Taking money abroad

This page is about what you need to do at home before taking money abroad on your trip (in the form of banknotes and cards). To learn how to budget your trip, read What will it cost?

• Go with debit cards, credit cards and hard currency banknotes — Each of the “holy trinity” of debit cards, credit cards and hard currency banknotes has unique advantages on access, security and exchange rate.
• Debit cards — Debit cards (ATM cards, bank cards, cashpoint cards) are your primary means to get local currency, so they must be part of the most widespread networks and be a type to minimize costs.
• Credit cards — Select credit cards that don’t come with a foreign currency transaction fee. Earning points or cash back payments is secondary. 
• Hard currency banknotes — US dollars and Euros are the most accepted banknotes.
• Other types of money not recommended — Pre-paid cards, traveler’s checks (cheques) and wire transfers are not recommended because they are too costly, not useful anymore or both.

It used to be that the best way to take money abroad was a modest stack of hard currency banknotes and a wallet of traveler’s checks (traveller’s cheques). While traveler’s checks have almost vanished, you still need a modest supply of hard currency to use in situations where other types of payment are either not possible or too expensive.

In rich countries and increasingly in middle countries, you can use a credit card for many purchases, including transportation, accommodation and food. But in poor countries, credit cards are accepted only at large businesses, such as international hotel chains and posh shops in tourist traps. Small vendors in poor and middle countries usually won’t accept credit card payment. Except when traveling in rich countries, you will use local cash for most of your transactions.

Where credit cards are not accepted, your debit card will be your principal financial tool. However, it’s a bad idea to use your debit card for purchases of goods and services, since it’s more expensive than a credit card and offers no recourse in the event of a disputed charge.

The real use of debit cards is to get local cash. They’re convenient, safe and (if you choose the right card) cost effective. Even in poor countries, ATMs are getting common in cities and towns. But check: a few countries have very few ATMs or ATMs from just one global network. Strangely, most banks in Japan are not connected with international networks, so you will have to seek out international bank or non-bank ATMs. 

Debit (ATM) cards

Use of debit cards

You definitely need one — in fact, you want two, in case one of themgets damaged, lost, stolen or eaten by an ATM.

• Obtain local cash — The only use for your international debit card is to get local currency from ATMs. Do not use it for purchasing goods & services. 

Pros

• Best exchange rate — You get the best retail exchange rate from them, typically the interbank rate plus 2%. This is much better than the over-the-counter rate you will get for cash or traveler’s checks (cheques) at a bank or moneychanger.
• Quick & convenient — Using your debit card at an ATM is quick, convenient and safe. There are millions of ATMs (ABMs, cashpoints) all over the world, even in smaller towns in poor countries. Note that even the biggest international networks are sparse or not even present in some countries.
• Less cash risk — Debit cards have largely replaced traveler’s checks (cheques) as a substitute for carrying large amounts of hard currency. You can limit the amount of cash to your immediate local expense needs and a small secure stash of hard currency banknotes.

Cons

• Costly for purchasing goods & services — Using your debit card for purchases of goods & services abroad usually comes with high fees and charges. Do not use your debit card for anything except ATM cash withdrawals. Use a credit card or cash instead.
• No dispute resolution — Debit cards do not have the same consumer protections that credit cards do: if you want to dispute a charge, your debit card issuer will not intervene on your behalf.
• Higher loss liability — If your card is lost or stolen and not reported promptly, you may be liable for all the losses. If your card is a multi-function “bank card” and a thief has your PIN, any bank accounts linked to the card could be drained.

Get the right debit card for travel

Plus (VISA) or Cirrus/Maestro (Mastercard) networks / Low or no cost to use

how to choose

Credit cards

You definitely need one. In fact, as with debit cards, you need two, in case one of them gets damaged, lost, stolen or frozen by your bank. It can also happen that a vendor accepts either VISA or Mastercard, but not the other.

Uses of credit cards

• Purchases of goods & services — Credit cards are best used for large purchases, such as flights and accommodation, although, in rich countries, they can be used for almost any retail purchase. In middle and poor countries, credit cards come second to cash for retail purchases.
• Online purchases & reservations — You will need a credit card account (if not the physical card) to make online purchases and to reserve accommodations and some experiences.
• Emergencies — If you find yourself in an emergency situation, such as the need to make a sizable medical payment, a credit card with a generous limit could save the day.
• Do not use for ATM withdrawals — Many ATMs will accept your credit card for a cash advance, but the credit card company will start charging you their high interest rate from Day One, even if you have a positive balance.

Pros

• Best exchange rate — Credit card exchange rates are also among the best you can get while traveling, usually the interbank rate plus 2%. 
• Dispute resolution — If you dispute a charge against your credit card, the issuer will usually trace it back and make the inquiry with the vendor on your behalf. 
• Limited liability — If your credit card is lost or stolen and you report it promptly, the amount you will be liable for is small. 
• Emergency cash — You can use a credit card to get cash at most banks. It’s bureaucratic, the rate is bad and interest starts accruing immediately. But if you’re desperate for cash, it can be worth it.
• Card replacement — Provided you meet certain conditions, a credit card issuer with an affiliated bank in your destination country will replace your lost, stolen or compromised card.

