How to Exchange Foreign Currency & Avoid High Fees

If you’re traveling to another country, you’ll likely need to purchase in the local currency. After all, foreign restaurants, stores, and tour guides likely don’t want your U.S. dollars. They want money they can use and spend in their home country.

When you look online to find the latest exchange rates for a country, you’ll typically find the wholesale exchange rate, which is the rate banks and other large financial institutions typically get. You probably won’t be able to get as good a rate when turning your dollars into foreign currency, but it’s a good guideline to aim for.

Here’s an example to help you better understand how foreign currency exchanges work. Let’s say you have $100 and want to change them into Mexican pesos. Let’s assume the exchange rate is 20 MXN per one USD. If you multiply $100 x 20, you get 2,000 pesos for your $100, assuming you get the current market exchange rate.

In reality, however, banks and currency exchanges usually offer a slightly less favorable rate, which is how they make money. If they gave you a rate of 17.7 pesos per dollar, they would make 10% of the exchange. The more pesos you can get per dollar, the better.

You can exchange your currency in a few different ways. Generally, you’ll get the best rate from major banks and the worst rates at currency exchange stores, sometimes called camobios, in airports or near tourist traps.

ATMs

Many people find it best to exchange currency at an ATM when they arrive at their destination. ATMs owned by top international or nationwide banks tend to give you rates as close to the wholesale rate as you’ll find.

If you have a debit card that doesn’t charge fees for using out-of-network and foreign ATMs, that’s even better! If you use the Chime card at an ATM outside the United States, Chime will charge no more than $2.50 per transaction.

Local bank branches at home

If you use a traditional brick-and-mortar bank, they may offer foreign currency withdrawals. Depending on which bank, fees may apply, and you may need to give sufficient notice to your branch to get the currency you want.

Some banks and credit unions don’t offer this service, but it may be worth checking if you’re concerned that the other options above won’t work. Before using this method, ask the bank about fees and how they set exchange rates to ensure you get a good deal.

Foreign bank branches

When you land in another country, you can visit a local bank to see if they will change your dollars into local currency. It’s also good to know that you might be able to use traveler’s checks at foreign banks to get currency. Reputable banks often offer competitive rates, but the process is inconvenient. Do you really want to spend time going to a bank on vacation?

Finding a bank to visit can be tricky, depending on where you’re going and staying. Plus, you may need money when you leave the airport if you’re taking public transit or a taxi.

You can exchange your dollars in other locations, but some are notorious for offering unfavorable exchange rates. Here are a few places you should generally avoid exchanging your money.

Hotels

Hotels often allow you to convert dollars into local currency, but exchange rates tend to be worse than you’d get from a financial institution. But if you’re in a jam and need local cash for your dollars, your hotel’s reception desk may be a quick and helpful option.

If you decide to go this route, ask about the rate they offer and compare it to the market rate (you can easily find it on Google) to ensure it’s not a total rip-off. If you want the best rates, you might do better visiting an ATM in the hotel or nearby.

Currency exchange shops

You can also find dedicated foreign money exchange shops in airports and busy tourist areas. But the rates are often among the worst around. They make all of their money from people who don’t know (or care) that they can get a much better rate from the ATM around the corner.

Stores where you can buy foreign currency are a last resort. If you’re in a jam and need cash quickly, you may want to use one as a backup plan. But if you can go to an ATM or use a credit card, you’re better off in most situations.

If you’re going to exchange currency, you should follow these general steps:

1. Find a currency exchange option

Start by hunting for your desired currency exchange location from the list above. If your phone works abroad, you can quickly find ATMs and other trusted options with your favorite maps app.

2. Check and compare rates and fees

Next, compare the rate you’ll get per dollar to the current market rate. If it’s too low, you may want to skip it and get your currency elsewhere.

3. Complete your transaction

If you’re okay with the rates and fees, follow the prompts on the ATM or hand over your dollars for the foreign money. Count it, maybe twice, to ensure you’re not getting scammed.

You may not need to get foreign cash at all. For example, in many countries, Visa and Mastercard are accepted nearly everywhere, even by independent vendors for small purchases. If you’re in a modern city, you’ll likely find you can get by with a card exclusively.

If you use a major credit card at checkout, you’ll usually get a top exchange rate and an excellent deal, assuming your card doesn’t add fees for foreign transactions.

Chime doesn’t charge foreign transaction fees when using your card outside the United States. Check your credit or debit card agreement before leaving for fees to know if your card is a good choice abroad.

Many countries accept Visa and Mastercard almost everywhere you go. American Express is also accepted at many locations outside the U.S. but less widely than Visa and Mastercard. As another benefit, you’ll only convert the money you need when using your card and have less risk of getting stuck with foreign cash on the way home.

In some foreign countries, people may prefer that you send money with an app like PayPal or Wise. If you’re sending money to another country from the U.S., look for low-cost and trustworthy remittance options.

Now you know how to exchange foreign currency while traveling to another country. Savvy spenders use their credit cards for foreign purchases or use currency from an ATM when they can’t. As you do at home, stick to your planned budget to ensure the best travel experience without breaking the bank.