Revised
and up-dated, replacing the post of May 04 2011.
One
of the most frequent questions asked on travel forums is "how
much foreign currency should I obtain before I leave home" and
"how much should I purchase in Traveller's Cheques". My
answers are "as little as possible" and "nothing".
Instead, join the 21st Century and use ATMs (Automatic Teller
Machines) wherever possible.
Most
of my trips involve several countries and many different currencies.
For example, my 2011 seven-week trip used in sequence the Malaysian
Ringgit, Indian Rupee, Malaysian Ringgit, £, €, Swiss Franc, €,
Croatian Kuna, BiH Marka, Russian Rouble, £, Malaysian Ringgit and
finally home again, with much of the pre-purchasing using US$. My
2016 rtw trip used in sequence the Malaysian Ringgit, Indian Rupee,
€, Albanian Lek, £, Norwegian krone, Swedish krona, Danish krone,
€, Cuban peso, $Canadian and $US. Fun :)
Pre-trip
planning
My
primary card overseas is a debit card suitable
for use in overseas ATMs. I
choose to use a debit card because
credit cards can add significant fees and use poor exchange rates.
Possibly
the most important pre-trip requirement is to find a bank which
provides a suitable debit
card.
That will vary by country. As
an Australian I found our local major banks added excessive fees when
using foreign ATMs on my overseas trips. They also added a hidden fee
by using exchange rates 2% or more worse than the actual rate. I
searched until I found a bank offering a fee-free account, including
no fees using foreign ATMs. Their
effective
fee is the difference between the real exchange rate and the bank's
rate. With this bank that is usually about 1% (I use www.xe.com for
comparisons). I
load the
account
before trips with
sufficient cash plus a safety reserve and
adjust when I get home.
Another
advantage of a debit card is security. If it is stolen or misused the
amount risked is limited by the cash balance.
I
very rarely use overpriced currency exchangers before departing
unless I have a need for a specific non-local
currency
on arrival. For example, I had to pay cash for my apartment in Buenos
Aires in US$; I could not get that out of the local ATM and bought it
before
departure
instead. Similarly,
when I visited Myanmar in 2012 the government exchange agency in
Yangon Airport demanded pristine $US, excluding some serial numbers.
I had to arrange that in advance before I left Australia. Expect
a cost in excess of 5% using foreign currency dealers.
I
do a lot of on-line pre-purchasing of hotel rooms and other services.
I don't usually book every night of a trip, but at least the first
night after travel. I do not want to be hunting for a place to sleep
as I get out of the airport or station jet-lagged or travel-weary.
Often the cheapest rate requires full payment but cannot be
cancelled. That has the added advantage of locking in the exchange
rate of that day if you think it may drop in the future (see my later
comment on forex). Some sites convert to my currency for the purchase
at their own exchange rate, which can be surprisingly good, so the
debit arrives my bank in AU$ with no fees.
If
I use my credit card for pre-purchases I also need to carry the card
on the trip because some airlines and hotels require the booking card
for verification at check-in. Use of the credit card may give me free
travel insurance in certain circumstances. Its other use is as my
emergency backup if my debit cards are lost, stolen or not accepted.
Heading
Out
I
always carry a minimum of three cards for
redundancy. If you carry only one card,
loss or theft or cancellation could be a disaster. It doesn't need to
be stolen to have a drama. On our first trip the bank officer
handling our account left to have a baby and neglected to arrange
automatic monthly credit card payment from our primary account. It
maxed out; we discovered that courtesy of a cranky
non-English-speaking (and why should she?) French supermarket
check-out girl in front of a long and increasingly grumpy queue. The
back-up card saved the day – and the rest of that month and my
sanity.
The
three cards are on different accounts; if one is cancelled the
others are still OK. My primary is a debit Mastercard, with a Visa
credit card and Visa debit card as backups.
Another
reason for backup cards is variability of ATMs. In some countries not
every ATM will work with every card, even if the appropriate symbol
appears. I once tried all of my cards at six different bank ATMs in
Rio before I found one that worked. I had similar difficulties in
Buenos Aires and China. But I always eventually found one which
worked.
While
travelling I keep only my ready-use local cash and primary debit
card in my ordinary wallet in my front trousers pocket. For vital
documents and my emergency stash I use a Go “secret wallet” which
hangs off my belt inside my trousers. I store the essentials in that:
my passport, the credit card, backup debit card, spare passport
photos and cash in the form of approximately €200 or US$200 in
modest bills depending on the region.
Cash
on Arrival
I
assess my likely need for cash when I arrive in the country and head
straight for an ATM at the airport, rail
station or nearest
border town (if
driving)
which
will accept
my debit Mastercard or backup
Visa
debit card.
Many overseas ATMs charge a fee for service on top of any fee your own bank charges. If there is more than one ATM available check whether a fee applies; if so check the other ATMs for better value if possible. Major local bank ATMs are more likely to be fee-free - but not always.
I
only withdraw sufficient in local currency for three or four days,
replenishing as necessary, and try to budget so that I arrive at the
border on departure with just enough to buy coffee or a meal or
duty-free goods on the air side of the security barrier. If I'm
driving I usually turn any remaining cash into fuel at the last gas
station before the border.
Sometimes
it may be necessary to allow for a lack of ATMs if heading into rural
districts but I can only recall a couple of times I needed to do
that. For
the rare
times times
when there is no ATM
I have my "secret" reserve for emergencies of €200 or
US$200. One of those two currencies is usually accepted as an
alternative, although sometimes the locals use very flexible exchange
rates.
Where
possible I pay for hotels and other major costs with the debit card. That
minimises the amount of local cash I need to carry and has the dual
benefit of reducing my security risks and limiting the amount of cash
I may need to re-convert as I cross a border to another new currency.
However, local cash is always going to get the best price when in
markets or for other general purchases.
Heading
Home
Unused
foreign cash is not always a problem but sometimes it can be costly.
Minor border crossings where the locals frequently cross over can
have excellent cheap currency exchanges; I have used those in Eastern
Europe successfully. But others do not. We lost over 10% converting
Swiss Francs to Euros in a French bank near the border. Banks back in
Australia
charge like wounded bulls for turning foreign notes back into Aussie
dollars and will not even look at foreign coins. Back in '03 we
didn't know that; we came home with about £40 in coins, which is
easy to do with £1 and £2 coins, worth about AU$100
at that time. The bank would not accept them. We spent them on our
return to the UK in '06. Today they would be worth $70.
A
word of caution.
Trying
to predict future exchange rates can be risky. After
seeing the Aussie dollar range from as low as US$0.55 to US$1.10 (it
is now approximately US$0.80) since 2003 when I went on my first rtw
trip I decided I am a wanderer, not a forex trader. Be careful of
cards advertised for travellers which lock in an exchange rate when
you deposit cash to them. Those rates can move in both directions.
Finally,
always remember to get your card out of the machine when you finish.
I lost a card that way in Argentina. I take extra care these days to
look for the final "are you finished" request, not always
in English, if the machine is the type that swallows my card.
Cheers,
Alan, Australia
