Before you run off and start exchanging your money while abroad, find out what your debit and credit cards are charging. You may simply be able to use your credit card or debit card in stores and at ATMs without any fuss and without being stung with a terrible exchange rate. On that note, be aware that some banks will freeze your accounts if you suddenly start spending in another country because they may believe your details have been stolen.
Don’t Overlook Travel Insurance When Exchanging Your Money While Abroad
Why am I starting this article with insurance…am I mad? What does this have to do with changing your money while you are abroad? What it has to do with it is the sheer amount of suckers who happily take big wads of cash abroad and are immediately relieved of it while looking for a taxi at the airport. If you are going to conduct money transactions abroad, such as currency exchanges, then don’t go without insurance.
Would You Like To Pay In Dollars Or Another Currency?
If you use your credit card or debit card in shops and the merchants ask if you would like to pay in dollars or in their local currency, then you must say in their local currency. If you do not, then the local moneychangers will control your exchange rate, and they have no incentive to give you a good rate.
Your Debit Card May Not Be Your Friend
Some debit cards (bankcards) are terrible for use abroad. Some banks and money companies have sneaked charges into their terms and conditions where you will pay extra for using your debit card. They will make you pay a nasty exchange rate, a withdrawal fee and a spending fee.
Open a Local Bank Account and Use Transferwise to Send to It
Now this is a bit of a convoluted way to do it and is probably only suitable IF you are travelling abroad and will be staying in a single location / country for a period of time (more than a month). For English teachers, expats, or long term tourists, or digital nomads, this is one of the best methods.
- First you need to sign up for a Transferwise account.
- You need to create a local bank account in the country you are staying in. Your ability to create a bank account as a tourist will depend on the country you are staying in. For example, it’s possible to create a local bank account with Bangkok Bank in Thailand, even as a tourist with nothing more than a letter from your Embassy or a rental contract.
- Then do a wire transfer from your home bank to your new bank account in the country you are staying, using Transferwise (see our review of Transferwise). You’ll need to be able to wire transfer money remotely via online banking or have someone wire it for you, since you won’t be in your home country. Also note there may be a fee for the wire transfer.
- In 4-6 days, you’ll have a significant savings due to much better currency conversion rates.
Transferwise Currency Conversion – Check What You Get
This method works best for larger sums — several thousand dollars or more. If you are just trying to send over under 1000 bucks, it might not be worth it. You can also use something like CurrencyFair as an alternative to Transferwise.
Try To Avoid Borrowing Money After Using Your Credit Card
You may have found a way of saving money by withdrawing money from your credit card while you are abroad. If you have, thanks to a reward or incentive scheme, then good work–but beware of the possible damage to your credit rating.
Withdrawing money out of a credit card from a foreign land only has a small effect on your credit rating, but if you come home and apply for credit within six months of your withdrawal, then it will look very bad on your credit rating. It will look as if you have no disposable cash and that you are overspending, you are living beyond your means, and you are using credit card/loans/overdrafts to fund your lifestyle.
If you are planning on coming home and then making a mortgage application, applying for finance for a purchase, or getting a loan/overdraft, then you should really wait at least six months before you go through with it. Otherwise, you may find yourself with a rejection marker on your credit history when the credit companies deny your application.
Don’t Think Of Saving With Just Your Currency Exchange
Savings that stem from your currency exchange are surely a good thing, but they are not the only savings you can make. For example, you could save money by making smart purchase choices. This would mean you wouldn’t need as much money. That would mean you don’t not need to exchange as much money, which also means you are going to save money that you would have otherwise spent on exchanging your money.
Save money from your exchange by lumping other things into your package holiday. For example, when you book with the travel agency, you could pay to hire a car right there when you buy so that you do not need to convert your currency and pay to hire a car when you are in the foreign country.
Planning is often a good way to save money in the long run. For example, if you book and pay for a meal in advance, not only could you get a better exchange rate while at home, but you may also get a discount for booking early. You may also be able to take advantage of cheaper exchange rates if the rates go up by the time you arrive at your destination.
Pack Your Wallet Prior To Leaving
A little preparation goes a long way. For example, if you keep going back to the same country, then save your currency in a drawer until you return. When you do, whack the money into your wallet ready for your trip because it saves you having to as much exchanging your money while abroad.
