Money Matters Overseas
(First of two parts, jump to part 2)
ITN asked readers to write in about how they deal with money and making purchases overseas (anywhere outside of North America and the Caribbean). We asked, “Do you procure some cash of the country you’re traveling to before you leave the States or wait until you step off the plane and look for a bank or automatic teller machine (ATM)? What type of card do you use? Instead of cash or travelers’ checks, do you prefer using credit cards for purchases? What advice do you have for others?”
Some of the responses we received appear below. (Note that bank fees and interest rates change constantly, so double-check those of your banks.) If you have anything to share, write to Money Matters, c/o ITN, 2116 28th St., Sacramento, CA 95818, or e-mail editor@intltravelnews.com (please include the address at which you receive ITN).
While I always have a credit card with me as I travel, to use in emergencies or for an unexpected major purchase, I rely on cash.
I begin by getting about $100 in local currency from my bank at home prior to the trip. This isn’t always possible, of course. A number of countries — India, for example — do not permit their own currency to be brought out or taken in.
I carry U.S. dollars with me to change into the local currency as needed. The cash is carried in a pouch that is attached to my belt and hangs down inside my trousers. If there is a safe in my hotel room, I will keep most of it there.
Over the years, I have discovered that frequently it’s hard, if not impossible, to cash travelers’ checks in foreign countries. ATMs are usually available but not always; I have been in some “off the beaten track” places where ATMs don’t exist.
A plus for using cash is that I am not inclined to overspend my trip budget as I might if I put everything on a credit card.
A final note — I do not spend a lot of time looking for the best rate when changing money. My experience has been that the difference in rates is rarely more than a few dollars. I would rather get local currency at a lower rate at the hotel desk and be on my way than spend my limited time chasing down the best exchange rate in town.
BILL ABER
Albuquerque, NM
In the last several years of travel to Asia and Europe, at each airport I have always found an ATM at which to acquire cash — and at less cost than using a currency exchange booth.
As a backup to my bank’s ATM debit card, I also carry a Visa card that can be used in most ATMs. This is critical, because a magnetic stripe can go bad or the card inexplicably may not be accepted. This happened to me in London, so I was grateful for my Visa.
I also carry a backup Visa card from another bank, because I also occasionally have had the experience of my primary Visa not being accepted at a restaurant or shop.
Most importantly, always call the customer service department of your bank and Visa and tell them you will be on a trip and using your card frequently, sometimes for large purchases.
KENT SHAMBLIN
Afton, MN
Using an ATM card is the most advantageous way to get money overseas. First Republic Bank has been offering an ATM card free of all charges, and the account accrues interest as well. The bank is in California, but anyone can access it.
Ask what your daily limit is. With the declining dollar, it makes sense to take out the maximum in cash, and if there is a service charge it is diluted.
Put your Visa card away! Do not make the mistake I did: on arriving in Norway after a very long flight, I was so disorientated that I put my Visa card in the ATM and withdrew about $50. The finance charge on that knocked my socks off! So put away that card and use only your ATM card.
ATMs are called various names in different countries. Try asking for the “cash machine” or “bank machine” and not the “ATM.”
Always notify your banks of where you are going and for how long.
In every airport there are cash machines. Sometimes they are out in the arrivals area and quite a distance away, but they are there. In a non-E.U. country, it makes sense to get the local currency so you can take a bus or taxi. Making an exchange rate “cheat sheet” ahead of time is also helpful. Currency equivalents can be found at www.xe.com.
Visa and MasterCard have been charging 2% over their 1% when you make a purchase overseas. I can understand the 1%, but the 2% is just a plain rip-off. If you have to make a large purchase, pay cash. It is easier to negotiate for “cash” than to hand over the credit card.
I pay for everything in local currency: hotels, meals, sightseeing, taxis, admissions, etc. Often you will get a better rate for “cash” because a credit card transaction can cost the merchant 3% or more.
Travelers’ checks are poison! Not only are they useless in many countries, but the hassle of cashing them at certain banks (which take a percentage) is not worth it.
I NEVER use cambios — another rip-off! They take an even higher commission than banks do. Don’t believe their signs saying “No commission.”
Of course, you will put your money in your belt bag under your clothes (when no one is looking) and keep out only what you need for the day.
A good idea is to NOT use the cash machines on weekends or after hours when the bank is closed. If your card gets “eaten” after hours, you can’t go into the bank and get it back. Also, always keep the receipts!
