Last week we wrote about how to get the best exchange rate when you change money overseas. We recommended you bring cash with you and change your money in a local bank. Another good option we talked about was to use your ATM card at a bank and draw cash directly form the machine. While you’ll get a good rate, watch out for fees both the local bank and your bank back home will charge for the transaction. While the rate itself may be decent, when include the lost funds from the fees you may end up getting a fairly poor rate of conversion. I bring up the topic again because the Mint Life blog has a particularly good article on avoiding bank fees while traveling. I’ve reproduced part of the article below, but make sure to head over there to check out the full article if you want to get all the details. The link is beneath the quote.

Here are the fees you’re likely to come across when spending abroad with a credit card, debit card, or ATM withdrawals:

• ATM out-of-network fees. This flat fee (typically $5) is charged by your bank for using a foreign ATM. Generally, big banks charge it; community banks, credit unions, and online banks don’t.
• Bank ATM fees. This is the fee charged by the bank that owns the ATM you’re using. You’re more likely to come across this in some countries than others. (And if you’re visiting the US from abroad, I would like to personally apologize, because the US is the worst offender here.) Some banks–particularly online banks–automatically reimburse you for this type of fee. Ally Bank, for example, reimburses all ATM fees.
• Foreign exchange fees. Visa and Mastercard charge you a percentage fee on all foreign transactions, and banks typically tack on a percent or two on top of that. The fee (up to 3% total) usually applies to credit, debit, and ATM transactions. This can add up fast. Capital One credit cards waive this fee entirely. (So does Discover, but who takes Discover?) If you travel a lot, carry a Capital One card–if you can qualify, that is; they’re sticklers for a high FICO score. For a trip to Japan next month, however, I’m not going to bother applying for a new card; I’m using my credit-union-issued card, which charges a flat 1%. I can live with that.
• Cash advance fees. If you use your credit card to withdraw cash at an ATM, you will pay and pay. Unless it’s an honest-to-God emergency, don’t do this.
• Exchange rates. This is the sneakiest of all, because it’s hidden. When using a credit or debit card, you generally receive a fair exchange rate, a wholesale rate comparable to what’s published in the Wall Street Journal or the Universal Currency Converter. (If you get a rate that differs significantly from this, call your bank and complain.) At an airport currency counter, you’ll get an unfavorable rate. Worst of all is exchanging cash at a store. And if a merchant offers to ring up your credit card transaction in US dollars to avoid the foreign exchange fee, decline unless you can check the exchange rate on the spot.

Your bank’s web site is unlikely to be forthcoming on what they’re going to charge you when you travel. Call the bank and walk through two specific scenarios with them: what will you charge me, in total, when I use my card at an ATM in Barbados (or wherever you’re planning to drink your piña coladas)? What about when I use it as a credit or debit card?

Furthermore, it pays to do this before you book your trip. Banks have been known to charge the 3% exchange fee for, say, booking a flight on an international airline, even when the trip is booked in dollars.

Read the full article over at the Mint Life blog. It’s one of the few blogs form which we actually read each article. I highly recommend you do the same!

My number one pet peeve about traveling is when I get ripped off as a tourist. I take great pride in researching my destination before I go and forgoing the usual tourist rookie mistakes. Sometimes that is unavoidable, but let me share with you one hard and fast rule I’ve found that applies to every country I’ve ever been to: do NOT change money at airports or in tourist heavy areas.

When you change money right after getting to an airport, after getting off your cruise ship, or at any major tourist attraction, you are literally throwing money away when you didn’t have to. That ticks me off to no end, and it should make you mad as well, especially when you see just how MUCH money you probably just flushed away.

I’ll give you an example from our recent trip to Buenos Aires. In the airport I could have changed my money at 3.28 Argentinian Pesos to the dollar. The same day at a bank in downtown I changed my dollars instead at the rate of 3.76 pesos to the dollar. That’s a 15% difference in exchange rate. If you changed $500 that day, you would have thrown away $75 if you changed money at the airport instead of at a bank.

What’s the moral of the story here? Always change your money at local banks that change currency. You’ll get WAY better rates that will save you a lot of money. You’ll need to bring cash with you, as well as your passport. If you absolutely need some local currency to get into the city from wherever you are, then change only enough for the taxi cab or public transport.

I’ve heard plenty of advice from people who say to use local ATM’s to withdraw your cash. This is probably a close second best method to use in my experience. The rate of exchange you’ll get will be good, but the combination of banks I’ve used have always charged me so many fees as to make it a net worse rate than changing cash in country. If you know your bank and the bank in the country you’re traveling to don’t charge fees for international transactions, then have at it!

One important caveat that will apply to some of our readers: if your currency is something other than USD or the Euro, there is a high likelihood the local bank may not make the trade. In this case, inquire about changing currencies at your local bank before leaving. They will still likely offer you way better currency changing rates than at the airport. Remember that competition here is your friend, so don’t necessarily jump at the first opportunity that presents itself.