Specialist Credit Cards
Are there specialist credit cards that deal with people who travel a lot? Do they offer fantastic exchange rates on purchases or withdrawals while you are in another country? Will they reward you with airmails or money-back rewards if you use your card to buy abroad rather than withdrawing abroad? Look for what are known as “Load-free” worldwide credit cards that do not add an extra charge for you being abroad while using the card.
Getting Around Higher Rates On Your Credit Cards
Are there credit cards you can use that only charge higher rates for overseas purchases? If they simply plump up the cost for use abroad, then come back and pay off your credit card bill right away before they may add the plumped up interest onto your balance.
Search Out Credit Cards That Do Not Charge For Withdrawals Abroad
They may not be able to save you very much on your exchange rate, but you may offset your loss with the benefit of not having to pay for cash withdrawals. Typically, such cards are only used abroad, and they will offer you terrible rates and costs if you use it at home. One assumes they want you to use your holiday credit card while you are at home so they may earn more fees.
Look For Duel-Use Overseas Credit Cards
They offer reasonable rates both while you are at home and while you are overseas. Their catch is that they offer a slightly higher withdrawal fee that is usually a percentage. If it is a duel-use card, then you may be able to find one with a very good exchange rate. You may be able to use it without having to physically go around exchanging your money while abroad, (because it is done automatically).
Keep An Eye Out For Load-Free Debit Cards
Most credit cards are going to charge you an extra fee for using your card abroad, especially when withdrawing from an ATM. However, upon occasion, banks and companies that will offer you a load-free debit card where you may use your card as if you are at home. The only downside is that they may hide their fee by offering a very poor conversion rate on your purchases and withdrawals.
Think About Pre-Paid Travel Cards
In these cases, you either buy cards with credit on, or you sign up for an account or load it with your currency. The rate you get is often a very good one because the companies that offer pre-paid cards are good at handling currencies and can often buy when rates are at their lowest. Prepaid cards such as Revolut will offer (read our Revolut review) a very good exchange rate, but in return you have to pay a withdrawal fee if you withdraw more than $200 per month, which you are likely to do while on holiday.
Wait For The Right Time At Home To Execute The Trade
Okay, I admit that this is not a way of exchanging your money while you are abroad, but it is a funky way of saving money on your money exchanges. It is not even a sophisticated trick, you simply sign up for email alerts from a conversion company. Ask that they email you when the exchange rate reaches an amount you are comfortable with, and execute your currency exchange when the rate is where you want it.
For example, Transferwise have a rates alert. You can have it email you every day with your desired exchange rate so that you may see if the rate is running in the right direction, or you can have it email you when it reaches a new low so that you may execute your trade right then.
There Are Extra Charges For Buying Currency With Your Credit Card
If you are at home on the Internet or abroad on the Internet, you are going to have to pay an extra charge if you buy currency with your credit card. Even if the exchange broker is kind enough not to charge an extra fee for you using your credit card, your credit card company will still charge an extra fee because a money exchange is considered to be a cash advance.
Do Not Buy At Airports Or Ports
Before you go exchanging your money while abroad in the airport, remember that the moneychangers do not have any incentive to give you a great deal. They know you are going to need money for taxis, train tickets, and even hotel rooms. They also know you are a captive customer because your options are very limited if you are in a new country and your debit card isn’t working or you haven’t planned ahead and bought currency already. Airports and sea/ferry ports will often have the very worst exchange rates.
Conclusion – The Problem Is Not Knowing
Transferwise Currency ConversionWant to send money abroad or convert currency? We recommend using Transferwise to get the best rates. Use the Transferwise calculator below to see what your exact conversion is
Think of this–in your country, there are hundreds/thousands of companies and banks that are competing to change your US dollars into another currency. Whereas, if you are in another country, there is not as much competition for turning dollars into a different currency. Yet, with that said, there are plenty of foreign exchange companies that have bought at the right time and are now able to offer fantastic exchange rates. To quote the header, “The problem is not knowing.” You don’t know if you will get a good deal until you arrive at your destination and start exploring the local money exchangers.