Money Strategies for Modern Travelers
What’s the best way to get cash and pay for things while you’re traveling? How can you extend the value of your money and lose the least in transaction and exchange fees? Making a travel budget is only one step in the process of being a successful and frugal traveler. Avoiding common pitfalls and currency gouging will be essential to keeping you on target. Here we share a few tips we have discovered from our years of travel.
Always Use Cash
Using cash is the cardinal rule of frugal travel. Many places charge you for credit card transactions (in addition to whatever charges your credit card will slap on) and in most places in the world, cash is the only means of payment accepted.
In today’s world of global business you would be hard pressed to find any place without a cash machine (ATM/bancomat/etc.) Nearly everywhere from Alicante to Angkor Wat has a cash machine these days, all equipped with familiar visa and mastercard logos, just waiting for your withdrawal.
When I fly into a new country I don’t even worry about having local currency before I touch down. Every airport that accepts international flights will have an ATM. Sometimes (like in Denpasar, Bali) they will be a bit hidden past the endless counters of commission-hungry currency exchangers—avoid these guys like the plague—but they will be there. Save your money and seek out your friendly ATM.
One of the biggest mistakes we see a lot of novice travelers make is to purchase foreign currency from their local bank before departing on their trip. Where do you think it is cheaper to get Indian Rupees, Baltimore or Bangalore? Why pay hefty bank fees and foreign transaction fees to get foreign notes when you can simply head to the ATM before you hire your taxi from the airport?
Avoiding Bank Fees
This strategy can require a bit of lead time. You need to know the exact conditions of every debit card and credit card policy before you leave on your trip. Believe me, these charges can vary wildly.
Set aside a few hours and call every bank you do business with. Ask them about their foreign transaction fees. For ATM withdrawals these are usually fixed fees (i.e. $3-5 per transaction) and sometimes additional currency exchange charges.
Be very careful with this and make sure you find the account terms in writing. We had a bit of a dispute with our bank resulting from misinformation. What was originally described as a $3 flat fee per transaction showed up on our statement as $3 and 3%. The bankers neglected to tell us this and that mistake cost us several hundred dollars in fees before we noticed. Ouch! A few hundred dollars is enough for a month’s rent on your bungalow in Thailand!
A lot of vacationers choose to ignore these fees because they are only on holiday for a short time, but for the long-term traveler on a budget these fees can make a big difference.
Unless you already have one, you may want to set up a checking account with a bank that doesn’t have any foreign transaction fees. The only banks that I know of that offer this are Capital One and Charles Schwab. That’s right, no transaction fees or foreign exchange fees! Free access to your money wherever you are!
Unless you have one of these fee-free accounts you will want to know your terms and use the ATM accordingly. If you have a $5 flat fee and you withdrawal only $100 that’s a 5% charge. If you instead withdrawal $500 at a time that fee is only 1%. In some cases it will make sense to get your maximum withdrawal to take advantage of the flat fees and keep expenses down.
Planning for Worst Case Scenarios
Wait, did she just recommend that I leave home penniless and carry hundreds of dollars on me at a time? That doesn’t sound safe! Travelers should always be concerned with security. Stay tuned next week when I’ll talk about keeping yourself safe and well setup if anything gets stolen or lost.