shelf collecting dust, and unlike fine wine, all currency depreciates over time (due to inflation) so you’re losing even more money.

3) In some countries getting cash can’t be helped (particularly 3rd world ones), but these are the exception. Most places in most 1st and 2nd world countries, especially tourist areas and populated areas (which the majority of people visit), will accept Visa (or MC). Get a no-FX credit card (Cap Spark Cash is my personal favorite – 2% cash back and no FX) and use it to pay for everything. Using major CCs (ie not department store CCs or tiny bank CCs) will assure you that you always get the best possible FX spot rate at the time of the transaction because the bank has to give you the rate they give themselves.

4) Cash expenses also means your expense reports got a lot more difficult to put together when the trip is over. CCs offer a nice breakdown.

5) Never use exchange booths. Ever. Especially at the airport. They are always the most costly way to get FX. The jury is not out, it’s in and all the votes are “guilty”.

6) If you must get local currency, get a bank card and use an ATM with a bank that credits you back ATM fees.

7) Unless you are collecting it to give to children as a souvenir, take all of our local currency at the end of a trip and pay your hotel bill with it, then pay the balance on a CC. Have the hotel pay the taxi to the airport (most will do this) or use a credit card. You’ll always be sure to exit the country without anything left over and you’ll be making a financially prudent move.
JB

totally agree w 2tall4economy (love that name). AND if the hotel is paying for your taxi you are getting ripped off. better to pay cash yourself.
traderprofit

Seems to me there’s a problem with the conversion rates MC uses which it purports as being developed from sources such as BBG. (why they need multiple sources is anyone’s guess when the interbank market is fractions of a a pip wide.)Here’s their conversion chart:
https://www.mastercard.com/global/currencyconversion/index.html. I’d just use the peso as an example. They are consistently using a number 2-3% off from the interbank rate. So, Chase uses this rate and gets to claim there is no FC conversion fee? There clearly is. Can someone enlighten me?
scwam@fastmail.ca

Get a penfed card if you plan to travel. No fee for cash withdrawel but immeditate interest at 10%. I live and use it in China and my rate is 6.234 when the rate is about 6.240. You should dispute DCC if you get screwed with that in China and hopefully get the merchant charged back. This practice needs to be punished. Chinese merchants claim they don’t know any other way but that still makes it a violation of visa/mc
Arun Baheti

I use credit cards for everything possible and pay my hotel bill with any remaining cash. If I forget and end up with spare cash, a small purchase (magazine, gum) at the airport can help burn it (or duty free shops will let you use currency+credit card).

I’ll invariably find a few random coins in our bags or pockets; if I’m not headed back to that country soon I donate at airports where there is a collection station for charity (London, Zurich), and even on some flights the FAs will offer envelopes.

When at home, I love the UNICEF “Change for Good” route because I can gather up coins and bills from friends and family from any random assortment of countries and send it off. http://www.unicefusa.org/donate/other-ways-to-give/foreign-currency.html
http://www.facebook.com/bob.erickson2 Bob Erickson

Never use a currency exchange booth or store! Always use a debit card (not a credit card) at a foreign ATM and make sure that the ATM does not have an ATM fee of its own. For example, several Australian banks charge a $2 ATM fee. Avoid them (unless your own bank reimburses the fee) and use a surcharge-free ATM (such as SunCorp Bank ATMs). Also do NOT elect to have your withdrawal charged in US dollars (if the option is offered). That’s the only logical way to get foreign currency.
Oliver Huang

Hello Rick

I am a Shanghainese using US issued credit cards while doing business in Beijing. I had DCC issues with all Hilton, Intercontinental as well as Renaissance properties across Beijing City but they seem relatively easy to attack.

All you need to do is just to request a non-DCC charge on your no foreign transaction fee card. If you see a wordy/busy receipt showing FX rate, dont sign it. There are two ways to approach the problem.

One is simply to request the concierge for a return on the card immediately and the hotel will convert the bill to local currency. The other is let them charge the DCC rate on purpose, then talk to your bank to issue a statement for charging local currency, which will freeze the total amount for at least 2 months without paying a dime.

Getting the Most Out of Foreign Currencies When You Travel

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