International travel is an exciting experience, but it can be a bit overwhelming when it comes to foreign currency. Here are three financial choices for traveling abroad and the pros and cons of each along with tips.
Pros: Using an ATM will give you the wholesale exchange rates, which are about 2 to 7 percent better than the rates you’ll get at a currency exchange.
Cons: The fees you’ll endure depend on your bank. You can end up paying foreign ATM fees and foreign transaction fees. Another problem you can face is putting all your faith in a little piece of plastic which can easily be demagnetized or eaten in a machine. There is also the potential for your bank to freeze your account because of suspicious foreign transactions or put a maximum on the amount you can withdraw.
Tips: Call your bank prior to leaving to alert them of your travels so they don’t freeze your account. Ask about International ATMs or partner banks that could help alleviate fees. Find out what their foreign transaction fees are, and if they’re high and you’ll be traveling often, it could be worth switching banks. Also learn if there is a maximum amount you can withdraw or request to have it raised. If your PIN is longer than four digits or includes letters, you’ll need to get a new one before you travel abroad since a four digit PIN is standard.
Pros: Credit cards can be a smart option for paying for larger purchases, such as a hotel bill, especially since many companies offer fraud protection.
Cons: Just like debit cards, you’ll be enduring a transaction fee. If your card is declined or frozen, it is no use to you. Depending on your credit card, cash advances can result in a spike in your interest rate plus the transaction fees. However, using a cash back credit card like Barclaycard's Extra Points Visa Signature or Chase Freedom Card for purchases while you travel can help offset some of that cost.
Tips: If offered to be charged in U.S. dollars, you should decline, according to Fodors, since you’ll end up paying much more in fees. Just like the ATM and debit card tips, call your credit card company to alert them of your travel so they don’t freeze your card. Have your credit card’s international number stored in your cell phone so you can easily contact them if your card is lost or stolen.
Pros: The benefit of a currency exchange and having money on hand, is you have that security in case you can’t locate an ATM right away or are traveling to an area that doesn't have ATMs readily available. Unlike using a debit or credit card, you don’t have to worry about cards getting frozen or not accepted. In some areas, the ATM can be a target for thieves.
Cons: You can be paying up to 9 percent more with a currency exchange opposed to an ATM or credit card. Currency exchanges are unfortunately often the target of scams. There’s also the issue that you’ll need to exchange back any unused money.
Tips: Opt for the safest place to exchange your funds such as reputable banks. Avoid train stations, airports, and other high tourist areas which will often have higher fees or rates. Exchange your money in the country you’re visiting. Check out XE.com for the current exchange rates so you understand what you’ll be getting. If you end up wanting to have the money prior to leaving, do so far in advance so you don’t need to pay for rush delivery.
Since each of these have their own benefits, many travel experts recommend playing it safe by having a variety of payment methods while you travel. ATMs are the best rates, credit cards are convenient and safe, and having cash on hand is ideal in case you can’t get to an ATM or lose your cards or if only cash is accepted.