Getting Cash in the Local Currency in Another Country Safely, Conveniently and Cheaply

Canadians get a little spoiled travelling in the USA where some of our banks are their banks, some places will take Canadian cash, and you can even find a Tim Hortons if you drive far enough. In America, plastic rules and they accept most of the same bank cards and credit cards that we have to pay for almost everything. However, when we venture further out into the world we can travel back to the land of local cash. Not everywhere in the world works on

credit. Even for major expenses like a hotel room for a week, they may expect payment in cold, hard or warm, papery cash. So what’s the cheapest and best way to get your hands on your Yuan, Euros, Shilingi or Nuevo Sol?

Buying Cash Before You Travel: Costly, Inconvenient and Unsafe

Some time after Marco Polo and before the invention of VISA, banks started selling foreign currencies. If you gave them enough lead time, often months, banks would order in foreign cash and sell it to you. They wouldn’t handle all currencies, though; you had to know in advance how much you wanted to  buy; the money was often only available in large denomination bills; and the service fees could be high. If you lost the money, if you were robbed, or if the bills were destroyed in an accident, fire or flood, you lost it forever.

This risk of loss led to the next major invention in portable foreign currency:

The Golden Days of Travellers’ Cheques:
The Cheap, Safe but Still Inconvenient Way of Getting Cash in Foreign Lands

In the olden days, like around 2001, the common way to get cash in foreign countries  involved travellers’ cheques.

For those who don’t know what a travellers’ cheque is or was, it was a piece of fancy paper issued by a bank or financial company in return for cash. At the time you bought a set of travellers’ cheques, you would sign each cheque once. Then, when you went to cash a cheque, you would date it, sign it again and make it payable to a business or bank. The receiver would check your id, compare your signatures on the cheque itself and on your id, and give you the money.

The advantage of travellers’ cheques was they came with an insurance policy. If you lost them, accidentally destroyed them, or they were stolen, you could get them replaced by the issuer. Some companies, like American Express, claimed they would replace them within 48 hours.

At home you’d buy travellers’ cheques preferably for no fee from a place like CAA. Then, when abroad, you’d go to the currency exchange desk at your hotel and cash them. Or, if you were backpacking, you’d go to a bank, wait hours in line, and then cash them.

Surprisingly enough, the exchange rate and fees doing it this way were usually much less costly than exchanging money before your trip. And the chance of losing the money en route or having it stolen was significantly reduced. You could cash the cheques into the currency they were written in (usually Canadian or US dollars or Pounds Sterling) or you could cash them into the local currency.

Some travellers’ cheques were even for joint use. Each cheque was signed by the two people travelling together and only one person needed to sign a cheque to cash it.

You could get the cheques in fairly small denominations and store them in various separate places while travelling. Some, for instance, could stay in your room while others went with you in your wallet or backpack. (Remember, they were insured against theft.)

Now, paper travellers’ cheques are becoming rare. (You can still get them though.)

Instead they have a single plastic travellers’ cheque. Which brings us to:

The Age of Plastic
Era 1: Credit Cards, Don’t Leave Home Without Them

When credit cards were new and exciting they became a new way to pay for foreign expeditions. If you needed foreign cash, you could take your card to a large hotel or bank and request a cash advance. The cost of the cash was billed to your account. This was a reasonable system at first: it was a bit inconvenient but safer than carrying large amounts of cash and not too costly.

Gradually, that has all changed.

First, it’s no longer particularly safe. Despite endless attempts to make credit cards safer with the move from embossed numbers and signatures, to magnetic strips and signatures, to electronic chips and PIN numbers, the credit card thieves have stayed just one step ahead of the issuers. In some countries, card theft and card fraud is so large a problem that many places will not accept credit cards.

The financial institutions that issue credit cards have also caused a problem. Fees have gradually been imposed and raised on almost all foreign transactions. At first, most card issuers were content to simply make a small profit on offering a somewhat poor exchange rate between the home currency and the foreign currency. Then, some started charging a transaction fee on top of that exchange spread. Then others started charging a transaction fee, a somewhat unfavourable foreign exchange rate and a percentage of the transaction fee on top. For example, right now it’s not unusual to pay a foreign exchange rate plus 2.5% of the total of the transaction in fees.

Era 2: Specialized Pre-Loaded Credit Cards: Buyer Beware

Instead of travellers’ cheques, many tourists have taken to carrying a single plastic card that is preloaded with cash. It can be insured against loss, damage and theft. A single plastic card, however, cannot be divided up and stored separately like the old paper travellers’ cheques. It also may not be as readily accepted by merchants.

Another type of pre-loaded card is the pre-paid credit card. This card is usually affiliated with a recognizable credit card company like VISA or MasterCard. The user buys a cash balance on the card. When travelling, the card is used like a credit card, but the cost is deducted immediately from the card.

