You look at your bank account, and you see the currency of love and happiness is more important than the currency of money
At the beginning of my days as a full-time, Fifty-Plus Nomad, I did not care about issues like currency exchange rates, ATM and credit card fees, and other money-related topics. I thought they were a small tedious, detail that did not merit much attention.
However, when I reviewed my spending patterns after my first year as a Fifty-Plus Nomad, I realized that I had spent almost $3,000 on foreign exchange, credit card, and ATM fees, and decided to do something about it.
In the six years since I have dedicated time and effort to learn all I could about these money-related issues. Along the way, I have made errors, but I have managed to reduce these fees by 90%. It has not been that hard, and it has saved me over $10,000.
My class: Money: ATMs, Credit Cards, Foreign Exchange, Safety, Using US Dollars Abroad explains how I reduced these fees in detail. While I encourage you to take the class, you can save considerable money by following these ten simple tips:
Top Ten Tips
- Use your ATM or credit cards for the best foreign exchange rates. You will not get the best rate, usually at a foreign exchange kiosk, hotel, or shop.
- Use foreign currency to pay for most transactions. Many people have the mistaken belief that you get the best rates using US dollars. This is usually not the case. (I discuss a few exceptions to this rule, in my course: Using US Dollars Abroad.
- Sign up for credit cards that do not charge a foreign exchange fee. Many banks have credit cards available that waive foreign exchange fees. Besides, most credit cards that are associated with an airline or a hotel (i.e., Chase-United and Citibank-American Airlines cards in the USA) come without a foreign transaction fee.
- Don’t make a withdrawal from an ATM with a credit card. Most credit card companies charge foreign exchange fees on these withdrawals and treat the withdrawal like a cash advance. Cash advances come with fees (up to 5%) and high-interest rates.
- If your credit card has a hefty credit card transaction fee, try to minimize your use of the credit card by withdrawing money from your ATM card. Then, use that money for all but your most significant transactions
- Don’t let ATMs make the foreign currency conversion for you. More and more ATMs will give you an option that reads something like: ¨Do you want to accept or to decline the option that the bank makes a currency conversion (from the local currency back to your home currency) for you?¨ If you do the math, you will usually find that the bank is charging you an eight percent fee for the conversion
- Do not use any ATMs on the streets in Mexican resort cities or near European tourist sites that have signs that say you can withdraw US dollars. Typically, you will be charged 12-15% additional fees on these withdrawals. (Generally for safety reasons, it is best to use ATMs in a bank anyway). For more information, read here.
- If you are going to be traveling for months at a time, sign up for a bank account that rebates ATM foreign exchange fee. Schwab, and a few other financial institutions in the USA and Canada, offer accounts that rebate international ATM fees. Usually, to be eligible for these accounts, you must maintain a high account balance (typically around $25,000). When I tried to sign up for a Schwab account in 2013, they also required that I spend more than half the year in the year. Check out this post from the Points Guy for details. (Keep in mind, however, that you may still pay an ATM fee to the overseas bank).
- If you do have to pay ATM fees, plan your withdrawals so that you minimize the fees. In other words, if the bank charges a $5 fee for each ATM withdrawal, take out the most maximum withdrawals possible in one transaction so that you don’t have to pay $5 each for a bunch of small withdrawals.
- Sometimes you can even avoid ATM foreign exchange fees altogether by using an ATM at a bank that is associated with the network of your home bank. (For example, there are no fees for withdrawals at Barclays Bank in the United Kingdom if you have a Bank of America ATM). You can find out which overseas banks are associated with your bank by checking your home bank’s website.
Want to Learn More About Make the Most of Your Money while Traveling?
In addition to exploring how to avoid unnecessary foreign exchange fees, my money course also discusses: