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How to Save on Foreign Exchange Fee When Travelling Abroad

Updated on January 4, 2016

Introduction to saving money when changing from one currency to another

Money lost in foreign currency conversion is mostly gone unnoticed by most of people travelling abroad. Even frequent international travelers are ignorant about ways to save money while converting foreign exchange. A traveler can lose any thing between 4% to 10% when converting one currency to another, based on the method used for the conversion of money.

The biggest culprit is ignorance or misinformation provided by middlemen engaged in currency conversion trade. Travelers choose credit cards or other methods to change money in another currency solely out of habit or influenced by advertisement available at airports, travel websites or banks.

Money can be converted by buying foreign currency from the bank or forex dealer in the home country or abroad. In addition, credit cards, stored value forex debit cards, bank debit cards, travelers checks, bank drafts can be used for changing money from one currency to another. Choice of method used for exchange of domestic currency should ideally be decided by answering following questions:

  • How much money do I need to convert?
  • What is the length of my total stay abroad?
  • Do I plan to travel to one country or multiple countries? What will be duration of stay in each of the country?
  • What is the minimum amount of cash I would absolutely need at each location?

It is also influenced by individual preference for cost saving, convenience and safety. Generally convenient or safer methods will cost more to convert foreign currency. Let’s examine following most popular methods for converting one currency into another and cost / convenience associated with them.

  1. Cash

  2. Traveler's check

  3. Prepaid / stored value travel cards

  4. International debit cards

  5. International credit cards

  6. Western Union

  7. Wire Transfer

How do you carry your travel cash?

How do you carry your travel cash?

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Foreign Exchange is About Changing One Currency to Another

When you change one currency to another there is an exchange loss
When you change one currency to another there is an exchange loss | Source

Traveling to a foreign country?

Have you ever traveled abroad?

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1. Foreign Money in cash

Cash in foreign currency is easy to carry, but not safe.
Cash in foreign currency is easy to carry, but not safe. | Source

Avoid Money Changers at Airport

Avoid changing money at the airport as they offer worst possible exchange rate.
Avoid changing money at the airport as they offer worst possible exchange rate. | Source

Carry enough cash for small expenses

Changing cash from one currency to another is one of the cheapest and most straightforward way available for any international traveler. A short trip to a bank or bureau de change counter along with passport is all you need. Generally, when exchanging currency in cash form one may lose 1% to 2% in value. This loss is attributed to difference in buying and selling rate for a currency generally known as an exchange spread in trade jargon. As a general rule, the popular and widely accepted currency will have a lower spread this is why forex losses are minimum for exchange between US Dollars, Euro, British Pound and Japanese Yen, the four most popular and widely accepted currency in the world.

  • If you have to carry cash it is advisable to carry any of the above currency or the currency of the country that you plan to travel.
  • In general, banks and exchange dealers at the airport gives worse rates so buy in advance in the city from a bank or dealer located in the busy financial district.
  • There are many online dealers that allow you to place an order in advance and pick up at a later date.
  • Some forex dealers may offer slightly better exchange rate for the currency notes of higher denomination. For example USD 100 may have a better exchange rate over USD 5,10 or 20.
  • Laws in most countries put a limit on the amount of cash that can be taken out or brought in. This can be anything between USD 2000 to 5000 so check in advance.

Most of the banks / forex dealers both buy and sell foreign currency, this is why they offer two way quote for a given currency pair. The difference between buy and sale rate is known as currency spread.

Money Changer

Dealers in Chungking Mansion in Hong Kong give most competitive exchange rate
Dealers in Chungking Mansion in Hong Kong give most competitive exchange rate | Source

How Much Cash Can I Carry

Allowed to bring in
Allowed to Take out
$ 10000
$ 10000
€ 10000
€ 10000
€ 10000
€ 10000
A$ 10000
A$ 10000
$ 5000
$ 5000
$ 5000
$ 5000
$ 20000
$ 20000

Cash Allowed to Bring or Take Out While Traveling to a Foreign Country.

These are for guideline only. Please check country specific website for official information.