One advantage is you can buy (or “fill”) the card on a day when the exchange rate is good. You won’t have to worry about the rate worsening during your trip. If you pay by regular credit card, you will be charged the rate on the day the transaction is posted to your account. The posting date can be days or even weeks after the transaction date.

Usually the cards are insured against theft. There may be a fee, however, to load the balance from a stolen card onto a new card. Not all of the cards are insured against loss or damage.

The cards have some drawbacks. Hotels and gas stations, for instance, often put a hold on an amount of money before you finish your transaction. This hold can take several days to clear off your card, limiting how much you can spend elsewhere until the hold lifts.

They may have unexpected quirks, too. For instance, according to the article in the Guardian newspaper online, you can’t use them  “to pay on most European toll roads.”

If you are interested in one of these types of cards, research the fees carefully before buying.

• Some have a fee to start using the card.
• Others have an “inactivity fee” where you are charged a fee or a percentage of the balance if the card is not used for a certain period of time. That’s a real kicker if you bought the card for emergency funds and don’t intend to spend any of it before you return from a long trip.
• Some cards charge a fee to get a refund of any balance still on the card when you get home after your travels.
• Sometimes fees are charged by the merchant for allowing you to pay using this type of card. I’ve read reports on TripAdvisor of tourists who were billed a fee by the merchant for using these types of cards in Florida.
• Some card issuers charge fees to withdraw real cash from an ATM, but don’t charge a fee for using “cash back” when buying something else from a store.

The rules are confusing and depend on the card. If possible, read them before buying your card.

There’s an article in the Guardian newspaper, Travel money or prepaid currency card: which is best? that you might find interesting to skim.

The government Financial Consumer Agency of Canada has a lot to say about these cards. One tip it offered t hat I had not read elsewhere is that some prepaid cards charge a fee to check your balance!

So if carrying cash is out, and travellers’ cheques are passé and prepaid cards are fee-ridden, what other way is there to get local currency safely, conveniently and cheaply?

Why not try the bank machine?

Using Debit at a Bank Machine to Get Foreign Currency Conveniently and Cheaply

In most countries, you can now use the debit card from your bank at home at the local ABM to withdraw cash in the local currency.

The Pluses
Often, the exchange rate is as good as or better than you could get at home.

You can withdraw cash at key intervals during your trip to avoid carrying excessive cash.

If you plan ahead a bit, you can know where the closest bank machines will be to your trip accommodation. All big banks list their machines on their websites. Most allow lookup by a postal or zip code. If you don’t plan ahead, it’s still relatively easy to find bank machines in most large cities.

You may even be able to deposit excess cash back into your account prior to leaving a country.

The Drawbacks
Watch out for high per use transaction fees charged by your bank for each withdrawal. BMO for example charges $3 for each withdrawal in the USA and $5 for each withdrawal from an ATM not located in Canada or the USA.

You may be able to find a bank that does not charge any fee for an international withdrawal, or that at least charges a lower fee. Check on discussion boards on the internet before travelling. This topic gets discussed often.

There may also be a per use transaction fee charged by the bank machine sponsor for making a withdrawal. For example, if you are in Italy and use an Italian bank’s ABM, that Italian bank may charge you a fee.

Canadians are used to this type of nuisance fee. Generally if you make an ATM or ABM withdrawal in Canada anywhere but at your own bank brand’s ABMs you will be charged a fee by the ABM sponsor. For example, if I have a bank account with BMO and make a withdrawal from a CIBC ATM, I will be charged a fee by CIBC. I will actually also be charged a second fee by BMO. Talk about fee happy!

This government web page has a table listing the common fees charged for using ABMs in Canada.

You may have to be extra cautious about security. Protect your PIN as much as possible. Never write it down. Also, when you are at the bank machine, go to great lengths to hide what you are typing.

As soon as you return home, change your PIN. (For example, Some Australians visiting Canada were upset to find their PIN was captured while in Canada but was not used to defraud them till months later. If they had changed their PIN on returning home, they would have had less hassle. See http://www.tripadvisor.ca/ShowTopic-g155019-i55-k2708687-Watch_your_bank_accounts_and_change_your_PIN_regularly-Toronto_Ontario.html for details.)

Be aware that some countries use 4-digit PINs and some use 6-digit PINs. Check before travelling what will be expected and how to deal with it. Usually, though, banks will accept either. If you have any doubts, just check with your bank or on a travel chat board before you leave home.

Related Reading

• Buy Your US Dollars at ING Direct

Join In
How do you get local cash for your international travels? (And yes, unlike Canada Post for their stamps and Pearson International Airport for their departure levels, I do consider the USA to be International!) Please share your tips and experiences with a comment.