Cons

• Limited use in some countries — In middle and poor countries, many restaurants, retailers and small lodge owners do not accept credit cards. Sometimes, those that do charge up to 6% extra over their cash price.
• Huge foreign currency transaction fee — Most credit cards will add 2.5 – 3% to any transaction made in a currency other than the home currency. Be sure to get at least one credit card that does not charge this fee. 
• Instant interest charges on ATM withdrawals — As noted above, credit cards are inferior to debit cards for use in ATMs.
• Account maintenance — You have to be diligent about paying down your balance to avoid interest payments. Too many travelers fail to pay attention on a regular basis. Set up a standing order to pay down your balance every month or manage it as you go. To do banking on the road, you must have your own digital device, since using public computers for banking is too risky.

Get the right credit card for travel

VISA or Mastercard / No foreign currency transaction fee / More…

how to choose

Cash

This section concerns the hard currency you need to take with you, not the local cash (like those bricks of Somali banknotes in teh photo) you acquire at your destination.

Yes, you need cash, too, but not too much unless your destinations are unusual. You should carry a thin stack of hard currency banknotes, usually US dollars (USD) or Euros (EUR), that you keep in your travel wallet or secure stash.

Uses of cash

There are lots of potential uses of hard currency banknotes, but almost all of them are contingent in nature — you might not encounter any of these situations at all. Cash is back-up when your debit cards or credit cards cannot be used.

• Empty or offline ATMs — When you can’t find an ATM with any cash left or there’s a technical problem and the ATM is down, you have cash as a backstop.
• When an ATM eats your debit card — You probably still need local currency for immediate use.
• Where there are no ATMs — There are still many places that lack ATMs, so you have to plan to have enough local cash before you go there. But, if you’re just entering the country, especially at a less-used land border, you may have to change a bit if hard currency to get you to your destination and an ATM. 
• Expensive ATMs — Where the ATM operator’s local service fee divided by the maximum withdrawal amount is more than 2%, you might  better off changing cash. 
• When you run out of local currency on the eave of departure — If you’re about to leave and have insufficient local currency for those final payments (last night’s lodging, bus to the border, taxi to the airport, airport tax…) you can change a small banknote or even make small payments with hard currency. USD are best for this casual use.
• Your debit card is compromised or lost — If you damage or lose your debit card or if your bank freezes it because of suspicion of fraud, you still have cash to keep going until the problem is resolved. (You won’t have this problem if you possess a backup debit card or credit card.)
• Where USD or EUR are used as local currency — When an entire country operates on USD or EUR, or the hard currency is readily used alongside the local currency, hard currency banknotes can be used with no foreign exchange loss. In these countries, at least some ATMs dispense USD or EUR.
• Big spread between official and unofficial exchange rates — Some badly managed countries try to fix the value of local currency artificially high. ATMs and banks have to comply. Invariably, hard currency banknotes can be exchanged on the black market for a much better rate. Sometimes the black market is openly accepted, even at moneychangers or local businesses. And sometimes it’s highly illegal, making it subject to scams and arrests. Depending on the exchange rate spread, consider financing your entire stay with your hard currency travel cash.
• Worst case scenario — Suppose you’re mugged while traveling with your gear. The mugger takes your luggage, your wallet, even your hidden travel wallet. All you have left is your ultra-secret stash of banknotes.

Pros

• Universal acceptance — US dollar and Euro banknotes (recent and in good condition) are accepted everywhere.
• Portability — Large denomination banknotes can be very compact for hiding in your travel wallet and/or secure stash.

Cons

• High risk — If your banknotes are lost or stolen, you have no way to recover the money.
• Poor exchange rate — Changing cash will always draw a worse rate than you’ll get at an ATM, sometimes much worse. Local storefront moneychangers are often good, followed by banks. In some countries, a government bank or post office offers the best rate. Lodges and other businesses always offer a bad rate. Airport exchange windows are worst of all, with net cost often approaching 15%.  
• Hassle to change — It’s hard enough to determine where to get a good rate, but then you have to go to the bank or other office and spend time dealing with bureaucratic processes. The last (but necessary) hassle is standing at the counter, counting every banknote.

Acquire the cash you need

What currency? / What denominations? / How much? / More…

about cash

Other ways of taking money abroad

There are other options available for taking money abroad, although none are recommended.

Pre-paid cards

You can buy a card with a pre-paid balance (amount selected by you), issued by a major credit card brand (Mastercard or VISA), but sold by financial institutions. American Express also sells them, but American Express is not accepted by many ATMs and retail merchants. For purposes of topping up the balance, it’s best to get a card from where you bank.

