Hot Tips for Handling Foreign Currency

As I was traveling to the airport this morning, I was casually talking to my Uber driver about traveling. I mentioned that I had just returned from Mexico and he immediately started asking me questions about how to handle money in Mexico.

I started answering all his questions and realized I have been asked this question so many times that this is information that should be shared with all travelers.

Rule #1. Always Use Local Currency.

Always conduct money transactions in the local currency of the country you are in. In Mexico, use Pesos. In Iceland, use Krona. This is best for the vendor, as well as best for you. Some tourist spots will offer to let you pay in US dollars as a convenience to you, but that is aimed at tourists that aren’t savvy with foreign currency and very often can be a tourist trap. In this instance, the vendor is providing the exchange rate and is it most likely not favorable to you. Don’t fall for this. Always insist on paying in the local currency. Some places will have an exchange rate posted in a restaurant. I have never seen a posted exchange rate that was favorable to the consumer. So, follow Rule #1 and always pay in local currency.

If you are paying with a credit card, always tell the server that you want to pay in local currency. If you are American they will sometimes make the assumption that you want to pay in US Dollars. In this situation, request to pay in local currency and your credit card company will convert at the current competitive exchange rate. Although, you do need to be sure you are using a credit card that doesn’t incur foreign transaction fees, as that could be costly (2-4% per transaction).

I recommend either Chase or Amex as they have no foreign transaction fees:

• Chase Southwest cards: https://www.referyourchasecard.com/226f/00XWMZZ7KH

• Amex (all card types): http://refer.amex.us/LARACGOz0?XL=MNACP

Rule #2. Get the Best Exchange Rate

News flash. Currency Exchange places do not have the best exchange rates. These places are there to make money. They use a low exchange rate when selling and a high exchange rate when buying. So, don’t use them. On my first trip to Mexico, San Miguel de Allende, I mistakenly took large sums of US cash with me. I was a newbie and didn’t know better. While my experienced travel buddies popped into the nearest ATM upon arrival and withdrew pesos, I walked around aimlessly looking for a bank that would exchange and trying to find a decent exchange rate. I found neither. When I finally did use a currency exchange place, I had to fill out some paperwork and let them copy my passport which was way too intrusive. The easiest way by far is to leave your cash in the bank in the US, and use an ATM once you arrive. The exchange rate will be your bank’s current exchange rate and probably very competitive. I usually take out enough for the week so that I only pay one transaction fee (usually $3-4 dollar ATM fee).

I have recently found a new “no account fee” debit card called So-Fi that I have started using for international travel. It is a simple savings account with a debit card. I set up this card for the specific purpose of travel only. I use this to withdraw pesos at ATMs in Mexico. I only put money in the account when I’m traveling, and I never connect it to any other accounts or bills. So if it is compromised, there is very little at risk.

Bonus: So-Fi refunds all ATM fees so this is a win-win for me. I can go to the ATM as many times as I want without worrying about fees. I only transfer my travel funds (about $500 per trip) to the So-Fi account before my trip so I never have to worry about it being compromised.

They have a bonus ($75) for signing up thru a referral and making 2 direct deposits.
Use my link to sign up and you get a $75 bonus. I only recommend products I use and love. And now, I am worry-free when traveling. http://bit.ly/SoFiLara

Be sure to use an ATM that dispenses in local currency. In Mexico, the ATMs are clearly marked at the top Pesos vs. Dollars.

Rule #3. Learn How to Calculate the Exchange

Before you travel to a foreign land, know the local currency. Look it up on online so you are familiar with it and research with your bank/credit card what the current exchange rate is. You will want to have a good idea of the exchange or at least a working knowledge before you buy anything so you can determine if you are getting a good deal for the price. For example, in Mexico right now, the exchange rate is 19.5 to 1, for a rough calculation, I take the amount in pesos and drop a zero off the end and divide in half. 400 pesos is about $20 dollars. This way I can calculate the rough price in my mind before talking to the vendor. If the exchange rate is more complicated, there is no shame in using the calculator on your phone.

Rule #4. Bring Back Foreign Currency with you.

Many people ask “what do I do if I have foreign currency left over when I am about to return?” I say keep it. Especially if you plan on returning to this country. When I get home, I put the remaining foreign currency in a ziplock bag and put it in the safe. When I am ready to return to that country, I am excited to know that I will be returning with local currency in my pocket.

And what if you have a really large chunk of foreign currency that you do not want to leave sitting in the safe. Well, I have been known to buy last minute souvenirs in the airport gift shops with remaining currency, just before I leave, but my preference is to bring it home instead as airport gift shops usually overcharge.

Final Tip: Call the bank and credit card company before you leave the US.

One final tip, before going on vacation, call your bank and your credit card company and let them know the dates that you will be in a foreign country, and let them know that you will be using your ATM card and credit card. Otherwise, they may see this foreign activity as suspicious and put a hold on your cards and block your withdrawals. You don’t want to be stuck in a foreign country with no cash or credit.

Happy Travels. Here’s to a most prosperous journey!