You've probably been there already: standing bleary-eyed in front of a foreign ATM after a long-haul flight, the numbers on the screen in the tens of thousands, a line forming behind you. How much should you withdraw? A little bit, or a lot? If you take out a lot, will you be an easy target? Look, the change bureau just opened. Should you exchange cash instead?
When traveling overseas, you have a range of options for spending money: credit cards with a chip and pin, or swipe and sign; credit cards that impose international transaction fees and those that don't; prepaid cards with multiple currencies; and locals lurking in market stalls purporting to offer better rates for your dollars, Euros or pounds.
Each transaction is a balance of cost, risk and convenience. Herewith, my tips to minimize cost and - more importantly - time spent agonizing over the options.
By far the most convenient way to pay, credit cards are preferred for your larger expenses: flights, hotels, shopping and fine dining. But it's a convenience you pay for: your card issuer will almost certainly charge a currency conversion fee, as a percentage of every single purchase - which you won't see until you view your statement. While these fees are annoying, bear in mind that they're usually less than what you would have paid to exchange cash at a change bureau.
Like so many things in life, it pays to plan ahead and research. Call your credit card company before you leave and ask what fees you can expect to incur. A few issuers, such as Capital One, do offer cards with no currency conversion fee (and some even give you points), which might be worthwhile if you travel frequently.
While you're enquiring about fees, also inform the issuer of your travel dates and destination. You don't want your purchases to trigger fraud alerts, and find your card is suspended from use.
As part of your travel planning, investigate getting a credit card with a chip. In yet another example of American financial facilities being behind the times, the growing prevalence of "chip and pin" cards elsewhere in the world can leave American travelers stuck at ticket kiosks or other places where there isn't a vendor to physically swipe your card.
Lastly, while you should never travel without at least two credit cards, be prepared that they might not work, or that cards might not be widely accepted at your destination. In Japan, for example - a country known for producing all manner of electronic gadgets - cash is still king. Even in the major cities it can be challenging to find ATMs that accept foreign bank cards, and many restaurants and inns only take cash.
Cash Exchange or ATM Withdrawals?
I prefer ATM withdrawals over exchanging currency locally. Even factoring in the bank's commission, foreign ATM fees and other expenses, you still usually get a better rate than you would exchanging cash.
As with your credit card, call your bank before you leave and tell them where you'll be and for how long. If you don't bank with one of the "majors," confirm that your bank card comes with international ATM support.
When withdrawing cash, always take out the maximum amount you're comfortable carrying. If you withdraw a total of $1000 in ten lots of $100, you'll get hit with ATM fees ten times. If you're nearing the end of your trip, however, keep the withdrawals smaller so that you're not left with money that you need to pay to convert back to your home currency.
While ATMs win on convenience and usually on cost, I recommend always keeping an emergency stash of a major currency, separated from your other belongings. Don't exchange it at the airport when you arrive - keep it locked in the safe of your hotel or secure on your person in a discrete money belt. (Or, better yet, divided between both places.) The idea is not to use this money, but to keep it for a situation where you've run out of the local currency and can't withdraw cash or pay with a credit card.
My emergency stash came in handy last year in Koh Phangan, Thailand, where the closest ATM was a boat ride away. Some miscommunication about how much money my boyfriend and I had each withdrawn and spent left us with no Thai baht and me too sick to get on a boat. Fortunately we had our emergency stash of AUD and USD to exchange at a nearby hotel.
And what about those locals, usually young men, offering local currency at better rates than the banks or hotels? Buyer beware, and remember that black market foreign currency exchange is illegal.
Plan, and Then Relax
Perhaps an obvious tip, but one that is often overlooked: just before you fly, investigate the current exchange rate and decide how much money you're going to take out when you land. Imagine staring at an ATM screen after a 15-hour flight, contemplating numbers that are longer than your mobile phone number - only to realize later that you only withdrew an equivalent of $100.
Finally, remember that it's impossible to do everything "right" - to get the best deal every time. Leaving your comfort zone always invites hiccups, and sometimes a raw deal. In every seasoned traveler's journeys, a few missteps and major blunders are to be expected. (For a glass of wine, I'll tell you about getting my handbag slashed open with a razor blade in Hanoi.) Chalk it up to experience and move on: you're traveling to see the world, not obsess over every penny not saved.