If you plan to travel to another country, it's helpful to do a little research in order to get the best rates on your foreign currency exchange. Use the following tips to help get the most bang for your buck while you’re on an international trip.
Look Up The Foreign Currency Exchange Rates Yourself
One of the best ways to prevent losing money on a bad foreign currency exchange transaction is to look up the rates for yourself. Use websites like XE.com to find out what the current exchange rate is in the country where you'll be traveling. Banks and exchange counters always mark up this rate at least a little bit, but if you already know what the exchange rate is then it's easier to detect a bad rate when you see one.
Avoid Airport Exchanges
The exchange counters and kiosks you see at airports, train stations and other traveler's depots are largely a tourist trap. These exchange services almost always have high currency exchange rates, which makes them a bad option for getting cash in another country. If you need to pick up some cash to get by when you first arrive, try to limit your exchange to only $100 or so. Then go to a bank or ATM to get cash at a much better exchange rate.
Use Your Credit Card
In general, paying for things with a credit card when traveling internationally is a good bet. According to Bankrate.com, Visa and MasterCard secure exchange rates for their customers based on the wholesale rates offered to corporations and banks. That means that customers using these cards won't be subjected to the typically higher retail rates given to customers.
There is one thing to keep in mind, however, and that's additional foreign currency conversion fees. These extra charges are made by most banks and credit card companies when their customers make a purchase outside the U.S. Foreign currency conversion fees generally range from about 1 to 3 percent, according to Bankrate.com. However, a few banks are starting to waive the fees altogether, including Capital One. Before travelling, call up each of your credit card companies to find out what their foreign currency conversion rate is so you know which card is the best to use. While you’re at it, don't forget to warn them that you'll be out of the country. This will prevent your account from being locked due to what the credit card company would otherwise see as “unusual” charges while you're on your trip.
Get Cash From An ATM
Don't carry a huge wad of cash around while you're traveling. It's not safe or smart. Instead, get the money that you need from an ATM while you're out of the country. You'll get the bank's wholesale exchange rate, which is cheaper than exchanging your U.S. dollars at an exchange counter or an overseas bank. Just check in advance to find out about possible fees. Expect to pay a little extra for the currency exchange fee, but with a little research ahead of time (or a good app for your smart phone), you can find out where your bank has ATM locations where you'll be traveling so you can avoid getting a withdrawal fee as well.
Find Out Which Places Accept U.S. Currency
Contrary to popular belief, you can actually use U.S. currency at many locations in different countries. Some destinations where this is common include the Bahamas, Barbados and many other Caribbean nations. Check ahead of time to see if exchanging your money is even necessary – you might be able to avoid exchanges altogether so you don't have to worry about extra exchange fees or credit card currency exchange rates. However, sometimes it is a better deal to pay in the local currency even when U.S. currency is accepted, so do the math first to figure out which is a better deal.
Try To Limit Your Exchanges
While you do not want to be carrying around excessive amounts of foreign currency, you also do not want to rack up a large bill from exchange fees. Because you will likely get charged an exchange fee every time you exchange currency, you should try to limit the amount of times you exchange money. This will help you to limit the amount of money you lose exchanging the currency.
When you're travelling, you're already making a big monetary investment in order to see and do the things you want. Doing your research when it comes to exchange rates can help you avoid spending extra money on unforeseen expenses, like currency conversion rates and ATM withdrawal fees.