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Today’s guest post comes to us from Matt. Matt contributes to CreditCardCompare.com.au, an Australian website where Aussies can compare frequent flyer cards from a variety of airlines.
Seasoned travelers use proven banking techniques that avoid unnecessary fees but protect funds from theft. Carrying large amounts of U.S. cash is not a wise decision. But, using credit cards, ATMs, and checks while overseas can incur large fees for each transaction.
Every bank has methods for avoiding these fees and will answer the depositor’s questions when information is sought prior to departure. Informed travelers avoid costly bank fees because they complete research as a major portion of trip preparation and then use recommended methods for access to funds. Described below are some of these methods.
- Know your bank’s fee schedule – Ninety days prior to departure research the charges that will be assessed for accessing your account from foreign countries. ATMs are available in most countries, but the fees will add up quickly when the foreign bank and the domestic bank charge fees for each transaction. Research the fees associated with all foreign transactions including ATM, credit cards, and wire transfers.
- Choose a bank with partners – If the primary checking account resides in a locally-owned bank, open another checking account in a major bank with partners in the destination countries. Access to your account is available through partner banks in those countries with reduced fees. Notify the bank that you will be traveling so foreign transactions will not shut down access to the account.
- Open a second account – As insurance against loss of access to your funds, open another checking account at the same bank so that funds can be accessed if the bank system shuts down your account before you can address the situation. Notify the bank of your strategy so they can help you achieve the correct result.
- Establish a money market account – Place enough money for travel in each of the two basic checking accounts and move all other funds into a money market account that has online access. If one of the other accounts is breached, only the travel funds will be lost, but you will have access to money to continue travel and get back home. Look for a money market account that will pay interest on your money and allow you to access it easily.
- Use credit cards for large purchases only – Every credit card transaction will incur fees for currency exchange and use outside the United States. Pay for hotel bills and other major expenses with a credit card, but pay for every other transaction with the local currency.
- Rarely use an ATM – Unless you have access to an ATM that will not charge a fee, only access the ATM for large withdrawals. Avoid ATMs in airports, hotels, and public places because they charge exorbitant fees that will add up quickly and reduce the balance in the checking account that holds the travel funds.
- Exchange money – Avoid exchanging money at the airport upon your arrival. When you reach the hotel, ask where the best place to exchange U.S. currency for the local currency is located. The locals know where you will pay the most favourable exchange rates. Visit the exchange for large transactions and avoid small amounts of money. Make certain you are given small bills at the exchange because most merchants cannot change large denomination currency.
- Monitor exchange rates – Take note every day of the exchange rate between the U.S. dollar and the local currency. If the exchange rate becomes favourable, exchange a larger sum of money to take advantage of the rate. Make local currency last longer if the exchange rate becomes less favourable by postponing unnecessary purchases.
- Take travelers checks – Most large hotels can cash travelers checks, so purchasing travelers checks prior to departure may be the most favourable way to carry sufficient funds for the entire trip. Record the numbers on the travellers check and make two copies. Leave one copy with a person of trust here at home and take the other copy on the trip, but store them separately. Replacement requires the exact check numbers.
- Record account numbers – Write down all checking account numbers, credit card numbers, ATM card numbers, and travellers checks numbers prior to departure and make two copies. Leave one copy with a trusted person and carry the other one, but keep it in the hotel safe with your passport.
Travellers must remember that financial practices overseas are not similar to those used at home. Convenient access to money is very costly because of the bank network access that is required to process every transaction. Awareness is the only way to reduce the fees associated with convenient spending tools. Adopt a local mindset when traveling overseas and use similar tools to the people who live and work in the area.
How about you all? Have you ever been traveling and were hit with unexpected bank/ATM fees? How do you avoid paying too much for access to your money when traveling abroad?
Share your experiences by commenting below!
Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.
- The methods expressed in this article are very useful. In my experience traveling abroad, each time you access money using an ATM, you are charged ~$5 USD by the local bank and then ~$3-$5 USD from your domestic bank in the USA.
- Credit card foreign currency transaction fees can be even worse. Generally, the fee that your credit card will charge each time you make a purchase abroad is 3%. So, as discussed above, it is important to only use your credit card for emergencies and for larger purchases when you need to conserve your cash.
***Photo courtesy of http://media.rd.com/rd/images/rdc/slideshows/6-Ways-To-Avoid-Exces-Travel-Fees/6-Ways-To-Avoid-Exces-Travel-Fees-01-sl.jpg