Taylor Scott
Banks typically charge a fee for exchanging currency, which can be a flat fee or a percentage of the transaction amount, usually around 1-3%. Some banks may charge higher fees, such as a 9% fee for currency exchange, which is considered expensive and may not be worth it. It is recommended to check with your bank about their specific fees and policies regarding currency exchange and international ATM usage. Additionally, using a credit or debit card with no foreign transaction fees can help avoid these charges, and withdrawing cash from ATMs in the local currency is often suggested as it may provide a better exchange rate.
| Characteristics | Values |
|---|---|
| Bank charges a fee for exchanging currency | Yes |
| Percentage charged | 7-9% |
| Flat fee | $7.50-$10 |
| Fee waived for transactions above a certain amount | Yes |
| Bank of America | $1000 |
| U.S. Bank | $300 |
| Fee for using ATM outside bank's network | Yes |
| Fee for using credit/debit card | Yes |
| Fee for using card overseas | Yes |
| Fee waived for some banks | Yes |
| Schwab | Yes |
| Fidelity | Yes |
| Credit Union | Yes |
| Discover Card | Yes |
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What You'll Learn
Using a credit card with no foreign exchange fees
When travelling, it is often more convenient and cost-effective to use a credit card with no foreign exchange fees. This is especially true in places like Europe, where many countries have adopted the Euro as their standard currency. By using a credit card with no foreign transaction fees, you can avoid the hassle and expense of exchanging cash at a bank or currency kiosk.
There are several credit cards on the market that offer no foreign transaction fees. For example, Chase offers several credit cards with no foreign transaction fees, such as the Chase Sapphire Reserve card and the United ClubSM card. Bank of America also offers credit cards with no foreign transaction fees, although their website does not specify which cards include this benefit. Additionally, some credit unions offer debit cards that use the mid-market rate and do not charge any foreign transaction or ATM fees.
When choosing a credit card for international travel, it is important to consider the fees associated with foreign transactions. Some credit cards may charge a flat fee for foreign transactions, while others may charge a percentage of the transaction amount. These fees can add up quickly, so it is worth looking for a card that waives these fees. Additionally, be sure to read the fine print, as some cards may waive foreign transaction fees but still charge other fees for international usage.
Another advantage of using a credit card with no foreign exchange fees is the convenience of making purchases in the local currency. When given the option to pay in your home currency or the local currency, always choose the local currency. If you select your home currency, you may be subject to a less favourable exchange rate and additional fees. By choosing the local currency, you can take advantage of your credit card's better exchange rate and avoid unnecessary charges.
In addition to using a credit card with no foreign exchange fees, there are other strategies for accessing money while travelling abroad. For example, you can use an ATM to withdraw local currency. Be sure to read the policies of your bank regarding international ATM usage, as fees may apply. It is generally advisable to use ATMs from major banks, as they tend to have lower fees. Additionally, consider opening a "borderless account" from a company like Wise for extended trips, as these accounts can provide more favourable exchange rates and lower fees.
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Using an ATM
When using an ATM abroad, you may encounter various fees, including foreign transaction fees, currency conversion fees, and ATM usage fees. Here are some detailed instructions to help you navigate ATM usage while travelling:
Understand the Fees
Firstly, it's important to recognize the different types of fees you may encounter. Foreign transaction fees are charged by your bank for using your card in a foreign country, typically ranging from 1% to 3% of the transaction or withdrawal amount. Currency conversion fees, also known as dynamic currency conversion (DCC), are offered by some ATMs and allow you to convert transactions into your home currency. However, this service can come with hidden fees, sometimes as high as 7%. Additionally, the ATM itself may charge a usage fee, which can vary depending on the ATM operator and your bank's relationship with them.
Choose the Right ATM
When possible, opt for bank-owned ATMs located at physical bank branches during their opening hours. These ATMs usually do not charge usage fees and are generally more secure. Avoid "independent" ATMs from providers like Travelex, Euronet, or Cashzone, as they tend to have high fees and may be less secure. If you're in Europe, look for a bank-run ATM just outside the bank and withdraw cash in the local currency.
Use the Right Card
Consider using a travel credit card that waives foreign transaction fees. Alternatively, choose a bank that doesn't charge foreign transaction fees or ATM fees, such as Capital One 360, HSBC Premier Checking, or Varo's mobile-only banking app. If you have a checking account with certain banks, like Capital One or HSBC, you can benefit from their worldwide network of ATMs with no additional charges.
