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If you’re someone that loves to travel, you can appreciate that traveling costs add up. That said, it is possible to travel on a budget and have a great time. To help you save money while traveling, you need to ensure you’re avoiding bank fees that can tack hundreds of dollars onto your vacation costs.
How to Avoid Banking Fees While Traveling
If you do your research ahead of time, you can save a ton of money by not paying hefty credit card transaction fees and ATM fees. Below, we cover how U.S. citizens can:
- Avoid paying bank fees
- Eliminate foreign transaction fees
- Get the best exchange rate possible
Avoid Paying ATM Bank Fees
When you withdraw funds from an international ATM, you’ll get hit with three different fees:
- The ATM’s fee of around $3 to $5 USD per transaction
- Your bank’s out-of-network ATM fee of around $2.50 to $5.00 USD per transaction
- The international conversion fee of around 1% to 3% of the transaction
Let’s say you end up withdrawing two times per week, and we’re conservative on the fees, with your total fees being around $8 per transaction. That comes out to $16 per week, $64 per month, and $768 per year. With that amount of money, you can spend a few extra days, or even several, on your vacation if you don’t incur those fees.
To avoid paying ATM fees, your first step is to open an account with a bank that offers a no-fee account. Charles Schwab, if you’re a U.S. resident, charges no fees. It also reimburses all of your ATM fees each month. To qualify, you’ll need to open a high-yield checking account that has no monthly service fee or minimum deposit requirement.
Capital One 360 checking account also doesn’t have any out-of-network or foreign transaction fees, and other banks, like Chase, reimburse ATM fees and waive foreign exchange fees if you have a premium bank account with them. You can do your research to identify other banks that might offer similar setups if you plan to travel.
Next, you want to withdraw funds from an ATM that is within your bank’s international network. There are several banks that are part of the Global ATM Alliance. These banks allow free ATM withdrawals when you use banks within their network. Some banks that participate in the alliance include:
- Bank of America – United States
- Barclays – England, Gibraltar, Portugal, Spain, Wales, certain African countries
- BNP Paribas – France, Guadeloupe, Guyane, Italy, Luxembourg, Martinique, Morocco, New Caledonia, Poland, Reunion, Turkey, Ukraine
- Banca Nazionale del Lavoro – Italy
- Deutsche Bank – Czech Republic, Germany, Italy, Poland, Portugal, Spain
- Scotiabank – Canada, Caribbean, Chile, Mexico, Peru
- Westpac – Australia, Cook Islands, Fiji, New Zealand, Papua New Guinea, Samoa, Solomon Islands, Tonga, Vanuatu
Eliminate Foreign Transaction Charges
If you are using a credit card, you want to use one that has no foreign transaction fees. Most credit cards charge a fee of 3% for each overseas purchase, including those at restaurants, stores, and any other vendor you might purchase from. If you use your credit card frequently, the fees will add up quickly.
Many credit card issuers are waiving the transaction fee. Some cards that offer no overseas transaction fees include:
- American Express Gold Card
- Bank of America Travel Rewards
- Barclays
- Bilt World Elite Mastercard
- Capital One Venture X
- Chase Sapphire Preferred
- Citi Premier
- Discover it Cash Back
Get the Best Exchange and Currency Rate Possible
Here are some pointers to help you minimize fees and avoid losing money due to currency exchange rates.
Use a Credit Card First
Credit cards provide you with the best exchange rate that is closest to the official interbank currency rate. Use credit cards before using an ATM or cash when possible.
Use an ATM Second
After credit cards, ATMs offer the best exchange rates. Use ATMs before exchanging cash when possible. Exchanging cash will cost you the most.
Pro Tip: Avoid using ATMs in locations that will charge a high convenience fee, like those in hotels, convenience stores, and casinos. It’s best to find a major bank and use their ATM.
Get Your Currency at Your Destination
Typically, you’ll get a better exchange rate if you exchange your local currency for the foreign currency at your destination. Therefore, unless you know you’ll need cash immediately upon arrival, wait to exchange currency until you reach your destination.
Avoid Foreign Currency Cards
Foreign currency cards pre-load money for you at a set exchange rate. The rate is far worse than what you could get elsewhere, and the cards also come with a lot of additional fees.
Choose the Local Currency
If you use your credit card abroad and are given the choice to be charged in your home (USD) or the local currency, go with the local currency. Your bank will give you a better rate than what the vendor is offering.
Avoid Exchanging Money at Airports
The exchange rates at airports are typically the worst you can get due to how far down on the food chain these vendors fall. Wait until you get out of the airport to exchange your currency if you can.
You want all the money you saved for your vacation to be spent on the vacation without racking up avoidable bank fees. With a little effort and some research, you’ll be able to choose the right banking account and credit card options to avoid costly transaction fees. The tips above will also help you avoid paying more than you need to when exchanging currency. Happy travels!
Sources for credit cards
ATM Fee Resource