The science of understanding conversion fees – what to do with your money abroad

 

Alright, so we booked that foreign trip and we’re ready to go out of the country baby! But wait, what do we do about our money abroad? Conversion fees? 

Do we use a credit card vs debit card? What about paying in the local currency? If you need physical cash abroad, what do you do?

 

These are common questions you might have before you leave or prior to using your money abroad. Educating yourself on what to do and what not to do will be your best bet. 

It will save you money by preventing silly fees. This post is meant to prevent confusion on how to use your money abroad; Along with the resources I use to help set you up correctly.

These are things you should not avoid and should pay attention to, especially as a frequent traveler.

 

Get a travel-friendly bank account-

First things first, get a proper travel bank account. If you want to use your money abroad, we’re going to need a global friendly bank account.

 Why is this? Let’s say we need to take out physical cash- you shouldn’t have to pay a million fees for your own money.

Now, you’re probably thinking – I’m just going to use a credit card abroad, no biggie. That’s an awesome idea, but what if you need physical cash at some point? 

Odds are, you will need physical cash. Whether it’s the restaurants that don’t accept cards or you are splitting the cost with friends, the time will come.

 Therefore it is crucial to open up a bank account that is friendly to conversion fees, non-network atm fees, and foreign transactions. 

Especially if you travel abroad a lot. If you don’t choose this route, you’ll end up paying more just to use your debit card. Scratch that, fees are not cool in my book!

 

 

Charles Schwab is the best bank account for your money abroad

Charles Schwab Investor Checking – My absolute favorite. This is #1 on the recommendation list. Here are some of their amazing perks!

• No minimum monthly balance. Meaning you can have as little or as much money in this bank account and you will not be charged anything.
• No monthly fees to have the bank account.
• You get reimbursed for all nonbank atm fees at the end of the statement (it’s unlimited). Meaning you can go to 1,000 different atm’s and you’ll get reimbursed on all of those fees.
• 0 foreign transaction fees.
• Visa negotiates a 24-hour rate for conversions. This is for any currency outside of the country you’re from. The conversion rate is regarding the current market. You can go on here to check rates. 
• With my 6 month experience of this, the rate is usually on point. E.g – When I take out cash in Madrid, it’s usually 1 USD to 0.88- 0.89 euro cents. The exact conversion today is 1 USD to 0.90 euro cents. That’s an awesome conversion rate on Visa’s behalf, that’s almost exact!
• When you open this bank account you automatically get an Individual Brokerage account. If you are into investing, this will be useful. I haven’t invested and it’s not a problem if you don’t. You just have the option which is nice!
• You get 0.31 APY (does fluctuate) on the checking account cash. For the Individual brokerage account, you get 0.18 APY. 
• With my past experience with other bank accounts in the US, you get 0.01. This is a good rate. You are getting more for your money without having to pay for that.
• Last but not least – If you deposit at least $1,000 & up – you can get a bonus award with this link at no extra cost to you.

Nope, I don’t get anything from referring you, this is strictly for your benefit! Enjoy and don’t forget to use my link, if you don’t you won’t get the award when you sign up!

Charles Schwab sign up bonus

Here is the Bonus award information as it increases by certain increments:

 

I’ve had 8 bank accounts in my lifetime. This includes Chase, Wells Fargo, Santander, Citizens Bank, TD Bank, M&T Bank, CIT, and Charles Schwab.

Out of all of these bank accounts, the only one I would recommend for travel purposes is Charles Schwab. The others I’ve used on the road charged me way TOO much. 

Santander and Wells Fargo were the most expensive with conversion rates and fees.

 

TD Bank – I had TD Bank but I closed it, it wasn’t a great travel bank account. TD bank doesn’t charge you foreign transaction fees which is nice. 

However, it does charge you atm fees which ridiculously add up over time. I spent $456 on atm fees in 4 months. 

That’s not so much but when you think about the fact this was only to take out my own money – that’s just bizarre. 100% a waste of money. 

If you are not a big traveler and want something flexible, then TD bank isn’t a bad choice but for my situation, this isn’t ideal. Check out TD’s website for account options here.

 

If you are looking for additional bank accounts that are travel-friendly, click here.

 

An absolute must for using money abroad, conversion rules:

Always pay in the local currency– Let’s say you are in a restaurant and you decide to pay with a credit or debit card – never pay in your currency, always pay in the local currency. E.g. 

You are American and go to Spain, pay in Euros vs Dollars. Why is this important? Because you get charged more.