Best places to change money while traveling abroad

City / Country
Where to get best exchange rate for cash
Anywhere in China
Any branch of Agricultural Bank of China and Bank of China. Daily Limit USD 300
Bangkok, Thailand
Banks and exchange shops in Sukhumvit Road
Hongkong, China
Chung King Mension in Tsim Sha Tsui, Kowloon area
Little India / Arab street forex dealers
Reputed banks such as Deutsche Bank, Zivnostenska Banaka, Komercni Banka, Ceska Sporitelna, CSOB, Raiffeisnbank in Wenceslas square
Istanbul, Turkey
Banks, post offices (PTT) and exchange shops around Sultanahmet, Sirkeci or Taksim
London, UK
Online dealers
Los Angeles, USA
Basement of World Trade Center Building
Post offices that have a Banque Postale
Post office that offers to exchange foreign currency
Kuala Lumpur, Malaysia
Private moneychangers sometimes offer slightly better rates for cash than banks. Maybank Forex Counter (Jln Hang Lekir, Chinatown; 10am-6pm) RHB Bank (Ground fl, Suria KLCC; 10am-7pm)
Sydney, Australia
Post office, Westpac
Tokyo, Japan
Most banks prefer USD. Daily Limit USD 400. Japan is traditionally cash based society, carrying cash is mostly safe

Best exchange rate for your cash. This is based upon my personal experience. Readers are encouraged to share information about more cities via comment

2. Traveler's check

Traveler's check offers both safety and low cost
Traveler's check offers both safety and low cost | Source

Traveler's check safe and low cost option

Traveller’s check has been out of fashion lately due to increase in use of plastic cards that are easier to use albeit at a higher cost. If you google comparison between travelers check and the prepaid travel cards, it is unlikely that you will see any website recommending use of the traveler’s check in the first few pages. Why? Simply because banks make more money when you use credit/debit cards or stored value travel cards.

Traveler’s check costs 0.5% to 1% at the time of issue and there is generally low, flat fee per check when you encash them. In the USA most stores and banks would accept it without charging any fee, however, in some countries, dealers may charge small percentage based fee generally ranging between 1% to 3%.

Helpful Tips:

  • Always buy traveler’s check in higher denomination as there is a flat fee for each check leaf at the time of encashment.
  • Keep your receipt and record of all check numbers in a separate location so that it can be accessed in case of traveler’s checks are lost.
  • Do not countersign in advance. Countersign (sign for the second time) only at the time of encashment in front of the person accepting it.
  • Think of traveler’s check as a banker's check payable at par at locations in the world. Use all precautions that you would normally take while safeguarding your check book.

Pros and Cons of Using Traveler's Check

  • Pros: Very low total cost for conversion of foreign exchange, more secured than cash/cards, easily replaceable within few hours, if lost, no expiry date
  • Cons: Need to travel to bank / exchange dealer for cash, not acceptable in all countries especially in Asia/Africa

Pros and Cons of using a Travel Card


  1. Easy to carry, safe to use.
  2. Avoid overspending associated with a credit card
  3. No need for a bank account
  4. Easy to buy, reload value
  5. Access cash from most ATM
  6. Easily replaceable in case of loss


  1. Expensive to buy, load and use
  2. Exorbitant cash withdrawal charges
  3. Not useful when traveling in some parts Africa / Asia due to the underdeveloped banking network.

Prepaid Travel Cards

Prepaid or stored value travel cards have gained popularity over traveler’s check lately due to its ease of use. They offer safety of traveler’s check and convenience of a plastic card that can be used in most locations with minimum fuss. However, these cards are more expensive than cash or traveler’s check.

They are available as Visa Travel Money Card (in USA) or Post Office Travel Money Card (In UK) or by any other name in other countries. Every bank worth its salt is doling out some variant of prepaid travel card, so shop around as your mileage will vary. They can be purchased in value ranging from USD 25 to 10000 from banks, post offices and forex dealers. The cost may vary a lot, while comparing options one should watch out for following costs:

  • The cost of buying prepaid card - one time cost between $5 to $20
  • The cost of loading / reloading/ adding value - up to USD 15 per transaction
  • The cost of using the prepaid card, including withdrawal / balance checking at ATM - 3% to 7% of the transaction value and/or flat for use of the ATM
  • Balance checking fee $ 0.50 to $ 2.0
  • Cost of replacement of card USD 10 to 20
  • Inactivity fee or account maintenance fee, if the card is not used at least once in six months - anything between $2.5 to $5 a month

Useful Travel Card Comparison Links

Debit Card

Prepaid travel cards are preferred over debit cards while traveling abraod
Prepaid travel cards are preferred over debit cards while traveling abraod | Source

4. Bank Debit Cards

Bank issued debit cards are similar to stored value or prepaid travel cards, but they are linked to your bank account. It is generally not advisable to use debit cards because:

  1. High transaction fee for use
  2. High ATM withdrawal fee
  3. In case of fraud you may lose all money in your account

The fees are dictated by the bank who has issued you the debit cards.

