For many, traveling abroad is a life long dream. A chance to see amazing sites that they have only seen in movies or have read about in a book. An opportunity to try new foods and experience a whole new culture, but how do you pay for that pizza in Rome or take that ferry ride in Sydney? Some people pullout their debit or credit card and end up regretting it later. While others use foreign currency that they got from the airport or a traveler's check that they got from home before they left for this dream destination. There are many advantages and financial pitfalls to each of these strategies. So how do you decide what is the right way to pay for things without "being taken yo the cleaners?"
First of all, credit and debit cards are the easiest way to pay for larger purchases like hotel rooms and meals in extremely touristy restaurants. For most places you will not have much trouble using Visa or Master Card. They are universally excepted in most countries, where as American Express is much harder to use, especially in non-westernized and Discover Card is virtually useless outside the United States and Canada. In spite of the fact that using cards are exceptionally easy, there are some major drawbacks to purchasing with plastic. They regretfully come with a very hefty international transaction fee. This can be as high as 10% per transaction, depending on the bank your card is associated with. This can add up to significant amount in a hurry. Also, many smaller businesses, do not typically take credit cards. They prefer cash, because they can avoid reporting these transactions to their local governments as earned income. Besides keeping the sales off the books, small businesses owners try to avoid paying these credit card companies for the right to accept their services. Every time they swipe a card in a reader, they pay the card companies a fee. Thus, they choose not to take credit cards. If you decide to use credit cards and debit cards while you are abroad, do not forget to call your banks and let them know that you will be gone. Nothing ruins a vacation like having your bank deny your transaction and having to spend hours on a phone convincing the bank that you are really in Paris and not still in your slippers at home.
Travelers checks have very little upside when traveling abroad. If your wallet or purse is stolen while abroad, than you can cancel the checks at anytime and you can get your money back when you get back state side. Also, carrying travelers checks will give you a false sense of security by not having a large amount of cash on hand. With that said, travelers checks are by far the most difficult way to pay for things when traveling. Most places will not take them as payment, especially if they are in large denominations. Thus, you have to track down a bank that will cash them for you. Some hotels will as well, but not many. No matter who does cashes them for you, it will be at an unfavorable rate.
Now cash is the best way to make purchases abroad. Everybody takes cash. So it is definitely the way go, if you can. You can obtain better bargains when shopping with cash and many hotels will give you a reduced rate with it. So how do you get it cash when abroad? The best way is by using your debit card at a cash machine or an ATM. By using your debit card, you can obtain large sums of foreign currency for a small fee. That's why I usually withdraw larger sums of money when using these machines. It will reduce the amount of ATM fees that you will incur throughout your trip. Most ATM's will charge you on average $2 for each transaction and a 4% foreign exchange rate. So for a withdrawal of $200 you will only pay $206 for the transaction. This is so much cheaper than the airport exchange offices, because they will charge you a fee of around $8 plus an unfavorable exchange rate for your currency. Thus, you may have to pay around $20 per $100 exchanged.
With so many options available, how do you decide which option is best for you? I would mix and match the types of money you take on your trip to insure that you have no problems while abroad and give you the most flexibility possible. Personally, I take one credit card in case of emergencies, one debit card for ATM with drawls and some cash in U.S. dollars, around $200 to $300 in case there is a problem with your cards. I find that this strategy covers any unforeseen problems and greatly reduces the fee's that banks will charge. I hope this helps you save money on that dream trip abroad. Bon Voyage!
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