So how does that actually work? Basically the credit card machines have to make a profit too so they don’t charge you an exact conversion rate if you don’t pay in the local’s currency.

If they did charge an exact rate, the credit card machines wouldn’t make a profit. In other words, you are paying the credit card machine to convert your money for you. 

Tiny transactions aren’t that bad but over a course of time trust me, these fees add up. Especially if you are staying anywhere abroad over a long period of time. 

Also, if you have a non-travel friendly bank account, you are going to get charged foreign transaction fees, plus the extra fee for converting. Not a win/win situation.

 

ATM Withdrawls for money abroad

 

When withdrawing cash – The picture above is a real-life incident of me going to a Bankia in Madrid to take out physical cash. For the purpose of an example, let’s look at what this picture represents.

The transaction was a 50 euro withdrawal, which converts exactly to $55.35 USD while I write this post. I would get that conversion rate because I pressed continue without currency exchange. 

If you look at the picture, if we choose to continue with currency exchange, you will get charged an access fee of 2.85% plus their terminal exchange rate which is .87 euros to 1 USD. 

The exact conversion rate is .90 euros to 1 USD. You also get charged the 1.75 euro fee for the non-atm fee. 

It’s not a big deal if you are losing out on a few dollars a few times, but if you are living abroad and go to the atm a lot, it’s just throwing money out the window. Additionally, this could be prevented if one pays attention.

To summarize, NEVER let the atm convert the currency for you abroad. If you do, that means you are technically paying for currency from the atm bank. 

That’s why it’s so expensive. Only let your bank do the conversion fees. Even if you don’t have a travel-friendly bank account, if you let only your personal bank convert, you won’t be paying to convert twice.

Hope you are still with me, I know these conversion rules are a little confusing. Regardless, it’s best to get educated on these rules as I’m not sure why no one tells you about these random fees. These are major rules that will save you big time.

 

Know how to play the game of credit

I’m an advocate for utilizing your credit card benefits because a lot of credit cards have great perks. The catch is, you have to know how to play the game of credit. 

All one has to do is to be responsible and don’t buy things you can’t afford.

When mentioning responsible, I mean to always pay your credit card balance in full each and every month on time. If you don’t, over the course of time it will turn into debt. 

Debt is no fun! The huge catch with a travel credit card is that they have an impressively high-interest rate. I have excellent credit and mine is still 24.74% APY. Yikes!

Regardless, I try to utilize these benefits as much as possible. With that being said, I’m OBSESSED with my Capital One Venture card. 

I couldn’t recommend the card enough especially when we are talking about money abroad. If you are interested in applying, here is my referral link here.

 

The perks

So why Capital One Venture? There are so many perks to this card but to name my favorites, here are a few:

• You get 2x miles for every 1 dollar spent with Venture. Most credit cards give you $1 for every $100 you spend. (That’s a pretty bad rate if you ask me)
• 10X miles on thousands of hotels through January 2020.
• Earn 50,000 bonus miles once you spend $3,000 on purchases within the first 3 months from account opening. (Lower spending minimum on most travel cards at the moment)
• No foreign transaction fees.
• Auto rental collision damage waiver (a big one for me as I’m always renting cars)
• Additional warranty protection on eligible items that are purchased with your credit card.
• Use your Venture miles for flights, hotels and more—you can even transfer miles to any of their 10+ travel partners.
• Redeem purchases (this is nice as you can redeem your purchases for your statements)
• Amazing customer service.

Those are my favorite features of the Venture card. It’s a no brainer that if you are going to sign up for a card, that you won’t get charged foreign transaction fees. 

Most cards don’t, but that doesn’t mean all credit cards operate the same way. 

This is something I personally would inquire about before I even sign up for the card (at least if you are on the road and abroad a lot) I couldn’t recommend the Capital one card enough, especially if you are looking for a new, strong, and most importantly beneficial (!) card.

It’s a 10/10 in my book. I have other credit cards and honestly stopped using all of them together except for this one. I just can’t compare the value nor its strengths to my other ones.

Curious to learn even more travel tips? Click here to get tested and proven ideas on how to quickly save for a trip.

 

Think ahead

Well, I hope you enjoyed reading about tips on how to use your money abroad, this is a must for any traveler or person living abroad. 

Take some time to plan for this because it will take some time to open the bank accounts if you have a trip coming up. Be prepared and think ahead! Cheers!

See you on the road,

Britt