Always make sure you are alone at the cash machine. If a “helpful stranger” just happens to be there, hit the CANCEL key and your card should come back.
JANE L. REBER
Palo Alto, CA
Before we travel to a foreign country, we ALWAYS obtain some of the local currency of our first stop from our bank. My Bank of America branch has excellent service in obtaining foreign currency, even though the exchange rate is not exceptional. When arriving at the end of a long flight, we are usually tired, and the thought of waiting in line at an exchange booth is unappealing. Having a little local currency to get through the first day or so is comforting.
We also carry $50 in “newish” one-dollar bills. These are invaluable for tipping, using at an airport, etc.
Regarding purchases/shopping, in most cases local currency is absolutely necessary for the fun of shopping and bargaining in local markets, whereas stores catering to tourists usually welcome plastic.
STEPHANIE L. KING
Highland, NY
My experience is that it’s fine to wait until you arrive at the airport at your destination before obtaining local currency. Currency exchange rates in the U.S. tend to be quite unfavorable.
I either take extra cash to exchange upon arrival or I use an ATM. It pays to get larger, rather than smaller, amounts of cash ($200 minimum), since many banks charge a fixed amount per ATM transaction and some exchange offices also charge a flat fee as a commission.
I also generally take some travelers’ checks with me. Sometimes they can be difficult to cash, but my experience is that they generally can be exchanged, sometimes even at a more favorable rate than cash. Also, ATMs are not always available in out-of-the-way locations and I don’t feel that carrying large amounts of cash with me is a good idea.
DON STEIG
South Orange, NJ
My wife, Mary, and I lived overseas when I was in the Air Force, and since I retired we have been overseas two or three times a year. Our money handling has changed a great deal since our first trip in 1975.
CASH — We used to take travelers’ checks but no longer bother with them. We use our ATM card and occasionally a charge card for a cash advance.
Our normal routine is to find an ATM in the airport as soon as we arrive at our overseas location. I try to withdraw the equivalent of $300, knowing I can find an ATM in virtually every village or town. I usually try to use a bank ATM after that.
The advent of the euro has made cash handling in Europe a lot easier. In non-E.U. countries I base the amount of my withdrawal on how long we will be in the country. (Remember, if you are on a tour you can always use leftover local currency as tips for guides and tour directors.)
Note: overseas you must use only a 4-digit PIN (personal identification number), so make sure you have it set up before you leave the States if you plan to use your card in an ATM.
CHARGE CARDS — We have always used charge cards when we could, as we feel we receive a better exchange rate that way (those pennies add up on a long trip). We call our credit card’s customer service department before we leave to tell them the dates we will be gone and the countries we will be visiting. It helps them to watch for unauthorized use and to keep them from shutting us off when they get a group of our charges from “strange” places.
MISCELLANEOUS — Another thing I have found to be great is the use of the Internet and online banking to keep up with bills at home while on a long trip. I have also set up Internet access to the major credit cards we use so I can check to see what is really being charged.
Finally, before I leave, I make a list of all the credit cards and ATM cards we are taking (including card numbers and contact phone numbers in the States) in case I lose a card. I keep this list in my money belt in a separate zippered compartment so there is no danger of it falling out when I need my passport or anything else in there.
CHARLIE BROWN
Rocklin, CA
In our travels, we take US$200 to $300 per person in new 20s, 10s and ones for tipping and as backup. No travelers’ checks. We get no foreign currency before we leave.
We take with us individual ATM cards from our local credit union (with the I.D. numbers and PINs stashed separately) and also Visa and MasterCard credit cards (also with their I.D. numbers and PINs stashed separately).
On arriving, we get $200 in local currency from an airport ATM using our credit union ATM card (for which there have been no fees and for which we get the best exchange rates). We replenish our supply of local currency at ATMs as needed.
Only if absolutely necessary will we use a Visa or MasterCard, and even then we pay it off within 30 days to avoid interest charges.
The above procedure gives us the biggest bang for the buck, so to speak. We have had no problems over many years of travel.
RICH HARVEY
Athens, OH
My husband and I have traveled the world, and, with only a few exceptions, we have been able to use either U.S. dollars or a credit card.
Upon entering a new country, we exchange $50 at the airport. This is needed in case the cab driver won’t accept U.S. dollars or we want to purchase water or a small meal. Most often, in marketplaces (especially at cruise docks) the locals want U.S. dollars.
