Friday, March 9, 2012

What’s the Best Way to Get Cash Internationally?

If you travel internationally, there are a few things you should know in order not to get fleeced by money exchangers or banks – or ATM machines.

Anyone can use a moneychanger – and I do not recommend them. They will make money from you two ways – by offering a bad exchange rate, and by charging a commission.

Beware anytime you try to change cash for foreign currency. For instance, I was just in Indonesia, and one US dollar equals roughly 10,000 rupiah. I had gotten money at an ATM machine in Jakarta when I first arrived (see below), and had then spent two weeks at a diving resort, where I did not have to use cash. When I traveled out, I was giving tips to porters, and the porters were more than unusually happy when I gave them their tip. I finally realized that I had been giving the porters Rp 100,000 notes instead of Rp 10,000 notes – US $40 to $50 instead of what I thought was $4 to $5. I had many connections that day, so I ended up spending a lot of money on tips by mistake! Oh well, I made some porters VERY happy and hopefully struck a blow against the stereotype that Chinese guys are cheap!

I opened an account at First Republic Bank, which has branches all over California and in select cities around the US. They state this on their website: First Republic Bank will refund ATM access fees from other banks, worldwide!

I therefore carry an ATM debit card from First Republic Bank wherever I travel, and I use it as soon as I reach another country, to get $60 to $100 in cash for meals, taxis, and other items that require cash. Their promise has held up pretty well; using this ATM card will give you a good exchange rate (the banking world’s going rate for that day and time) with no glaring ATM fees. I did find that on one transaction in Australia where I was able to compare this card with another ATM debit card – that I paid 2% or so more than the other ATM debit card. More on this below.

For all other transactions that allow me to use a credit card, I use a credit card. I NEVER use a debit card to make a purchase (even in the US), only for the ATM, because credit cards give me protection.

Most credit cards, however, will charge you u to a 3% foreign transaction fee. They’ll charge you for that dinner you just paid for at the normal exchange rate, and they will then tack on the additional 3%. I avoid this by using credit cards that do not charge foreign transaction fees. All credit cards offered by Capital One, as far as I know, do not charge transaction or currency exchange fees. Here’s a quote from a financial magazine: “Discover and Capital One are the only cards that don’t charge a dime in currency-exchange fees; Capital One doesn’t even pass on the 1 percent fee charged by Visa and MasterCard.”

Here’s advice from Undercurrent, a newsletter for traveling divers ( American Express doesn’t charge a foreign-transaction fee but it does carry a 2 percent currency-conversion fee. Besides Citibank, those that charge 3 percent include Bank of America, Chase and Wells Fargo. Don’t think you can get away from fees by using your debit card - - fees of 2 to 3 percent are the norm.

Now, if you absolutely have to get cash from an ATM machine overseas, try to use a debit rather than a credit card. If you use a credit card, the bank treats this like a cash advance and will charge you a minimum cash withdrawal fee of $10 to $20, then will charge you interest and finance charges starting from the date you withdraw cash. Not only that, the interest will start accumulating on your entire credit card balance from that date, as opposed to the normal 30 days or less from a credit card charge.

As mentioned above, if you use a debit card in an overseas ATM, your bank, as well as a charge by the ATM’s operator will charge you a fee of 2 to 3 percent. This can be significant but it is probably still cheaper than using a moneychanger. There is one great solution that I recommend.

I am a Bank of America customer, and I can use their ATM debit card at certain overseas ATMs/banks that are part of the Global ATM Alliance. When I use my BofA ATM card to withdraw cash from a Global ATM Alliance ATM machine, then all ATM fees on both sides are waived. BofA may charge an International Transaction Fee is 1% to 3%, but I was just in Australia, and I did not see this fee appear (yet) on my statements.

In Australia, the bank that was part of the Global ATM Alliance was Westpac. In France, the bank was BNP Paribas; and in Italy, it was BNL D’Italia.

Here are banks in the Global ATM Alliance:

When I was in Australia recently, I had to withdraw AUD $1200 in cash to pay a guide. I did an experiment.

At a Westpac Bank ATM (part of the Global ATM Alliance), I withdrew AUD $200 using both my Bank of American ATM card and my First Republic ATM card. I should not be charged any fees for using either of these ATM cards – and that seemed to be the case – the transactions showed up as US $214.79 withdrawals on my bank statements.

A few weeks later, I withdrew AUD $400 from a Westpac ATM using my BofA debit card, and then withdrew AUD $400 from an ANZ bank using my First Republic debit card. With the ANZ transaction, a note flashed across the screen stating that I would be charged AUD $3 for this transaction. I did get a slightly better rate from Westpac, which says to me that using my BofA debit card from a Global ATM Alliance machine is slightly preferable to using the First Republic ATM card. The difference was not quite AUD $3.

Withdrawing AUD $400 from Westpac resulted in a charge of USD $431.70 from my Bank of America account. Withdrawing AUD $600 from ANZ resulted in a charge of USD $433.85 from my First Republic account. Hey, I’m not complaining. The difference is only $2.15, or 0.05%.

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