Get the Most (or Lose the Least) in Foreign Exchange

BY Ed Perkins TIMEMarch 8, 2022 PRINT

With COVID-19 restrictions falling, chances are that many of you are considering a trip to Europe or Asia this summer. That means paying in euros, francs, yen, or whatever when you’re at your destination. Unless you’re a currency speculator, you’ll almost always lose something in exchanging your dollars for whatever, but you can keep those losses to no more than around 1 percent.

The Right Plastic

Today, foreign exchange is all about which plastic to use and how to use it. A few European retail outlets have started requiring that all transactions be with plastic—no cash at all. And much of the world is ahead of the U.S. in widespread adoption of the latest technologies. Plastic isn’t only the best way to cope with foreign exchange; in many cases, it’s the only way.

To minimize losses, you need at least two different kinds of plastic.

1. A credit card without a foreign-transaction surcharge or fee. To keep losses to a minimum, the key rule is to put as many big-ticket bills on a credit card as possible: But you have to use the right card. A decade ago, most credit cards added a surcharge of 3 percent on all transactions completed outside the U.S.—even those conducted in U.S. dollars. And that’s a gratuitous “junk” fee: When a U.S. bank processes your transaction; the bill is already in dollars, so your bank adds nothing to the process. The very small actual cost of conversion is covered by the international network to which your bank belongs: Visa, Mastercard, or American Express.

More recently, a lot of credit cards—especially co-branded travel-related cards—have reversed their exchange practice: They no longer charge a fee at all or add just a trivial fee of 1 percent or less to cover the actual transaction cost.

If your current credit card carries no surcharge, you’re already OK. If it still adds that 3 percent, consider getting a new card with no foreign transaction fees.

2. A debit card with no ATM fees. The best way to get local currency outside the U.S. is to get it from a local bank’s ATM. But finding the right card can sometimes take some digging. Although a large foreign bank’s ATM generally uses the bank rate for conversion, when you use a debit card at a foreign bank’s ATM—and your bank likely considers all bank ATMs except its own as “foreign” ATMs—you face up to three possible fees:

–Your bank assesses a fee—typically around $3 or $4—for every ATM transaction at any “foreign” bank, regardless of the amount.

–Your bank may also add that nasty conversion fee.

– The operator of the foreign ATM may assess a withdrawal fee,

There’s a good chance that your bank’s debit card hits you with at least one of the three fees. To avoid them, consider opening a no-fee checking account with a bank that (1) charges no exchange fees on foreign withdrawals and (2) absorbs some or all foreign-bank fees as well. That’s what I do: I have a small no-fee checking account with a small local bank that I transfer money to before a trip but otherwise keep idle. Your best bets for such a “travel money” account are credit unions, former savings banks, and online banks.

Keep away from three major gouges:

1. Airport exchange offices almost always give very poor rates—you can lose up to 10 percent.

2. Many foreign airports have given local exchange agencies exclusive franchise to operate all ATMs at the airport. Those ATMs proclaim “no fees,” but they give the same lousy rates as the exchange office. Find a major bank’s ATM instead.

3. Some foreign merchants may offer to bill you in dollars rather than local currency. Even if your card adds no junk fees, however, the merchant will almost certainly give you a lousy exchange rate. Don’t fall for it.

Fortunately, these gouges are easy to avoid—or at least to minimize. And that means losing as little as possible in the exchange process.

Ed Perkins
Send e-mail to Ed Perkins at Also, check out Ed's new rail travel website at (C)2022 Ed Perkins. Distributed by Tribune Content Agency, LLC.
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