The world’s economies and banking systems may be becoming more integrated, but there are still unique challenges to managing your money on a vacation outside the U.S. Here’s a rundown of some money missteps to avoid whenever you cross a border.
Bringing A Lot Of Cash From Home
To save time upon arrival, you may be tempted to change currencies while stateside. Resist the temptation. Apart from the safety implications of carrying a lot of cash, you’ll typically receive a less favorable exchange rate than at a bank ATM at your destination. You’ll also take a hit on the exchange rate compared with foreign ATMs if you bring U.S. dollars with you and exchange them when you arrive. Rates can be especially unfavorable at the foreign-exchange booths found at airports or in touristy neighborhoods.
Not Using A Credit Card
Using your credit card for as many purchases as you can makes sense financially. At most of the popular foreign destinations for American tourists, credit cards are as widely accepted, or nearly so, as they are at home. Using a card, rather than cash, allows you to skip the additional fees associated with using a foreign ATM.
Those ATM fees invariably include a charge by your own bank for using a machine that isn’t their own, along with possible charges by the owner of the foreign ATM you use. Also standard when using an ATM is a foreign transaction (FX) fee, typically of between 1 to 3%, levied by your bank the cash you withdraw.
Most credit cards also charge an FX fee, and the range of percentages is similar to those at ATMs. However, the best so-called world credit cards charge no fee at all. Check whether you or anyone you’re traveling with already has a no-fee card in their wallet. If you’re planning a long trip, or one with unusually high spending, you might even want to consider getting such a card to use abroad.
Another plus to using credit cards is that they offer more fraud protection than debit cards. With credit cards, you should be liable for no more than $50 of fraudulent charges where with debit cards, you could be on the hook for the entire amount withdrawn from your checking or savings account.
Using Non-Bank ATMs
As in the U.S., abroad you’ll find smaller ATMs in stores, hotel lobbies, and so on that are not allied with major banks. You should, however, treat these cash outposts as a last resort.
Not only may these non-bank money machines charge higher fees and offer worse exchange rates than bank ATMs, but they’re more likely to offer the unwelcome option to use Dynamic Currency Conversion (DCC) for your withdrawal. This measure, which converts your purchase in local currency to U.S. dollars at the machine, seems alluring, because it eliminates the foreign exchange fee. However, DCC fees are typically higher than FX fees.
Getting Cash Advances On Your Credit Card
Most ATMs abroad will accept your credit card as well; indeed, most are allied with one or both of the Cirrus and Plus networks, which are subsidiaries of Mastercard and Visa, respectively. However, avoid using your credit card to get a cash advance at a machine.
This move is expensive for the same reason as at home: The cash is considered to be a loan, and interest on the loan accrues, and compounds daily, from the time you withdraw the cash until you pay off the advance.
Being Sanguine About Safety
It’s wise to be more vigilant about the safety of your money, cards and identification when traveling abroad than when at home. Many cities in Europe and elsewhere have higher rates of petty crime, such as pickpocketing, than do most U.S. cities. And, regardless of the location, tourists can be more vulnerable to theft than locals, because they’re carrying more cash and valuables and are less familiar with local customs and scams.
One smart strategy to minimize the impact of any theft is to separate your cards, carrying your bank debit card in one location and your credit card in another. If you’re carrying at least a second credit card (which is a good idea for several reasons) store that card in yet another place.
Getting Too Little Cash Out At Each ATM Visit
While you should be mindful of safety, making innumerable withdrawals at foreign ATMs isn’t wise financially. In addition to the FX conversion and out-of-network fee your own bank will impose, you may incur an additional fee from the bank that owns the foreign ATM you’re using.
That makes it cost-effective at each ATM visit to draw out as much cash as you’re comfortable in carrying. However, as when using an ATM at home, you may face a daily limit for withdrawals. It’s smart to check in advance what that limit is, and ask that it be raised if you’re concerned it isn’t sufficient. (And while you’re calling the bank, it’s also helpful to let them know of your trip, so they don’t attribute to fraud the withdrawals, or credit-card transactions, you make from an unfamiliar location.)