Exchange Foreign Currency at the Best Rates

Convert money for travel with the lowest fees

By Matt Lepkowski

How do I get foreign currency for my next trip? That’s the question people ask me most about traveling. Part of the challenge of saving money on a holiday is exchanging money. Banks and other money changers have lots of fees that can empty your wallet quickly. Here are the details they prefer you ignore.

In most places, it's cheaper to get local money from an ATM in the country after you arrive. Airports almost always have ATMs where you can do this - especially handy if you need local money for a taxi. If you have transport from the airport booked with your hotel already, you can just as easily wait until checking into your hotel; then walk around and get your bearings and use an ATM close to your hotel.

Another reason to use an ATM to get local currency is safety. You can pull out enough for a few days at a time and not worry about losing lots of cash due to theft or misplacement. This is the reason travelers' checks used to be popular, but nowadays they're antiquated devices, difficult and time consuming to exchange.

All cards are not created equal. Stick with Visa or Mastercard - the others are not widely accepted. Every card issuer charges different rates for cash advances in a different country than your own. In general, using a debit card linked to a checking or savings account will be the cheapest because they usually don't charge cash advance fees. You're withdrawing money you already have, not charging money and paying for it later. You will still have to pay your bank's fees for using other banks' ATMs, if applicable. In addition, you will be charged a foreign transaction fee, usually about 2-3%. Using a credit card versus a debit card incurs the foreign transaction fee, but also a cash advance fee which varies greatly. Often it's 3-5%, but can be a flat rate of $10-15 (home currency, USD in this example).

You'll find your bank's debit card ATM fee of $2-3 (home currency, USD in this example) is a lot less than the cash advance fee. In other words, it's cheaper to pay a $2 ATM fee and 3% foreign fee than a 3% cash advance fee plus 3% foreign fee. Every card is different. They only way to know is to call every card issuer and ask for these 3 rates: ATM fee, cash advance fee, foreign transaction fee.

In some places the rate to change cash are better than the rate your bank/credit card company provides. It really varies on the city, not just the country. In Bali for example, money changers were offering 8,500 Rupiah per US dollar (the actual exchange rate newspapers/Internet show), but other places in Indonesia were offering less than 8,000 or even 7,000 in some remote areas. In comparison, the effective credit card rate was about 8,250-8,325, depending on the card and the date.

If you do take cash, make sure to take crisp bills with no tears or damage. Money changers will offer less or not accept worn bills. Also, $100 bills have the best cash exchange rate; $20 bills and smaller are changed at a lower rate. Beware of whom you change money with. If the Internet says the rate is 8,500 and you see signs on the street offering a rate of 9,000, just laugh to yourself and keep walking. These places are notorious for folding bills over, quickly swapping stacks of bills, and other con-artist tricks. They obviously can't afford to give a rate better than the real rate so they lure people in with "great" rates and cheat them to come out ahead. Usually the fancy money changers in the airport with multiple digital displays charge very high transaction fees and/or offer lower exchange rates. Exchanging money at your local bank before leaving is not recommended due to poor rates and/or high fees and the risk of carrying large sums of cash.

Matt Lepkowski is the founder of TravelsInParadise.com and lives in the mountains of Colorado, USA.
See Matt's bio and more of his travel articles and pictures.