Travel Advice - Buying foreign currency

Considerations

When traveling outside of the US, you will need to use the currency issued by the countries you will visit.

1.  A key issue to understand is that you will be buying a currency by selling (exchanging) dollars.

• In this transaction, you are interested in finding the most favorable rate, so that you can buy the currency you need for the least cost.
• Just as in any shopping, rates vary by currency and may vary by  type of seller.
• Money can be bought at banks, exchange offices, Bureau de Change offices, or ATMs.
• Additional fees are tacked on to currency transaction (e.g. a service fee), so ask the rate and if the seller charges any additional fees.

2.  ATMs, generally, provide the most favorable exchange rates. In addition, ATM’s undeniably provide the greatest convenience when buying foreign currency with you bank card.

• Check to make sure that your bank belongs to an ATM network that provides international service (for example,  the Cirrus, Plus, or Star networks).
• When using an ATM for currency exchange, you may be charged additional fees from the agent bank (the bank owning the ATM).
• In addition, your bank (the issuer of the ATM card) may charge a service fee for the transaction, a second fee for using an out of network ATM, and a third fee for foreign currency transactions.
• Contact your bank for details on their ATM fees before you depart. If you have accounts at several banks, bring the card that has the lowest fees (as long as it in part of an international network).
• Even if there are additional fees,  using ATM's to obtain foreign currency is often more economical and more convenient than other methods of buying currency.
• If you use an ATM, withdraw enough cash to last several days.  Doing so is convenient and avoids piling on fees that might accompany each transaction.

3.  Credit Cards can be used to buy currency but "buying" money is considered a "cash advance" by the credit card companies.

• The interest rates and fees charged on "cash advances" are very high.  We do not recommend using your credit cards for this purpose, since the interest rate fee can be avoided by using an ATM card or cash to buy currency.
• In addition, the credit card company may charge a foreign currency transaction fee for converting your home currency into the national currency you want to obtain.

4.  If you can avoid it, do not buy currency at the airport when you are departing for foreign travel. In general, transaction fees at airports are high and the exchange rates are unfavorable.

5.  We recommend buying foreign currency once you arrive at your destination.

• Most "ports-of-entry" (airports and seaports) are equipped with ATMS and a Bureau de Change to assist the traveler in converting currency.   While the ATMs will always be "open" the Bureaus may operate on more limited hours.
  • Most ATM fees do not vary based on location within a country, so you should not be penalized for using one at a port-of-entry, but there may be a surcharge imposed by the ATM's owner or the network.  Check with you bank before you depart to understand the fee structure.  Finally, additional fees should be mentioned during the transaction.
• The Bureaus de Change at ports-of-entry locations usually provide unfavorable rates.
  • If you use the Bureau de Change, exchange enough money to cover the expenses for your first day (e.g. transport to your hotel and a couple of meals).
  • Once you find a reasonable sized city, you will likely find an opportunity to exchange at a lower rate than was available at your point of arrival.

6.  Manage your money with an eye on the exchange rate, as currency markets fluctuate on a daily basis. Try not to acquire more money than you will spend on vacation, as you will be forced to sell it back at a discount. Yes, they get you coming and going!

Converting money - the process

1.  If you are using an ATM for exchange purposes, you use it in the same manner that you would make a withdrawal at home.  Some ATM's , particularly in tourist areas, may provide multi-language instructions.  Check out our article on ATM  use abroad to find out some tips that will help you conquer a foreign language ATM.

• First, make sure that the ATM works with your ATM’s network (usually printed on the back of your card (e.g. Interlink, Plus, Star, Cirrus).
• Next, insert your ATM card and enter your pin or password.
• Next, select the function "withdraw" and the amount.
  • Be sure you understand the exchange rate and how much money you are requesting.
  • If the ATM can print a receipt, be sure to select this option,  as it helps keep your accounting straight and indicates any fees that you may have paid.
• Make sure that your request does not exceed the amount your bank allows you to withdraw in a 24-hour period (check on this before your departure).
• If you have done everything correctly, take the money after retrieving your ATM card.

2. If you want to buy currency at a bank or Bureau de Change, spend some time shopping for the best rate. All businesses that provide currency services feature an electronic sign indicating the rate at which they buy and sell various currencies. 

• Banks, often, have the best rates and lowest transaction fees.  Conversely, the "Change" businesses on tourist streets will advertise "no fees" but normally make this up by providing an unfavorable exchange rate. 
• Once you have selected a vendor, simply provide them with the number of dollars you want to convert and they will tell you the rate and the amount that will be returned in the foreign currency.
• You can use travelers checks instead of cash but you may be charged a fee to convert the travelers check to dollars, which you then will use to buy currency.
• If you want to avoid the extra cost of exchanging travelers checks in dollars, see our article on foreign denominated traveler checks: however, traveler checks are not as flexible as cash for currency conversion or shopping. (See our article on cash and cash equivalents).

3.  Never buy currency from someone on the street.  Buying currency from anyone who is not officially authorized to sell currency is a crime in most countries.   In addition, these sales are often set-ups that come with the arrival of  fake policeman who threatens to arrest you, unless you return all of the money to him (while the seller walks away with your dollars).

4. Whatever amount of cash you withdraw, protect your cash and your card by using a money belt.

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