Cash Abroad: ATMs, Local Currency, or Travelers Checks?

Most travel experts agree that the best way to get cash when traveling abroad is to use your ATM card, just as you would at home. But what if the ATM system is down (which always seems to happen on nights or weekends, when you can’t call the bank). Or the ATM eats your card or seems to working but won’t dispense your lire or pounds?

Foreign Currency

In these frustrating situations, it would help to have a bit of local currency before you can resolve your issues, which is why it’s a good idea to convert some currency before you leave for an international trip. Most major financial institutions (such as Chase and Citibank) have foreign currency on hand, although not all branches will offer this service and you may have to hunt for one that does.

Travelers Checks

Another option is to purchase travelers checks in foreign currencies through big companies like American Express or Visa. These are easily obtainable through the larger branches of many local banks or the American Automobile Association (AAA). But even though traveler's checks are advertised as being "safer than cash" because the issuers promise to replace them if they're lost or stolen, the issuer may refuse to refund or replace the amount if they decide you’ve been “negligent.” And more importantly, smaller merchants and some hotels may not accept traveler’s checks at all, and banks may charge you a fee to cash them (plus, you’ll often pay a fee to buy them).

Prepaid Cards

Some major credit card companies (like Visa and American Express) also offer traveler’s check cards. This is a prepaid debit card that can be used throughout the world to make purchases or withdrawals from ATM machines. If your card is lost or stolen, the issuer will issue a new card or refund the unused balance. However, the fees associated with using these cards can add up—they can cost up to $15 just to get one, and fees are deducted per withdrawal, reload, and every time you make a purchase in a different currency than the one on the card. So if you fill it with US Dollars and purchase something in Euros, another fee is added for the currency exchange service. Sometimes, there’s even an activation fee, so we don’t recommend this form of payment.

ATMs

Your best option for getting foreign currency is by simply using your ATM card, because exchange rates are lower than any other method. But we’ll say it again and again—it’s essential to notify your credit card issuer before you leave home, in case the bank freezes your account because of unusual foreign activity. In addition, it’s advisable to carry a second ATM card from another bank or another account at the same bank (keep it in a safe place, separate from your other ATM card) just in case you lose your first ATM card or it gets eaten by the machine.

However, if you’re going to use an ATM, find a bank at home that doesn’t charge to use foreign ATMs (some do, which can wipe out any savings on smaller withdrawals). For example, in the New York and Pennsylvania areas, Commerce Bank doesn’t charge for using another bank’s ATMs. And the foreign bank you withdraw from may also have its own fees. Since I travel to the UK frequently, I have a savings account with Halifax, a UK bank. It doesn’t pay interest, but I leave a few hundred dollars in it and pay no fees when I withdraw money from an ATM.

Citibank does not charge fees for withdrawals from its international ATMs and Bank of America charges no fees at select ATMs abroad.

Credit Cards

Don’t forget, too, that credit cards offer good exchange rates as well, but they do charge foreign transaction fees. Only two major card issuers don’t charge any fees at all: Capital One and Discover.  Discover is only accepted in Canada, Central America, Mexico, the Carribean, and China, but Capital One is accepted everywhere Visa or Mastercard are accepted (depending on which card you have).