Money Matters when you travel

I’m currently in Basel, Switzerland.  In this short trip I have already faced a number of money issues that are important to navigate properly in order to create the most value from your trip.  The key issues I have faced throughout my travel experiences have been currency exchanges and both overt and covert fees that come with the decisions you make.  Here’s my approach to travel and money.

Carry some cash – at least in a durable currency such as USD.  These days I tend to carry a smaller amount in cash, such as a couple of hundred in big bills.  I have found that some places offer a better rate of exchange based upon the condition of your money, particularly in poorer countries in Africa and Asia. Crisp, new $100 bills are accepted warmly, older bills receive a lower rate, and sometimes if they are a bit weathered the bills won’t be accepted at all.  I like to carry $100-$200 in $100 and then another $100 in smaller ($20 down to $1 denominations). The purpose of carrying the cash is that USD is accepted in most places, as an airport currency (meaning vendors like Taxi drivers etc will accept USD even when local currency is something else).

Work out the real exchange rate first

Prior to departure get a grasp of the exchange rates using a site like xe.com which offers the interbank rates.  The rate that you will actually get for your exchange will be less than this (the spread being the profit the forex company nets from the transaction).  It is good to get both directions on the rates since some places offer pricing only in the inverse; for example when comparing USD and CHF it is good to know both how many USD 1 CHF will buy as well as how many CHF 1 USD will buy.

Avoid US transactions unless absolutely necessary.

I have found some terrible rates on offer in the US; I recall one visit to Japan where they were offering a rate 1 USD buying 72 JPY in Newark Airport; and in Tokyo they were offering 1 USD buying 82 JPY for cash, and interestingly 83 JPY for 1 USD of Travelers Check.  Be cautious of forex marketing from these money changing places that offer to buy back your money or offer no transaction fees – these still build in shockingly bad exchange rates and you will lose out.

Watch out for being caught Cashless at a bad time of day

One exception to the idea of not arriving with money would again be a place like Japan, which has a habit of shutting down ATMs outside of local business hours (I think that they misunderstood the purpose of an ATM…) so if you are arriving into a foreign country at an unusual hour, such as late at night or early morning you should probably check to see how the ATM system works in the airport you are flying to, and if in doubt bring a small amount of local currency with you.

Using International ATMs

I use International ATMs for my money needs, my bank Citibank offers me free International ATM transactions (they do make money on the rate but I have found the rate favorable) ironically, they don’t offer me free ATM use in the US.  In order to get this from Citi you need to hold the Citigold Account.  Other banks that offer premium level service do offer the same level of service here, but many of the big name banks in the US aren’t good options for ATM use in their standard accounts.

A couple of good options include Charles Schwab and CapitalOne 360 for International ATM fee waiving, and there is a nice article on this by the PointsGuy here : Avoiding ATM fees when Traveling.

The big catch you will face with both ATMs and Credit Cards is the option to select ‘Local Currency’ or USD.  ALWAYS SELECT LOCAL CURRENCY.  If you select USD the ATM makes the conversion for you and adds on a penalty (their profit) to the exchange rate which will really sting.  It’s natural to pick your own currency when asked if you want to charge in USD, but always reject this option and select the local currency!

Watch Out for your Co-Branded Hotel Credit Card

We have a habit of pulling out the co-branded card because either we are savvy enough to know that spending it on the hotel for any incidentals offers bonus points, or we just are naive and pull out a card that matches the hotel name when digging through our wallets.  However, many of the major hotel cards carry a prohibitive international transaction fee, that wipes out all value from your points.

The following cards are some good options for no foreign fee:

• Barclaycard Arrival World Mastercard (2x everywhere)
• Chase Sapphire Preferred (2x on Travel)
• Chase Hyatt
• Citi Hilton Reserve Visa
• Chase Fairmont Visa
• Chase Marriot Rewards Card

Some bad options, due to the fee:

• SPG Amex 2.7% Fee
• Hilton Honors Surpass Amex 2.7% Fee

For example on this trip we stayed at the Sheraton Zurich, which would encourage us to use the SPG Amex card as it earns 2 Starpoints per $1 spent, however the 2.7% fee strips away the value, and if we instead picked the Barclaycard Arrival we would earn 2 miles with no deductions for the fee.

Chip and Pin or Chip and Sign

Europe has adopted a smarter approach to credit card transactions in that rather than signing for a transaction they ask for a PIN number just like a Debit transaction in the US.  They tie in a security Chip to this to reduce fraud and confirm the transaction at Point of Sale.  US issuers are slowly adopting this system, with the first step being Chip and Sign.  These aren’t the same as Chip and Pin and will cause problems when trying to use an unmanned kiosk such as at a Train Station.

Certain cards, such as the Chase Hyatt, Chase British Airways or Citi Hilton Reserve cards (all without foreign transaction fees) come with the Chip as standard, and if you hold these cards I would certainly consider carrying them since you can use them for swipe transactions overseas (requiring a human most of the time).  I personally have used my Citi Debit Card for PIN transactions overseas, again check that you aren’t getting fees for the use of the card, though more often than not it is simply easier to go find a human to process the transaction as they accept swipe transactions more readily.

Bottom line; if you are planning to need to use a machine for some purpose, such as picking up train tickets to the main city you are probably going to fail with any US card, and also they don’t offer a lot of cash in change, so if you pull cash out of the ATM nearby make sure to pick a random amount like $240 so you for sure have a small bill or two that can be inserted into the machine.

Spend it up

It’s not a good idea to hold onto a currency, other than in small amounts, unless it is a Primary world currency (USD, Euro etc) due to currency fluctuations that will occur before your next visit to the country.  Of course, if you are a frequent traveler to a place keeping a balance in that currency is fine, but otherwise it isn’t a good idea.  Also, there are some Countries that have banned currency trading outside of that nation.  For example Tanzania will not allow currency trading outside of their borders, so if you bring the money home with you it will be a lovely souvenir and good for not much else!

Security and Safety

It’s a good idea to carry enough, but not too much money when traveling, since people can spot a tourist a mile away and you will be more of a target for crime.  I personally don’t use a money belt, but they are a good idea.  If you do, make sure you carry most of your valuables in that, and still have a wallet for decoy purposes, you should have some small amount of money and perhaps one credit card (easier to cancel just one) in it.  If you are mugged with no wallet present it will encourage a thief to look further for your money belt.

Lastly, be aware that most borders track the movement of around $10,000 USD (or local currency equivalent) it is not illegal to move through borders with such amounts in cash, or cash equivalents, but you should declare it.