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Foreign Currency Exchange

Select the cheapest and safest method to change money.

Plan your spending so that you are not stuck with foreign currency. [©Jupiter Images, 2009]
©Jupiter Images, 2009
Plan your spending so that you are not stuck with foreign currency.

Foreign Currency Exchange

Travelers going abroad may wish to consider how they will handle foreign currency exchange before they leave the country. Those who do not plan ahead can get stuck paying high transaction fees; or worse, may find themselves cut off from funding altogether. When traveling, people have a multitude of payment options. They may use credit cards or automatic teller machine (ATM) cards, travelers checks in either their home or a foreign currency, or change cash before they leave on their trip. There are risks and costs involved with each of these choices; most people rely on a mix to ensure they get a good rate, are protected against theft, and have money at all times.


Travelers will probably see currency exchange kiosks wherever they disembark. The more convenient the location, however, the less likely the traveler is to obtain a good exchange rate. According to Bankrate.com places like airports, ferry terminals, international train stations and hotels tend to have the worst deals, but people can find a better rate if they look around. Local banks usually have a good exchange rate; in some countries, the post office may be the best place to change money. To avoid the necessity of changing money at the airport, travelers can change a small sum, perhaps $100, at home to cover the cost of a cab ride or meal upon arrival.

Travelers Checks

Travelers checks are secure since the issuing company will replace them if they are lost or stolen. Though vendors abroad do not accept travelers checks as readily as vendors in the United States, travelers can sign and cash them at a local bank. Those carrying travelers checks can even designate a travel companion as a second signer, in which case two endorsements would be required to cash a check. The downside, according to AARP, is that travelers checks are essentially an interest-free loan given to the issuing company, be it American Express or Visa, by the purchaser. These companies are betting that travelers will arrive home with at least some of that money unspent and forget to convert remaining checks back to cash.

People are best off purchasing travelers checks in their destination's currency to avoid exchange rates. Travelers should be sure to carry a mix of large and small bills, as $100 bills and their foreign equivalents are not accepted everywhere. Also, it is best to use small bills as the trip comes to a close, to avoid being left with an excess of foreign currency. Because they are such a safe method of payment, it may be a good strategy to carry travelers checks along with credit or debit cards, so travelers are covered in case of a glitch.

ATM Cards

In many cases, ATM cards that access a home account offer the lowest fees and best exchange rates. This is because both banks and credit card companies have access to the interbank system, which allows them to purchase foreign currency at wholesale prices and pass the savings on to their customers. People can ask their bank about exchange rates and any special fees tacked on to foreign withdrawals so there are no surprises. If the terms are not favorable, travelers may consider opening a new account with a bank that does not charge high fees; they are out there.

The trick for travelers is to ensure that they can use foreign ATMs before they leave. Some countries do not let non-residents access ATMs. In other cases, travelers may have to track down an ATM in their network, be it PLUS or Cirrus. Again, travelers can contact their bank before they leave to locate compatible ATMs and map them out. According to AOL Travel, it is common that foreign ATMs do not accept PIN codes longer than four numbers. Travelers can check to see if this is true of their destination, and if so, change their PIN before departure.

Credit Cards

There has been some controversy in recent years as credit card companies began charging 2 or 3 percent on foreign purchases. As Conde Nast Traveler reports, significant fees have even been applied to foreign purchases made at home. For instance, someone making a hotel or plane reservation online might be hit with a foreign transaction fee, even if the bill was in dollars.

Even so, Bankrate.com contends that credit card companies still offer some of the best exchange rates around -- often better than local banks -- and certainly better than the 7 percent or more charged by some exchange dealers. Consumers can also take advantage of credit card services to cover themselves in case they want to return an item purchased abroad. However, credit card companies charge enormous fees for cash ATM advances, and consumers will want to avoid using this service if at all possible.

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