You’ve heard a lot of perspectives on the best payment strategy when traveling internationally and now you are totally confused. All of your planning for the trip is done and you are almost ready to embark on your first international journey. Before you pack up your best travel gear and head to the airport, there are a few questions you still have about paying for things when traveling abroad. Should I get cash? Will my credit card work? Should I ask my bank to provide currency for the country. The list goes on. To be honest, the answer might differ depending on where you will be traveling and how remote you might be.
How do you ensure you are not getting swindled and not wasting money unnecessarily when you travel abroad? If you’re like me, you want to ensure you are spending your hard earned money on the experience and not unexpected fees. Even if you have traveled abroad in the past, there are probably a few insights here that might help you save a little money.
First things first. Let’s get into some practical tips the best payment strategies when traveling abroad.
Before you leave home
Let’s start with the easy stuff. Do these 4 things first:
Understand the local currency?
Familiarize yourself with the currency of the location you will be traveling. Some destination use currencies that are consistent across multiple countries (i.e Euro for any country in the European Union). Some places are under the rule of a bigger nation. For example St Barths is under French rule so they accept the Euro. Additionally, you want to get a good understanding of the exchange rate. Apps like XE Currency will help you understand to how much things cost in your home currency. Which will be incredibly helpful when you are shopping abroad.
Don’t Assume Your Credit Cards Will Work
Credit card companies leverage usage data to identify fraud. They also use AI insights to tell if you are actually traveling. Even still if you’ve never traveled to Germany before, your card might be flagged for fraud the first time you swipe. Before you travel, you should notify your financial institution that you will be heading out of the country and may be using your card. Find out if they have partner institutions in the country where you will be traveling. For example: Bank of America and Deutsche Bank are part of the same global alliance which minimizes any fees. Trust me, this will save you a lot of hassle.
Get Some Emergency USD
I don’t like to travel without some level of payment strategy for my trip. In most cases, I will grab $150 to $200 USD to have with me just in case I run into trouble. Worst scenario, you can always exchange it for local currency if needed. But only exchange it in emergency situations. More on that later. In a perfect world, that same $200 USD will come back home with you because you never needed to use it.
Understand Conversion Fees
Believe it or not, most financial institutions will charge you a conversion fee for using your card abroad. A conversion fee is an added charge generally charged by your institution for the luxury of using your card in another country. This is different than the exchange rate. Before leaving, you should contact your financial institution to check if there will be foreign transaction fees for purchases. The fees typically range from 1% to 3% of the purchase. That means the cup of coffee that you charged to your card, could cost you an additional $1 that you never planned. Ultimately it adds up. There are a few banks that don’t charge anything. Find out what your bank will charge before you leave.
Once You Arrive
There is so much conflicting information on when, where, how or even if local currency is necessary. Over the years, my payment strategy while traveling has certainly shifted. There was a time when cash was king. Today, there are a lot of places that will not accept cash which means you need a viable credit card. Even still, I recommend you always carry some cash to cover tips, taxis or other smaller purchases. Let’s dive into the best way to pay.
Cash: To Convert or Not
There are a few different ways to arm yourself with cash once you arrive in a new country.
Tip #1
Most airports or points of entry will have a currency exchange point. Don’t use them. The fees are outrageous and you will end up getting more than you need only to have to convert it back when you leave. A total waste of money. Instead, find an ATM in the airport that accepts your card and get money there. It’s important to know that ATMs are common in larger cities but can be harder to find in rural areas.
Tip #2
Avoid standalone ATMs or those in tourist-heavy areas as they often have the highest fees. I’ve seen up to $7. Then they will ask if you want them to convert or have it converted by your bank. Another trap. Always have it converted by your bank which will likely provide a more favorable rate.
In many cases, your bank will charge a fee for using an international terminal. It all adds up. If possible, opt for travel-specific debit cards, like Charles Schwab, that will reimburse ATM fees worldwide. Finally, before you go to the ATM make sure you understand conversion values. Nothing is more frustrating than getting 5000 Japanese Yen to only to find out it’s only worth about $35 USD and having to return to an ATM and do it all over again.
Tip #3
Under no circumstances should you convert cash on the street. Unfortunately, there are a lot of scammers out there and they have some interesting ways to steal from unsuspecting tourist.
Get some cash. But be thoughtful about how you want to use it so you can accurately estimate the right amount the first time. This will minimize the number of times you need to return to an ATM or try to get more cash. Remember every time you use your card, you will be charged a fee.
A Word About Credit Cards
I am an American Express disciple. It is my preferred payment method when traveling for a wide variety of reasons. Most importantly fraud protection. Sadly, not all places accept American Express. That means I always have a back up ready to go. You may run into similar challenges as you work your way through a country. With that in mind, you should have at least 2 different credit card types to support you during your travels.
It’s also important to note that different cards, charge different fees. In some cases, no fee at all. Cards like the Chase Sapphire Preferred, some American Express and Capital One Venture Rewards don’t charge foreign transaction fees. Check with your credit card provider to understand where you’ll get the best deal and make that your preferred card.
Use mobile payment apps like Apple Pay so you don’t have to expose your credit card details at the point of sale for a bit of added security. It also means you don’t have to pull out your wallet showing opportunistic thieves where you keep it.
Finally when paying with a card, some merchants offer the option to pay in USD instead of the local currency. While it sounds like a good idea, it is not! It usually comes with higher fees and a terrible exchange rates. Always opt to pay in the local currency.
After Your Trip – Managing Currency When You Return
If you gotten any local currency during your trip, it is very likely that you will have some left over when you are wrapping up and heading home. If you’ve planned carefully, that amount will be nominal and you can spend it on some last minute snacks or items in the airport. You can also donate it at the airport or with the airline. Many airlines collect and use the money for charity.
If you have a substantial amount left, use it to pay any remaining balance at your hotel. It’s a good way to use up your cash for something you have to pay for anyway.
You may be tempted to convert your foreign currency back to USD at a travel exchange kiosk in the airport. Just know, it will cost you. My personal way to handle unused currency is to put it with my passport and use it as inspiration to take a trip back to that location. Just check the dates on it before you attempt to use it again as some currency gets decommissioned. I learned that the hard way with the British Pound.
My Perspective
You can minimize the stress of managing currency abroad by using the strategies outlined here. I don’t play about my money and nothing gets me more amped up than feeling like I’ve been bamboozled out of my hard earned cash. Prepare in advance and you can stay safe and hang on to your money when traveling abroad.
For more tips on making that first international trip, read my notes on International Trippin’ for more insights.
FAQ’s
What is the safest way to pay when traveling internationally?
The safest way to pay when traveling internationally is to use credit cards with strong fraud protection, or mobile payment apps like Apple Pay, which add extra security by not exposing your actual card details. Additionally, carrying a small amount of local currency for emergencies is a good backup.
Should I exchange currency before leaving or wait until I arrive?
It’s often better to obtain currency at ATMs or leverage local currency exchange services abroad, which may offer better rates. However, you should avoid exchanging money at airports, where fees tend to be higher.
How can I avoid high conversion fees when using a credit card abroad?
To avoid high conversion fees when using a credit card abroad, opt for a card that does not charge foreign transaction fees and always choose to be charged in the local currency rather than your home currency, as this avoids costly dynamic currency conversion fees.
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