Tips on exchanging currency

By David Selley
This item appears on page 14 of the February 2015 issue.

I find that even quite experienced North American travelers are often very uncomfortable with and ignorant about foreign exchange. Europeans, on the other hand, are usually much better informed because they travel internationally more.

I offer the following advice for travelers, based on my experiences over many years.

The first tip involves foreign exchange bureaus, by which I mean any of those currency-exchange windows you see in airports as well as storefront operations in the streets of European and other countries (and in major foreign tourist locales in the USA, such as New York).

NEVER CHANGE MONEY AT A FOREIGN EXCHANGE BUREAU — The only exception to this rule is if you have no choice; for instance, you don’t have a credit or debit card or the country you’re in does not accept them and local currency is required. (For example, while visiting The Gambia for a day in March 2011, I didn’t see any ATMs and nobody there accepted US dollars or euros.)

Foreign exchange bureaus, even in developed countries and especially in airports, always add commissions or have outrageously bad conversion rates or both. Hotels are often worse still. Look at the spread between buy and sell rates. It is often way over 10%!

USE ATMS for cash needs — Many people buy foreign currency before they leave home. You get a better rate, however (usually much better) by waiting until you arrive at your destination.

By all means, buy a small amount in advance to get you from the airport into town by taxi, but even that is not absolutely necessary in developed countries because there are ATMs in all airport arrival halls.

When using an ATM, make sure it’s a bank machine rather than a private operator, which usually charges a larger fee. Your bank at home may be able to tell you which bank ATMs in the country you’re visiting will be free of fees.

WHENEVER POSSIBLE, USE AN ATM AT A BANK, PREFERABLY A BANK THAT’S OPEN — If you’re unfortunate enough to have an ATM at a bank gobble up your card, you can go into the bank to retrieve it, although probably with a fair amount of hassle. But if it’s a remote ATM, it becomes far more difficult, or even impossible, to retrieve your card.

You can find ATM technology in almost every country. It’s widely available all over Europe, the Far East and South America and in quite a few countries in Africa. In European cities and towns, you’ll likely find even more ATMs than you’d find in their equivalents in North America. (I got cash out of an ATM machine in a small fishing village in Ecuador that was way off the tourist beat. The machine was in the middle of the area where the locals parked their mules!)

CARRY A CHIP-AND-PIN CREDIT CARD — Unfortunately, travelers from the US may be at a disadvantage on this one. Almost all developed countries except the US (and many less-developed ones) use chip-and-PIN technology in their credit cards. (If you’re from Canada, as I am, you would already have a chip-and-PIN card, which is not the same as a chip-and-signature card.) Some US financial institutions provide these cards,* however, so check around and get one, even if only for traveling. 

In stores and restaurants, you can still use the magnetic swipe-and-sign variety, although in out-of-the-way areas, younger sales clerks may never have seen one and may have trouble with it. 

Without a chip-and-PIN card, you may not be able to use automated facilities like those in parking lots and highway toll booths and the ticket machines for trains, buses, etc. Imagine parking your car in a multistory parking lot and, upon exiting, finding that you have to pay with a chip-and-PIN card. And the lot is completely unmanned. Trapped! Believe me, it has happened.

The only solution is to find a sympathetic local who will let you use their credit card to get you out if you reimburse them in cash (plus a little extra for the trouble, I’d suggest). And you’ll probably be trying to communicate with that person in a foreign language.

Also, make sure you have a 4-digit PIN; 5-digit PINs don’t work outside the US.

ALWAYS PAY CREDIT CARD CHARGES IN LOCAL CURRENCY — Nowadays, especially in the UK and the rest of Europe, you may be asked if you wish the credit card charge to be done in your home currency (e.g., US dollars). If you say ‘Yes,’ you get dinged with a hefty additional fee. In my experience, it’s about 3% of the transaction amount, and they don’t inform you about it. There is absolutely no benefit attached to this fee (Nov. ’14, pg. 15).

So if you’re in the UK and the clerk asks you if you would like to be charged in US dollars, say ‘No.’ 

Sometimes, if you do not have a chip-and-PIN card, the choice will be shown right on the slip you are presented to sign. Make sure you choose UK pounds or whatever the local currency is, not your home currency.

FORGET ABOUT TRAVELERS’ CHECKS — Because so few people use travelers’ checks now, fewer places take them. Also, although many banks will cash them, you’ll likely have to spend ages waiting in a line to do so. 

They offer NO advantages. If they’re stolen, you can get your money back, but if your credit card is stolen, you can get that replaced just as easily. Always carry only a minimum amount of cash so that if it’s stolen, it’s no big deal.

Travelers’ checks are expensive. If you buy them in a foreign currency (e.g., euros), you have to pay an exchange rate both when you buy them and when you cash in what you have left over.

NEVER ASSUME ESTABLISHMENTS WILL TAKE US DOLLARS — In some countries, especially in the Caribbean and Central and South America and in Vietnam, most businesses accept US dollars. But don’t expect to use US dollars everywhere in Europe because, often, people will not take them. (Ask yourself whether a shopkeeper in Des Moines, Iowa, would accept euros. See what I mean?)

And if you are not American but US dollars would be useful where you’re going, remember that you are paying two conversion fees: one from your own currency to US dollars and the other from US dollars to the local currency, not to mention changing leftover dollars back into your own currency when you get home.


Toronto, Ontario, CANADA

*In the US, chip-and-PIN cards are not yet widely available for consumers (March ’14, pgs. 40 & 65). Two credit unions offering them are Andrews Federal Credit Union (800/487-5500), for those who join the American Consumer Council (800/544-0414), and United Nations Federal Credit Union (800/466-6047), for members of the United Nations Association (202/887-9040). Former or active members of the US armed forces and their family members may qualify for a chip-and-PIN card from USAA (800/531-8722).