How to Exchange Currency and Avoid Hefty Fees

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You’ve worked hard to build your travel stash. Why waste it on silly conversion fees?

Currency exchange can be a tricky business, and it can end up costing you a good chunk of your vacation money if you’re not careful. Still, it’s usually important to carry some local currency when you’re traveling. Not only do some merchants not accept plastic, having a little bit of cash on hand might be important if you find yourself in a jam.

So, how do you exchange currency without getting robbed by hefty fees? I’m glad you asked.

Where You Don’t Need to Exchange Money

While carrying local currency is rarely a bad thing, there are some places where you really don’t need to bother. Throughout most of the Caribbean (not all, but most), you’re almost better off carrying USD instead of the local currency. Since an island’s currency may fluctuate, the locals typically love getting paid in USD. The same can be said for most of the resort areas in Mexico.

On the other hand, you’ll definitely need to exchange currency when traveling to Europe. Most European countries use the Euro, with a few notable exceptions like Switzerland and the United Kingdom. Although many foreign businesses accept credit cards, that’s not always the case. Culturally, it’s much more common for locals to pay for items – particularly smaller items – using cash and coins.

If you’re traveling to territories in the Caribbean or the South Pacific that are still European territories, it may be prudent to exchange your money into Euros, British Pounds, or the local island currency. Be sure you know what local currencies are accepted before you go.

How to Exchange Currency

There are several ways you can exchange your money for a foreign currency. Your goal should be having enough cash to get you through the trip while exchanging your money at the lowest possible rate.

#1) Exchange Currency Before You Leave

Personally, I prefer to exchange money once I arrive, but many travelers like to have some local currency with them when they land. If you’re one of those people, be sure to visit your local bank before leaving on your trip. You’ll be able to exchange your USD for the current rate, plus you’ll save money on costly exchange rate fees.

Whatever you do, avoid exchanging your money at the airport. Typically, exchange fees at these money centers are far higher than those at your bank.

#2) Exchange Currency Upon Arrival

As I mentioned before, I like to pick up the local currency upon arrival. Generally speaking, I exchange a few hundred dollars for the local currency before we leave the airport… but I don’t do it at the currency exchange centers. Again, these places are looking to make money off unprepared tourists. Seriously, don’t be that guy (or gal).

Instead, find an ATM and simply withdraw cash from your bank account. It’s simple, fast, and relatively painless.

Regardless of whether you use this method or not, be sure to alert your bank about your travels before you go. Getting declined and having your card deactivated can really throw a wrench into your London sightseeing plans. Unfortunately, that could also mean you’re S.O.L. until you can talk to your bank back home.

#3) Use Credit Cards Whenever Possible

Although it isn’t possible for every purchase, the best method for handling money overseas is by using a good travel credit card. These cards should have no foreign transaction fees, and you’ll earn points while you spend. You’ll also have more protection against fraud and theft than you would by carrying cash or using a debit card.

This list mentions some of our favorite travel credit cards right now.

One of my favorite things about using a credit card is that you can pay in the local currency without any fees (provide there are no foreign transaction fees on the card). That means you don’t lose any money in the exchange rate. Bonus!

Hot Tip: When using a credit card, most proprietors will ask if you’d like to pay in USD or the local currency. Generally speaking, select the local currency. Although using the USD amount to take mental notes on how much you’re spending is a good idea, there is typically a premium added if you want to pay with USD. By paying in the local currency, you’ll actually save money. Let the credit card company worry about handling the exchange rate.

#4) Exchanging Money When You Return Home

To avoid as many fees as possible, it’s important that you don’t exchange more money than is necessary. The last thing you want is to get whacked twice with an exchange fee. That’s just setting money on fire!

If you find yourself with extra foreign currency at the end of your trip, take it to your bank and exchange it back to USD when you get home. However, if you’re planning a return trip in the foreseeable future, just hold on to the money. You’ll need that cash when you return, so there’s no need to get hammered with exchange fees three or more times on the same money!

Exchanging Money for Foreign Currency

I hope this piece has helped you navigate the pain in the ass that is currency exchange. Remember, use these travel credit cards when possible and avoid the big “currency exchange centers” located in the tourist hot spots. You’ll save money on fees, which means more money for the things you love – like food, drinks, and attractions!

Thanks again for reading. Until next time, happy traveling!