Our family is one month into a round-the-world trip and staying on top of our budget using our money tips for international travel. Amazing adventures, great food, multiple continents: yes to all. However, we are also diligent to follow sound financial principles while traveling. Here are our top money tips for international travel. These apply whether you are taking a long weekend to a destination just outside the USA or planning to spend extended time abroad. To find out what country we are currently in and to see all our worldwide travel adventures, head over to our Instagram page.
1. Proper use of international ATMs: Travelers Cheques are dead.
We like having small amounts of local cash. The only way we obtain foreign currency is from bank ATMs. Anytime you convert paper money (cash or Travelers Cheques), you are going to lose. The conversion rate can be up to 10% worse at a currency exchange compared to using an ATM. With an ATM, the withdrawal is fulfilled at a conversion rate determined by your ATM card provider (VISA or Mastercard). This will mirror actual market rates: currency exchange businesses make their money by giving you significantly less than market rates.
Example: converting $100 to euros in September 2021
Cash exchange = 78 euros
ATM withdrawal = 85,25 euros
That difference may seem insignificant, but those little hits add up! By careful practice taking care of small things, we ultimately get to choose to do big things. Quick note on why Travelers Cheques are dead: they have inherent cost to obtain, always come with a terrible exchange rate to local currency, and it can be hard to even find a place to exchange them! There is no scenario that we would ever use them.
There are a couple of potential downsides to using an international ATM: bank account safety and fees. However, you can avoid both pitfalls by following exactly what we have done. We have a completely free Charles Schwab online brokerage/banking account. This comes with a debit/ATM card that has worldwide free ATM transactions! Any fees that are charged to you by a local ATM are reimbursed by Schwab: pretty cool.
Quick tip: because you have no fees, only withdraw what you know you will need. If you take out too much, you can be stuck with a terrible exchange rate to return your excess to a usable currency upon leaving.
Having this setup also protects our primary bank accounts. Any time you use a debit card internationally, with your PIN, there is a risk of your account being compromised. This is one reason Jon prefers to only use ATMs at banks rather than random places. Also, we only keep a few hundred dollars at a time in the Schwab account. This way, if it does get drained by a fraudulent card transaction, we have a minor issue to deal with. We do not ever use our primary bank debit card: we don’t even carry it. Move money electronically as needed, and withdraw from your Schwab account without fees or risk!
2. Never pay foreign transaction fees.
When you use a credit or debit card outside of the USA, it can sometimes carry a significant additional charge called a foreign transaction fee. These fees can be several percent of each transaction and are completely avoidable. Make sure that your card includes “no foreign transaction fees”: this is a standard benefit for most travel cards. Feel free to contact us if you would like more information on the exact cards we use while traveling.
3. Card transactions: never pick the $ option!
It is very common when checking out via card to have a foreign merchant present an option for which currency you would like for the transaction. For example, in European grocery stores, it will sometimes pop up for Jon to select either paying in $USD or in euros. Always pick € or your current local currency! Similar to the currency exchanges explained above, you will always get a better overall value to run your card this way.
We also see this frequently when booking online transportation or entertainment. Some quick math on actual conversion rates will show you why you should pay using local currency! Because you are using a card without any foreign transaction fees, there is no downside to paying in euros and letting VISA get you the best exchange.
4. When to use local currency.
We use our cards for most transactions while traveling. Because we carefully budget and utilize tools such as Mint.com to plan for and track purchases, this works great for us. One pitfall is that people often spend more when paying with a card than with physical cash. Careful budgeting and continual communication if married are vital for success with money during international travel. Look for upcoming information on how we budget and made it possible to take our trip around the world.
There are definitely times that using local cash is ideal. We carry small overall amounts in small denominations with us while out and about. Our travel budget includes an occasional fun drink or snack, so grabbing a €2 frozen slushy from a street vendor is super convenient to pay with a coin. Local transportation like buses often require paying with cash, unless there is a ticket window or kiosk (often there isn’t). Lastly, there are going to be places you visit that don’t accept cards. This can be due to Wi-Fi, overall technology, or sometimes just being wonderfully old-fashioned and simple.
5. Using $USD while abroad
Despite all of the tips above, it can be a good idea to bring some American cash with you. Some areas you will be able to spend it, specifically in the Caribbean. But, even if you can’t buy groceries with $USD in Europe, having a safety net of cash is nice. Sometimes technology fails, you lose your ATM card (totally theoretical, definitely didn’t happen on the first stop of our trip around the world…), or have another issue arise. At that point, converting your American cash to native currency might end up being the best (only) option.
One tip for bringing $USD abroad: make sure all the bills are crisp and new. We have had old bills and bills with slight rips be rejected.
We estimate that by using all of the tips above, we save up to $500 per month, depending on how often we move through countries with different currencies. That adds up in a hurry!
Stay connected with our blog here, and we will post updates over time about how our budget is working in real life!
If you have questions or money tips for international travel, let us know! Happy Travels!