If we feel we need to change more, we go to a local bank.
JEAN YAKE
Las Vegas, NV
It all started when I received a notice in April ’05 from the bank MBNA saying they were changing the way foreign-currency transaction surcharges would be computed and recorded on statements.
I had previously made charges with my MBNA credit card only for foreign transactions. MBNA charged only the 1% conversion fee and added no surcharge, while most other banks added a 2% surcharge to the 1% conversion fee already charged by Visa and MasterCard. Moreover, because MBNA is a large bank, it offered a very competitive rate of exchange.
The fine print in the notice seemed to show a change in the fees, and a phone call to MBNA on April 25 confirmed it: the bank had joined all the others in newly charging a foreign transaction fee of 3%, I was told. Apparently, all the banks now have combined the conversion fee and the surcharge into one fee.
I decided to no longer use my MBNA card for foreign-currency charges, even though it offers 1% cash back and other awards. If I have to pay the 3% anyway, I might as well return to using my United Visa card for foreign as well as domestic transactions. (With the United card, I get miles on my airline of choice, plus United requires fewer miles to earn free flights, I can use miles to upgrade to business class and there are more ways to earn miles.)
When I first made that call to MBNA in April and complained about the increase in fees, the customer service rep suggested I not cancel my card, saying they had had many such comments and were considering returning to their old ways. I didn’t feel I should hold my breath waiting for them, however.
When I called MBNA a week later at the beginning of May to cancel one of my cards, I spoke to a “customer advocate” and learned that my MBNA World MasterCard still has just a 1% fee for foreign transactions, although the MBNA World Points Platinum Visa does indeed now charge a 3% fee. The advocate was most apologetic for my having been given the wrong information.
He reminded me that the MBNA World MasterCard, which earns points like their Visa, has several other benefits for travelers, such as a concierge service plus no over-the-credit-limit fee. It also has benefits for domestic purchases, including travel insurance, but I prefer to use my United card for purchases in dollars.
The lesson learned from this experience? It pays to be persistent when dealing with credit card companies.
Incidentally, after seeing an article in the New York Times, I called MBNA on July 19 and learned that it is merging with Bank of America. As of now, however, there are no changes to the World MasterCard program. The merger will be finalized at the end of 2005. Hopefully, they won’t change the perks for the card.
Another option I can use when traveling — my Smith Barney FMA (Financial Management Account) MasterCard debit card also charges only a 1% transaction fee. It has a free Travel & Rewards component, but the points earned, which can be used for travel, merchandise and/or gift certificates, can be converted to miles only on American, an airline we rarely use.
I like having more than one card with the lower 1% foreign transaction fee, since my husband and I carry different cards when we travel, just in case a wallet gets lost. In fact, this happened in Chiang Mai, Thailand, in December ’03 when we went out before dawn with food offerings for the begging monks and returned to our hotel missing a credit card wallet. We retraced our steps in the early daylight but came back empty-handed.
One call to our credit card registry took care of canceling and replacing the lost cards. Since we carry different cards, and some of our cards (FMA and AmEx) intelligently provide different numbers for cardholders sharing one account, we were able to continue using charge cards even after the loss.
For the record, here is some additional information I’ve gleaned on credit cards.
The AmEx Blue Cash card, which gives cash back, has been charging only a 2% conversion fee, but a customer rep wasn’t able to tell me how they computed the rate of exhange.
For their Visa debit card, my local bank has been charging a 1% currency conversion fee, apparently the standard fee for debit cards.
There are lots of cards out there that offer rewards, cash back and/or points and charge the 3% fee, but, in addition to the standard rewards/points, the AT&T Universal Rewards MasterCard offered by Citibank also gives 30 minutes of free domestic long-distance calls monthly. More minutes can be purchased inexpensively and can be used for accessing the AT&T network for international calls from abroad.
And on the subject of money, in addition to travelers’ checks we always take with us about $50 in local currency, which we get from International Currency Express (phone 888/278-6628). The cash is useful for that first taxi ride and for tips when checking in at the hotel in the middle of the night, before we’ve had a chance to find a bank.
JANE B. HOLT
Hinesburg, VT
After nearly 50 years of money changing — even back in the past when upon entering and leaving some countries I had to fill out forms declaring every bit of money I had on me, and sometimes I would have more than 10 currencies (traveling for the World Bank can do that) — I have come up with the following “optimal” ways to handle money (and I am a frugal financial analyst).