You can then use your pre-paid card as you would your debit card, wherever the credit card brand logo is displayed. You can also get a card with multiple currencies loaded on, although only a dozen or so major currencies are available.

The pre-paid cards are marketed as having three advantages over your debit card, but all of these “advantages” are negligible or false:

• Lower risk — Since the pre-paid card is not linked to your home bank account, as your debit card is, the risk of loss is supposed to be less. Vendors of pre-paid cards usually cover the balance if you report your lost card promptly. And they will issue you with a new card. However, you can also cancel your debit card when you lose it (although your bank may be reluctant to send you a new one at a foreign address). You should limit the balance in the account linked to your debit card, topping it up online from a non-linked account from time to time. If you do that, then the pre-paid card offers no significant protection benefit.
• Locked-in exchange rate — When you buy or recharge a pre-paid card, the exchange rate is set on the date of purchase. Suppose you’re an American going to Europe. You could buy Euros on the card before leaving home. But exchange rates go up and down. If the dollar goes up after you bought your Euros, then having all those Euros in advance is a net loss of dollar purchasing power. If the dollar goes down, then the opposite is true and you’ve gained. The only advantage from buying those Euros in advance is knowing how many dollars your Euro purchases will be. That may add a small bit of precision to your budgeting.
• Spending discipline — If you have a pre-paid card that you can’t top up online, then that’s all you have to spend. Really? Do you want to run out of money while partying in Buenos Aires? All competent independent travelers have a credit card at least and may also have reserve funds accessible from home. Sure, discipline your spending, but not with a pre-paid card.

But these cards are worse than useless — they’re expensive, compared to your debit card. All of them have at least one and often two of the following charges:

• Card fee — It’s bad marketing to whack the customer with an up-front fee for signing up, but some cards do.
• Annual or monthly fee — Some premium cards, that don’t charge other fees, charge an annual or monthly fee.
• Transaction fee — Many cards charge between 1.5% and 3% on every purchase.
• ATM fees — Many cards charge a small fee every time you do an ATM transaction. That is in addition to the fee that the local ATM operator charges.
• Multi-currency fees — If you make a transaction in any currency other than the one on your card, you will be charged a foreign transaction fee. These can be quite high: at time of writing, Travelex was charging 5.75%. Suppose you’re buying something for €200, but the Euro balance on your card is  €150. The card will then draw on another currency, say USD for the rest and charge the foreign exchange fee on it.

Can it get still worse? Yes. If you complete your trip with a balance on the card, there’s no way to redeem that balance on most cards. “Save it for your next trip!” the card vendors cheerfully say. The trouble is that, if your next trip is more than a certain period (typically 12 months) then they start to charge an “inactivity” fee every month from your balance. 

Bottom line: pre-paid cards do not offer substantial benefits over your debit card and cost too much.

Money transfers 

You can get money sent via Western Union, Moneygram or other services, but why bother? It’s stupidly expensive. If you need money from home, just have it deposited in your home bank account and draw upon it at ATMs.

There’s always an exception. Suppose you don’t have a working debit or credit card due to loss or theft and cannot get replacements sent to where you are.  A money transfer might be the only way to get money in a hurry.

If you end up needing emergency cash, there seems to be a Western Union or Moneygram outlet in every small town. They exist to suck money from residents who go abroad to work and send money back home to their relatives. They can suck money from you, too, to help you solve your cash flow problem.

Traveler’s checks (traveller’s cheques)

“TCs” are a staple from the old days that died with disco. Yet, they’re still available and may be worth taking as a substitute for a large wad of cash. If, for example, you’re going where banks or moneychangers exist but ATMs connected to the major networks are unreliable or rare, then TCs can give you more peace-of-mind than financing that part of your trip entirely with a worrying stack of hard currency banknotes. 

You might have difficulty finding someone to cash your checks. Merchants and even banks are now reluctant to accept TCs and many will refuse to take them. That leaves you with a limited number of banks, moneychangers and major hotels. Even when you find someone to take your TCs, you will have to deal with old-fashioned paperwork and get a worse exchange rate than for cash. 

So, you need a really good reason to opt for TCs. But if you do:

• Acquiring TCs — Depending on your service package, your bank or credit union may issue them to you free of charge. Normally there’s a fee attached.
• Global brands — Stick with American Express, VISA or Mastercard branded TCs. Banks and moneychangers are more familiar with them.
• Currency — Just as with cash, USD and EUR are best.
• Denominations — Think of TCs the same way you think of cash. Have a few big ones if you know that you’ll have to fund some time in the country and smaller denominations for those times when you’re just entering or leaving.
• Security — Keep a list of check serial numbers separate from the checks and cross them off as you spend them. This is vital, since, if you need to make a claim for replacement of lost checks, but don’t know which checks you’ve used, the issuer may keep you waiting for replacements until they can determine what checks have been used. Keep the contact information for the TC company handy in case you have to make a claim.

Personal checks (cheques)

You’re joking, right? Nobody will accept a personal check.