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Here is a scenario that you want to avoid: You’ve budgeted out the obvious expenses for your trip – the cost of a flight to Oaxaca, lodging, food, and entertainment. You’ve researched the currency exchange rate and know that right now, 1 USD = ~20 pesos. That means you can figure out your average daily expenses and plan your spending accordingly.
This is all good news until you head over to the foreign currency kiosk at the airport in Mexico City only to realize that they are offering a 15:1 exchange rate plus a service fee on top of that. Yikes. That’s going to cut into your margarita budget.
3 ways to avoid paying currency conversion fees
Currency conversion fees can really add up when you’re exchanging money. So how do you avoid essentially paying money to buy money? The key is to figure out where and how to buy foreign currency. Here are a few different strategies for making the most of your money and reducing the cost of currency conversion fees.
Exchange money before your travel
Start by exchanging money before you take off on your trip. It’s always a good idea to have some cash on hand when you’re traveling, especially if you’re planning to head out to some remote areas that might not accept credit cards. Even if you are mostly traveling through more prominent cities, it’s helpful to have some cash on hand for public transportation, tips, etc.
Head over to your bank and withdraw cash from your account (avoiding ATM fees) and then exchange this money for the country’s currency where you plan to travel. Banks will typically offer a much better exchange rate and will waive foreign transaction fees for their customers. Now you won’t be rushed when you land, and you can avoid paying expensive exchange rates at the airport.
Hot tip: remember to exchange your foreign currency back to USD before you head home. You’ll typically get a better exchange rate (and have an easier time finding a place that will purchase the local currency).
When I returned from my trip to Mexico a few weeks ago, I came back with a bunch of pesos, excited to exchange them into USD. I’m still looking for a bank that will take them (and give me a decent exchange rate). So long story short, learn from my mistake and exchange your money before returning home.
Use the right ATM
When you take cash out of an ATM in another country, there are two different charges to be aware of:
- ATM fees
- Foreign transaction fees that your bank charges on every withdrawal
These can add up quickly.
For example, if your bank is charging you a $10 ATM fee plus a 5% foreign transaction fee, you’ll pay an extra $15 every time you take out $100. That’s not a great deal. So how can you avoid this?
There are many banks that partner with foreign banks or have branches in other countries. By accessing money from one of these partner banks, you can often avoid ATM fees. To check one partner banks where you’re traveling, do a quick Google search for your bank name + international bank partner. For example, when I searched for Chase, you can find all JP Morgan European bank partners.
Charles Schwab
Have you banked with Charles Schwab? If not, you might have missed this loophole – Charles Schwab reimburses their clients for all ATM fees, and they don’t charge any foreign transaction fees. Unlimited ATM fee rebates for those who have a Schwab checking account.
ATM fees can be expensive; some are upwards of $15 per transaction. Knowing that you can go to any ATM in any country and take cash out whenever you need it gives a sense of security for those who are traveling.
Using credit cards with no foreign transaction fee
When I travel, my primary method of avoiding foreign transaction fees is to use a credit card that doesn’t charge these fees. This works best when you’re in a larger city where credit cards are widely accepted. This strategy might not be as effective in a small village in Peru. Be sure to know what types of payment are accepted before you travel.
Selecting your credit card based on travel benefits is one of the smartest ways to save money. Some of the best cards with no foreign transaction fees include:
- Chase Sapphire Preferred® Card
- Chase Sapphire Reserve®
- Chase Ink Business Preferred® Credit Card
- The Platinum Card® from American Express (see rates & fees)
- American Express® Gold Card (see rates & fees)
- Capital One Venture Rewards Credit Card
- Alaska Airlines Visa Signature® credit card
The information for the Alaska Airlines Visa card has been collected independently by Million Mile Secrets. The card details on this page have not been reviewed or provided by the card issuer.
Bottom line
When you’re traveling, you want to make the most out of your budget. That requires some strategy around how and when you convert money into foreign currency. Start by taking out cash and converting it before you depart. While you’re traveling, try to use a credit card with no foreign transaction fees as much as possible. When that’s not possible, look for partner banks that will waive or reimburse any ATM fees. By planning and becoming familiar with where and how to get cash, you can save a decent amount of money when you travel.
For rates and fees of the Amex Platinum card, click here.
For rates and fees of the Amex Gold card, click here.