First, maybe there are some money exchanges in the U.S. that charge reasonable rates, but I have not heard of them. Canada may possibly have some. If you are tempted to call a U.S. money changer, just check what you are getting for what and then add in the commissions, the postage, etc., for the “trade.” Or check at your departing airport booth.
For example, you may have to pay $1.32 to buy a euro, but you receive only $1.28 for a euro. That’s a loss of four cents, or 3.1% in a transaction. Usually, you will find that in the U.S. the “bid-asked” difference is pretty expensive, whereas in other countries the difference will be less.
Second, travelers’ checks are frequently more trouble than they are worth. They are harder to cash, you frequently receive a poorer exchange rate for them and you may have to buy revenue tax stamps to cash them.
Cash, in reasonable amounts, is better. No, do not carry it all in a wallet in your back pocket. (I usually carry $300 to $500, much in small bills.) Pack most of your cash, along with a second ATM card and credit cards and one or two checks on your bank account, into a money “pouch” that ties around your waist inside of your clothing, or, better still, into an inside pocket in your pants. (Such pants with inside pockets are available from TravelSmith [800/950-1600 or www.travelsmith.com] and others.)
Another alternative is a safari-type shirt/jacket which has lots of pockets, inside and out. You can even put a wallet inside, but you must then wear the jacket 100% of the time.
ATM cards are wonderful, but they should be on a checking account, not a savings account. You must have one with a 4-digit secret code (or PIN), and the code should be remembered in your head, not written down anywhere.
When you arrive at a foreign airport (or maybe you have to wait till you get to town), run for the nearest ATM and get a “lump”; I usually aim at the equivalent of $100-$200. Virtually universally, you will get the best exchange rate at an ATM, but there is usually a charge for the transaction.
I have used my ATM card in scores of countries, and the only place it did not work was in Tahiti. ATM cards do usually have a maximum amount ($300-$400) that you can obtain per day from the machine, BUT if there is a bank alongside you frequently can walk through the door and get up to $1,000 from the teller or officer, and there may not be the ATM use fee.
Other possibilities, such as changing money at money changers and foreign banks, may have less advantageous exchange rates plus commissions which may be substantial for a small transaction, etc. Hotels usually consider money changing as a convenience to the traveler and make a profit on it.
But, remember, my viewpoint is that of a frugal financial analyst. I watch the pennies and percents and hate to waste. Some folks have a more relaxed viewpoint, and for them convenience is more valuable than a few euros here or there. If you are on a tight budget, however, watch the alternatives.
Visa cards and MasterCards are remarkable and in reasonably developed countries are almost universally usable, from the supermarket to even small restaurants, etc. I find them useful for major or substantial purchases — in restaurants and the like. I carry two cards, one easily accessible and one in a hidden place. The wife should have a different card account than the husband, so if there is a problem with one, the other won’t be void.
Although the banking system usually provides a good exchange rate on conversions to U.S. dollars on your statement, with regret, many banks now are tacking on a percentage of extra profit, with some also doing so on ATM cards. Credit cards are not normally accepted at country/city markets and the like. Cash is king. In some countries, U.S. cash.
For folks who do moderate traveling, there is an excellent bank that offers particular advantages (other “net banks” may be comparable — I don’t know). USAA Federal Savings Bank in San Antonio, Texas (www.usaa.com), is a great, unusual bank. It primarily serves members of the armed forces who are all over the world, but anyone can have accounts at the bank.
Since it does not have branches, users can use any ATM at no charge by USAA, and USAA even reimburses for the fees charged by other banks (to a reasonable extent).
USAA has rebate credit cards and does not charge high interest. Since it is a mutual-type bank, used as a prime bank by many in the armed forces, it provides its services advantageously and doesn’t add on those other little percentages that some banks do; you get a good exchange rate for ATM transactions and don’t get socked on Visa. I use it as my prime bank. It also has better telephone service for other countries.
Now a caveat — though not so prevalent now as in ages past, some countries do have currency controls, so beware of changing money illegally. You may get a better deal in the park, but if you are caught, well, let’s just say it could spoil your whole day, or week, or month.
In closing, remember Tahiti where I could not use the ATM? Things still went okay. I used Visa to buy wine and beer, food, etc., and U.S. dollars in small bills took care of tips, souvenir shops and the like.
To good, economic, traveling!
FRANK LAMSON-SCRIBNER
New Smyrna Beach, FL