Whether it is your first or 40th time traveling abroad, you’ll need some foreign currency. But how do you get the best rates? Should you use cash or a debit card, or maybe concentrate on using credit cards instead? Currency exchange remains one of the most complicated issues in international travel, but do not panic! We walk you through the process and talk in detail about the best ways to exchange money.

 Even with more than 30 years of international travel experience and a master’s degree in economics, I learned to navigate the exchange currency world mostly by trial and error. Many errors, to be honest.

Foreign exchange is not something I like to deal with. As a devoted credit card lover and points and miles collector, I know that using plastic domestically or abroad is the best financial choice, but that is not always an option. When traveling abroad, I am often forced to carry cash and use a debit card instead.

The Best Way to Exchange Foreign Currency

In today’s world of paying with plastic, there are still times when we need cash, especially when traveling abroad. For example, when traveling with kids to Paris or visiting beautiful Zakynthos in Greece, cash may be the best option.

Often, you’ll need local currency — for taxis, coffee shops, tips, ice cream, or even restaurants. And believe me, I know! During my last visit to Croatia, I faced a high bill at one of the local restaurants, and it was cash only! I immediately pictured myself working at the sink at the restaurant, but luckily my sister had enough cash to help me out.

Getting the Best Exchange Rate

Most international travelers ask the same question: “Where should I turn to get the best exchange rates?” There is no universal right answer. Did you know that exchange rates change every second? The currency market is continuously “live,” meaning the exchange rate is always changing. Also, major banks update their rates at least every half an hour. Unless you are a currency expert, chances are you are not going to grab the best exchange rate. If you are ambitious and want to spend time analyzing exchange rate predictions, do your research here.

In this scenario, hunting for the best rate is like chasing a moving target. It is a gamble, regardless of which financial institution you visit to get your foreign currency.

I suggest removing “best” from the equation and replacing it with which way works best for me? Take into consideration not only whether you’re getting a fair currency conversion but also the stress and risks associated with obtaining it. For peace of mind, check the currency converter at xe.com, where you can also sign up for rate alerts.

Depending on your personal preferences, you can either exchange cash before you trip or once you arrive. In the next sections, we explore each option.

Buying Foreign Currency in the USA Before a Trip

Buying foreign currency in the US is my preferred approach, even though it may not be the most economical one. It works best for those of us who want to arrive at our destination and start our vacation immediately, without worrying about where to go and how to get local money.

Here are the ways to obtain foreign currency before you leave:

1. Buy currency at a local bank or credit union

Many banks will exchange your U.S. dollars for a foreign currency if you have a checking account or savings account with them. Some big banks will exchange the money if you have the bank’s credit card. This service is provided primarily by major banks, such as Bank of America, Wells Fargo, CitiBank, PNC, TD Bank, U.S. Bank, and Capital One. These usually offer the best rates, but not always. Even if you have a bank account with a lesser-known financial institution, call to see if you can convert your money there.

Most commonly, banks require you to call or stop by at their branch to order currency and then return later to pick up in person.

Some provide online orders that deduct from your checking or savings account. The foreign currency is then shipped to your home address, often for a fee that varies depending on the size of the order. Euros or Canadian dollars may be fulfilled that same day, while other less requested currencies could take two to four days or more to receive.

2. Use Travelex services online

If you do not have an account with any major banks, the most convenient way to exchange money is by ordering online through Travelex. The process is easy. You order online, and the currency will arrive at your door. You can pay with your debit or credit card.

Free in-store pickup is also available. For example, you may be able to pick up your currency at the airport kiosk. However, you will be paying for this convenience with less favorable foreign exchange rates and delivery fees.

Do not make my mistake! Use debit only! I used my credit card, (and get points – you know) once to buy euros on the Travelex website. My transaction was qualified as a cash advance, and interest rates were immediately applied to it. Costly operation!

3. Order currency at your local AAA location

AAA uses Travelex for exchange services, so you pay the same as with Travelex. You can order online or in person. As of late 2019, if you order currency worth more than $500, there are no fees. Orders for less that $500 incur a $12 fee. You may be able to avoid delivery fees if you visit your AAA local branch, pay in advance, and pick the money in person. Call to confirm.