Be Mindful of Withdrawal Limits
ATMs have withdrawal limits, and these limits are often lower in foreign currencies. Be aware of your daily limit and the exchange rate to avoid getting an "insufficient funds" message. If you need to withdraw a large amount, try making several smaller withdrawals or using another ATM with a higher maximum withdrawal limit.
Plan Ahead
Before your trip, notify your bank or financial institution about your travel plans to avoid any unwarranted fraud alerts on your account. Additionally, consider ordering a small amount of foreign currency from your bank or a currency exchange service to have some cash on hand when you arrive. This can be useful for small purchases or emergencies until you can locate a convenient ATM.
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Ordering currency in advance
Bank Accounts
Firstly, check if your bank offers foreign currency exchange services. Some banks will only offer this service to account holders, and you may have to place an order in person at a financial centre or branch. Bank of America, for example, offers foreign currency exchange services to its customers with a checking or savings account.
Fees
Exchange Rates
Banks add a profit margin to foreign exchange transactions, which will reduce the amount of foreign currency you receive per dollar. It is a good idea to check the exchange rate your bank uses and whether they charge a foreign transaction fee. You can also check with your bank if they offer a foreign currency calculator to help you determine how much your foreign currency is worth.
Credit Cards
Using a credit card with no foreign exchange fees is another option to avoid fees when travelling. Capital One, for example, offers travel rewards credit cards with no foreign transaction fees. Alternatively, you could consider a "borderless account" from Wise for extended trips.
ATM Withdrawals
If you decide to withdraw cash from an ATM when you arrive at your destination, be sure to use an ATM from a major bank, such as Deutsche Bank or HSBC, to avoid excessive fees. It is also a good idea to check your bank's policies on using international ATMs and their reimbursement policy for ATM fees.
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Using a different bank
If your bank charges a high fee for exchanging currency, you may want to consider using a different bank. Some banks offer better exchange rates and lower fees for currency exchange. For example, Bank of America customers can order foreign currency through online banking or a mobile banking app, but there is a delivery fee of $7.50 on all foreign currency orders less than $1000. This fee is waived for orders of $1000 or more.
US Bank also offers foreign currency exchange services, with a $10 exchange fee for transactions of $300 or less. This fee is waived for transactions greater than $300.
Some people recommend getting a credit card with no foreign exchange fees or a low-fee credit card as an alternative to using a bank for currency exchange. This can be a good option if you plan to use your card for most purchases while travelling. You can also consider opening an account with a bank that offers low or no fees for currency exchange, such as Schwab or Fidelity. These banks may also reimburse ATM fees incurred while travelling, which can save you money if you need to withdraw cash in the local currency.
Additionally, it is worth considering the exchange rate offered by the bank. Banks may add a profit margin to the exchange rate, which can reduce the amount of foreign currency you receive per dollar exchanged. In some cases, it may be more advantageous to exchange currency at a physical location, such as a currency exchange booth or a bank in the country you are visiting. However, it is important to research the fees and exchange rates offered by these alternatives before making a decision.
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Exchanging currency at the airport
However, if you absolutely must exchange money at the airport, use a reputable company like Travelex, which is known for fair exchange rates and low markups.
Ordering currency from your bank before you travel is almost always better than using the airport currency exchange. Typically, you can access the currency exchange webpage through your bank’s website or mobile app, or by phone. While you can generally expect a solid exchange rate, use a trusted source such as Reuters or the International Monetary Fund to find current exchange rates and ensure you get a fair deal. Understand all the fees involved, for example, Citi charges a $5 service fee for transactions under $1,000, though it’s waived for premium bank accounts. Bank of America charges a standard shipping fee of $7.50, but this is waived for orders over $1,000.
If it’s too late to order foreign currency from your bank, consider using an ATM when you arrive at your destination. Check your bank's policies on using international ATMs to get the most accurate information. Using an ATM can provide a decent exchange rate while eliminating out-of-network ATM fees. If you end up using a non-network ATM, pay attention to ATM fees, which usually run about $5 per transaction. Consider limiting ATM debit transactions by withdrawing the amount you think you’ll need for the entire trip or a large portion of it.
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Frequently asked questions
Yes, banks typically charge either a flat fee or a percentage, generally up to 3%, of the amount exchanged. Some banks may charge a higher fee for larger amounts. It is recommended to check with your bank about their specific fees and policies.
Yes, you can use a credit or debit card with no foreign exchange fees as your primary method of payment when travelling. ATMs are also an option, but be aware that your bank may charge a non-network service fee for using an out-of-network ATM.
It is recommended to plan ahead and compare exchange rates at different banks or credit unions. Exchanging currency at the airport or at convenient locations like currency exchange kiosks often results in unfavourable rates and high fees.
