Cash and Foreign Exchange Tips for Travelers

Apr. 8

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KEY POINTS

No-FX Fee Debit Cards and Credit Cards
Cut down on hefty foreign exchange fees and commissions with specialized cards allowing you to spend freely without worrying about extra costs eating into your travel budget.
Dynamic Currency Conversion Awareness
Save money at the checkout counter by choosing to pay in the local currency rather than your home currency, avoiding hidden fees and maximizing your purchasing power during international transactions.
Travel Insurance – 24/7 Protection
Gain peace of mind with comprehensive travel insurance while securing financial protection and 24/7 multilingual travel assistance in case of lost or stolen cash and credit cards.

You should always expect some financial slippage while travelling.

The potential causes are numerous, ranging from excessive cellphone roaming charges to falling for overpriced tourist traps and facing exorbitant mini-bar fees. These expenses can be extremely frustrating and have a significant impact on your travel budget.

We find the following combination particularly frustrating:

Excessive foreign exchange (“FX”) fees
Lost or stolen cash

Let’s start with a primer on foreign exchange fees.

How do FX rates and fees impact your wallet?

Exchange rate fluctuations between your home currency and your destination's currency can have an impact on your purchasing power. A stronger destination currency reduces your buying power, while a weaker one increases it.

You may be able to exchange currency at various banks, credit unions, currency exchange desks, post offices, online platforms, hotels, travel agencies, airports, and more.

You may be surprised to learn that not all these entities will utilize the exact same exchange rate for a given currency pair. They may reference different data sources. This can lead to you paying more to exchange your currency.

To make matters worse, you will pay a fee to convert your money. Even top-tier financial institutions may charge more than 4% to facilitate the exchange. Each institution has their own rates for fees, commissions, and target profit margins.

Maybe worst of all, you will receive little, if any, transparency into what fees and commissions you are being charged.

Tip
Chartered banks typically offer a better combination of rates and fees compared to airports, hotels, or tourist area currency desks.

How to mitigate currency risks?

The term Currency Risk can be a bit intimidating. Fortunately, there are several steps you can take to reduce your risk.

Research

You should start researching relevant exchange rates well before your trip commences. There are lots of resources including currency conversion websites, financial news platforms (television, newspaper, internet), personal brokerage portals, and mobile apps.

You can make informed budgeting choices, once you are familiar with the current exchange rate and its historical trends and forecasts. You may also find optimal times to convert your money and translate your research into savings.

FX Free Debit Cards

These specialty cards are an excellent option for avoiding excessively high foreign exchange fees charged by your bank or other financial institution. They can also be a very convenient option.

Multiple debit card options are at your disposal for international travel or even for shopping at home for products from overseas. Our personal experience with the Wise debit card has been excellent.

It has proven very convenient during our international travels. We prefund it and use it instead of our credit card. The card is accepted virtually everywhere as it operates on the Visa and Mastercard networks.

From a fee perspective, it has lived up to its hype. I have tested it in multiple live situations by comparing it to rates provided by Thomson Reuters, my bank, and my brokerage firm. Wise was significantly less expensive every single time.

Wise is a publicly traded company and listed on the London Stock Exchange. Your debit card allows you to transact in over 160 currencies. A Wise account allows to send and receive payments in multiple currencies.

We invite you to read our Wise review for more information.

FX Free Credit Cards

Typically, credit cards will convert your foreign exchange purchases and add a fee in the 2% range. While better than the 4% charged by some financial institutions, the cumulative cost can become substantial.

Many of the top credit card companies offer credit cards that waive the foreign transaction fees. A quick internet search will reveal the main competitors and their related credit card offerings.

Limit Cash Transactions

Carrying large amounts of cash while travelling increases your financial risk. You are more susceptible to losing the cash or having it stolen.

Consider reducing your need for physical cash and utilize debit cards and credit cards like those discussed above. Mobile payment apps like Apple Pay and Google Pay can also be secure and convenient options. Prepaid travel cards may also fit into your travel plans.

These payment methods reduce the risks of carrying physical cash as well as providing a host of security features. You will have PIN protection, fraud detection, transaction tracking, and the support of your financial institution.

Pay in the Local Currency

Vendors in your destination country may offer the option to settle your bill in the local currency or your home currency. This is known as Dynamic Currency Conversion (“DCC”).

Typically, we recommend that you do not pay in your home currency. Instead, choose to pay in the local currency and save your money.

Let’s look at what happens when you request the merchant to convert the transaction to your home currency and apply the charges to your card.

First, the local merchant will covert the transaction and charge their fees and commissions. As highlighted above, local merchants will often charge fees significantly higher than the industry standard. It is unlikely that you will know the extent of the fees charged due to the lack of transparency.

Next, your debit card or credit card company will likely treat this as a foreign transaction and apply their own foreign currency fees and commissions to the transaction.

Tip
When using a debit or credit card abroad, opt to pay in the local currency to save on fees.

Travel Insurance

Some countries may require you to have travel insurance before allowing entry at the border. Travel insurance can mitigate various health and financial risks during your travels, including those related to cash and credit cards.

Many providers offer 24/7 multilingual travel assistance. This service can be vital in the unfortunate situation where your cash or cards have been lost or stolen. You may receive assistance to replace your cards. Some even offer limited cash advances.

Currency Restrictions

Your destination country may impose limits on the amount of foreign currency that can be brought into or taken out of the country.

Take the time to learn these restrictions as non-compliance may result in fines, penalties, currency confiscation, legal action, denial of entry / exit, and being blacklisted.

There may be declaration requirements regarding the cross-border movement of cash, as well as a list of prohibited currency transactions.

Pre-trip Planning Checklist

To summarize, the following steps can help reduce your financial risks and provide stress-free travel:

Research currency exchange rates	✔
Apply for No-FX fee debit card	✔
Apply for No-FX fee credit card	✔
Notify your bank of travel plans	✔
Notify credit card company of travel plans	✔
Buy travel insurance	✔