So, which method is best?

From my experience, unless you are buying a large amount of foreign currency, all three ways above deliver almost the same value. Before one of my trips, I compared closely to determine which was the best way, and I could not come up with a clear winner.

My bank does not have any branches near me, so I could not pick the currency in person. The exchange rate offered was good, but the fees, including a delivery fee, added up to $20! Travelex used a less favorable rate, but the fee was only $9.99. If I ordered with AAA, I would pay $12. But then, you have to be an AAA member to be able to use this service, and that comes with a yearly fee.

4. Travelers Checks

Yes, traveler’s checks still exist! A traveler’s check is a check issued to you in exchange for foreign currency. This form of payment makes sense when you do not have a credit or debit card. The main benefit of traveler’s checks is that they reduce your risk of theft or loss because, unlike cash, traveler’s checks will be replaced if they are lost or stolen. The downside is that fewer and fewer places still accept traveler’s checks, so it can be tough to actually using them. Additionally, buying and cashing traveler’s checks come with extra fees.

5. Prepaid Cards

Prepaid cards are the modern replacement for traveler’s checks. You can reload the balance from the company’s website or over the phone. They’re safer than cash, easy to get, universally accepted, and convenient to use. They are definitely the right choice for those who do not have a credit or debit card. But that convenience comes with foreign transaction fees and limitations, such as ATM withdrawal and purchase amount caps.

Buying Foreign Currency Abroad

If you are an experienced traveler, then buying local currency abroad may the best way to exchange money. If you are new to traveling or just nervous about it, think twice before choosing this option. You will not make better financial decisions in unknown territory than you would at home. Buying abroad usually offers good rates, but exchange fees can be higher. (Find other tips for the first-timer traveling abroad here. )

1.   Using debit cards abroad to obtain foreign currency  

Many travelers are convinced that using debit cards abroad is the best way to get foreign currency because of the better exchange rates than those offered by financial institutions in the USA. But this often comes with a foreign transaction fee of 1% to 3%! Additionally, your bank can charge you a foreign ATM fee for using an out of network ATM. Also, the owner of that ATM might have its own service fees on top of it.

Not all debit cards are created equal! Only very few can be considered as the right choice. Until recently, Charles Schwab Bank Visa Platinum Debit Card was undeniably best in the field. The card offers fee rebates for unlimited ATM withdrawals and foreign transaction fees. Along with no ATM fees, your Schwab debit card comes with some valuable Visa benefits that you might typically find on a credit card, such as Travel Accident Insurance, Warranty Protection, Price Protection, and more.

The Charles Schwab debit card is now facing competition from SoFi Money Debit Visa card, that boasts many of the same benefits, including a debit card with fee-free withdrawals anywhere in the world.

2. Buying foreign currency with US dollars

At times, you may choose to purchase local currency with US dollars, but use this option as a last resort. On average, you lose about 8 percent when you change dollars to foreign currency. When you use an airport currency exchange kiosk or other tourist areas, the hit can be as much as 15 percent!

Do not make my mistake!

During my visit to Vienna, I needed cash for a private guide. I bought euros with my US dollars in the most touristy part of the city. I almost fainted when I saw how little I got for $100!

3. Credit cards to obtain local currency

This possibility exists but you should NEVER withdraw cash from an ATM with a credit card. If you do, you will start paying cash advance interest on the money the moment you withdraw it at the ATM.

Credit cards give you the best currency exchange rates!

Regardless of your credit card issuer, credit card exchange rates are the same across the board because they’re determined by the major networks — Visa, MasterCard, and American Express. The card network rates are 5 to 10 percent better than those offered by financial institutions such as bank branches that convert currency. It’s an even bigger spread when compared to exchange shops on the street or at the airport.

TravelingMom Tip: To get this best rate, always charge in a local currency, not US dollars. This way, your credit card will pick up the rate, not a merchant.

Just like debit cards, not all credit cards are created equal. The best credit cards do not apply foreign transaction fees. ATMs can still inflate their exchange rates and charge withdrawal fees, but a direct credit card payment only involves the credit card you signed up within your home country. And with good points or cashback program, using credit cards abroad beats any other method of payment.