If you have to use a debit card to avoid overspending it is always better to buy a stored value / prepaid travel cards offered by banks and online dealers. Keep your bank issued debit cards for backup only.

5. International Credit Cards

Credit cards are safe, easy to carry and offer protection in case of any dispute arising with the seller of the goods and services abroad. They can be easily be replaced if lost and offer exchange rates near to inter bank rate.

Travel is a major expense and most bank offers to spread out payment over a period of a few months so that you get better control over your finances. It also allows you to earn cash back, lounge access at airports and loyalty points. However, it can be as expensive as a debit card, even more if you have an unpaid balance on your card.

Many banks will charge you for use of credit cards in any of the following ways:

Foreign Exchange Fee: Your bank can charge of 3% to 5% simply because you have used it abroad.

Cash Withdrawal Fee: Bank would charge heavily for ATM withdrawal abroad, which could be 7% of the withdrawal amount. In addition, foreign bank who owns the ATM may charge a flat fee for the same. It is best to avoid using a credit card for cash withdrawal abroad.

Interest Charges: If your balance is not paid on time, all unpaid balance may attract a hefty interest rate ranging between 18% to 30% that evaporates all savings that you earned by cash back or loyalty points.

When to use credit cards abroad?

  1. For Flight booking
  2. For Hotel booking
  3. For fine dining if there is an offer
  4. For high value purchases (watches, electronics)

Using a credit card abroad? Consider this.

  1. Many US credit cards lack extended security feature of PIN + CHIP that are popular in Europe and Asia which makes them unusable while traveling abroad.
  2. Some merchants offer to convert charges in your local currency. Avoid it. While it locks transaction value in your local currency, it also allows merchants to charge a conversion fee that can be as high as 5%.
  3. Hotels or car rental agency may put a hold on money equivalent to your expected bill. They may forget to remove this hold even after the bill is paid. So ensure that the hold is removed.
  4. Your credit card company may block your card if used abroad without notifying them. Let them know before you travel if you plan to use their credit card.

6. Western Union / Moneygram


Western Union / Moneygram

Western Union can be a great way to receive emergency cash, however you need to make arrangement for sending money from your country and you need to pick up money in person at the foreign destination where you are. The overall cost (sending + receiving fee) can be anything between 5% to 10% of the total amount transferred. The money can be received in cash or prepaid card generally within minutes of making the transfer.

I would keep this option only for the emergency purpose.


7. Bank Wire Transfer

Transfer of funds by bank wire is least used by travelers because:

  1. It involves opening a bank account in the travel destination country. Many countries do not allow traveler’s to open a bank account and require some local address for opening a bank account
  2. Transfer of funds may take a few days
  3. The account needs to be closed before departure.

However, it is the cheapest and most secured way for transferring funds. The bank usually offers inter-bank rate for fund transfer and there is a flat fee of USD 20 to 50 for each transfer determined by the bank where you opened the account. This option is quite useful for the traveler who plans to stay in one country for few months.

Independent traveler planning to stay in a single foreign country for months (short term language courses, research, visiting close family members) should investigate possibility of opening a bank account in host country.

Methods for exchanging cash

How do you prefer to carry travel money?

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Compare Options

Travel Card
Credit card
Debit card
Very High
Conversion fee
Transaction fee
Set Up fee
Interest fee
Ease of carry
Carrying Limit

Conclusion: Best way for carrying money when traveling in a foreign country?

In reality there is no single method which would serve needs of all international travellers. One should use a combination of two to three methods mentioned above that gives maximum convenience with low cost.

Many asian countries have cash based society where it makes sense to travel with cash US dollar or Euro while most of US/Western Europe has developed banking system combined with easy access to ATM so it makes sense to use more cards.

A frequent business traveller may like to use multi currency card whereas a solo traveller staying in a foreign country might use bank wire or postal money transfer as they are cheapest mode of transfer available.

There is no single formula or combination and it all depends of preference of an individual traveler.

© 2014 Kamal Mohta


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