Travel Logistics: Foreign Currency

Continuing from previous posts about planning for travel abroad, and dealing with issues like different languagesfinding flights, getting hotels, and the like – we got a recent question about how we deal with money while we travel.  How much do you bring?  How do you exchange it?  How do you make a budget?

There are multiple reasonable ways to do handle these questions, but we thought we’d write up some thoughts about our systems in the regard.

1. Getting Cash – Usually ATMs

We usually just use ATMs to get local currency.

For us, given that our bank doesn’t charge extra fees for using other banks’ machines, this is usually the least expensive and safest way to get foreign cash.

Be aware that some banks do charge fees for using other banks ‘ ATMs, so your plans might be different in this case. But for us, if we check the bank’s app right after making an ATM withdrawal, usually the spread vs. the ideal rate is fairly reasonable – usually within 1%, and much better than one would normally pay at a cash exchange window.

btw, traveler’s checks are so 1980. If you want to carry something besides plastic, carry crisp $100 bills somewhere safe, like a money belt.

Cautions: If you obtain a bigger wad of local cash, transfer it out of your wallet to a safer place like a money belt once if you’re in a safe place like a hotel room. Also, guard your PIN code and watch out for card skimmers, which aren’t unheard of.

2. Credit Cards – not too much overseas

This is a debatable. Some folks like to collect credit card points, and gravitate towards putting everything on the card. We use cards for many expenses at home.

But, when abroad, we typically veer towards cash for most venues except for hotels. This is personal preference, and varies a bit based on country. Our main reasons are the less than universal acceptance, avoiding fraud, and budgeting.

The Acceptance Issue:  Usage of credit cards varies a lot by country. Many countries are more cash-based than the US. Many of the cheaper providers abroad simply don’t accept credit cards, for many reasons – higher local bank fees for merchants, less local demand for card acceptance, or petty grey-market tax dodging. Even some very developed economies like Japan can be surprisingly cash-centric.

The consequence is that if you restrict yourself to take cards, you’ll unnecessarily restrict yourself to super high-end places. Which might be fun, but will distort the picture of the local culture that you’re trying to get. Hole in a wall restaurants and Asian street stalls can have awesome cuisine. And in places like India, I suspect that we even paid for many of our hotels with cash.

Fraud: The fewer places you use plastic, the fewer chances for fraud. And it’s annoying to get a card replaced overseas. We prefer to limit cards for a smaller number of big ticket items, such as hotels and plane tickets, which we can track the use of more carefully. This seems safer than giving it to a gazillion waiters and small merchants who might record our card number.

Budgeting: For us, it is simpler to keep an eye on how much money is being used if the day-to-day expenses are cash, rather than being lines on next month’s card statement. The volume of ATM withdrawals gives a picture fairly quickly. But we recognize that others have other strategies that work for them.

Will our strategy change? In Europe, it feels like the tradeoff here has been moving over the past decade, where chip+PIN has become more common, and is actually a far more convenient way to buy train and museum tickets from automated machines (just make sure you know your card PIN). This seems like something to evaluate per-country, where one’s strategy for Iceland and India might be somewhat different.

3. What if my ATM card is stolen or gets cut off by the bank?

We’ve never had a card stolen, but have had our ATM cards turned off by the bank several times – the most memorable times were in China in 2007 (where we were low on cash) and in our first trip to Italy in 2005. But there were probably other times. And, we didn’t want to test our card from an ATM in the Palestinian West Bank.

In those cases where our card was cut off, we were able to call the bank’s fraud department and get access restored. These days, we are more diligent about giving the bank a “Travel Notification” to avoid this situation, but even then, sometimes they make mistakes and shut it off.

Our strategy to avoid this situation is to always keep a decent wad of cash in US$ (sometimes Euros) that we don’t intend to spend or change, split between us. This is to give ourselves some breathing room for such a situation. A backup credit card can be useful too.

For the US$ backup, a small stack of crisp US$100 bills usually works well for us (with a couple $20s and $5s as well). These can be straightforward to exchange in a pitch – especially the smaller bills, and can be kept around for a following trip. It’s wise to ensure that the bills don’t have writing or tears on them, aren’t too old, and are reasonably crisp – banks in some places do care, and we’ve had bills refused.

4. Sometimes exchanging cash can make sense

In the US and much of Europe, the spreads on exchanging cash can be abysmally bad – you can lose roughly 10% every time you hand them cash. Particularly, don’t exchange any money in the US.

That said, this isn’t universally true – for instance, in Russia and Turkey, the rates on changing cash can be very competitive, partly because the locals use their services as well – locals often keep their savings in Dollars/Euros instead of the local currency. Similar in Indonesia – I don’t think we ever used an ATM there. If the spread is closer to 1-2%, you might do well exchanging US$100’s at a bank window.

Some people make detailed plans to spend their local cash down exactly to $0 as they leave the country. But since we’re a family with kids, we prefer not to cut things too close, but want to leave room for the unexpected. Instead, we’re fine paying a few percent in fees at the airport to exchange back our last $50-$100 in local currency.

So, when we leave a country, we usually exchange the remaining currency at the exchange desk for either the currency at the next country, or for US$ – whichever rate is most competitive. There are a few currencies, such as Euros or Canadian dollars, that we don’t bother to change back, but just keep for “next time,” since we seem to go back often enough.

5. Misc Mistakes

Know the rough exchange rate before you get money from an ATM. We once took out $500 rather than $50 in local currency because we missed a zero doing the math. It ended up being ok, but we lost a little bit to unnecessary conversion fees.

The ATMs at the airport are usually fine. The cash exchange places don’t necessarily give an ideal rate, though they’re not universally awful either. Make sure you leave the airport with enough local cash to get where you’re going, and ideally enough for the day, since you don’t want to be preoccupied finding an ATM or bank near your hotel.

Be aware of your card’s daily withdrawal limit. This can be important if you’re paying for your lodging in cash when you arrive (we’ve done this occasionally, for instance, when renting private apartments). You don’t want to hit the limit, and not be able to pay, though you can mitigate this by exchanging some of your US$ emergency cash stash. For us, our ATM card limit is per-person, so we can double up on the limit.

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