How to get money abroad...
...and how to spend it
No American Express here: Bargaining for handcrafts at a remote Thai village takes some negotiating skill and cash. They don't take credit cards, the nearest ATM ATM is a full days trek away, and they can't give change for large bills.
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In the late 1990s, ATM cards were generally the best way to get the local currency while traveling abroad, and credit cards were consistently the best way to spend it.
It's no longer so simple. Banks are testing the limits -- some more brazenly than others -- to see how high they can raise their fees. No single rule of thumb works consistently. Instead, the budget-conscious traveler needs to know the various options, then pick the best one.
Credit cards. The easiest way to make purchases abroad is with a Mastercard or Visa. (American Express is accepted in fewer places.) However, since 1999, some companies have instituted a "handling fee", typically from 1 to 2% (but Chase Manhattan has gotten up to 3%), on overseas transactions. This is pure gravy for the credit card companies, since the handling is done in a nanosecond of computer time. The new charge was probably announced in the small print in one of the endless flyers and inserts you got from them -- you do read every word of that timeless prose, don't you?
Even with a 1% fee, credit cards are usually the easiest and safest way to make purchases overseas. But there's no reason to stuff your banker's pockets any more than you need to. Estimate how much you'll be putting on your card during the course of your vacation; is the difference between 1% of that amount, versus 2% or 3%, enough to justify calling each company, and asking for their current policy? (As well as inquiring about fees, also ask how the exchange rate is determined; sometimes that, too, is tilted in the bank's favor.) Your call will also alert the bank that yes, consumers are taking note of these fees.
ATM cards. Nowadays, nearly all ATM cards will work in most major cities worldwide. Here again, you'll need to check with your bank to see what fees they charge, and how the exchange rate is determined.
If your ATM card is refused by the first bank you try, don't despair; assuming you have money in your account, it will probably work at the next one, or the next day. Even ominous messages such as "Service denied on instructions of card issuer" are often incorrect, and the card will work at another machine.
Some banks charge a $5 to $10 fee for ATM withdrawals made overseas; others charge nothing. If you have to pay a high fixed fee, you'll save money by making fewer but larger withdrawals. However, weigh in the risk of theft or losing your wallet, when deciding how much to withdraw.
Also be sure there is an ATM machine at your destination. In major cities, this shouldn't be a problem. But in out-of-the way locales, don't assume anything. We sponsor a dive trip on the Caribbean island of Saba. Population: 2217. Number of ATMs (as of 2001): Zero.
Credit card advances. You can generally get a cash advance from your credit card if you have a PIN number; fees vary with the issuer, however, and tend to be exorbitant. This is a last resort.
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Travelers checks. Whether in U.S. dollars or the local currency, travelers checks are not accepted as widely as they used to be! Even if they are issued in the local currency, you may have to cash them at a bank -- many hotels, shops, and restaurants will not accept them. Generally, the combination of a credit card and an ATM card is more convenient, and often no more expensive.
The biggest benefit of travelers checks is that they can be replaced quickly (American Express is particularly good at this) if lost, assuming you did keep a separate record of the numbers.
If you get travelers checks in the local currency, don’t get more than you need, or you’ll pay the conversion fee twice. And don't assume these will be easier to negotiate than checks in U.S. dollars.
Local currency: Most banks can get you any of the major world currencies, in advance of your departure. It will take several days or more, and usually the service fee will be slightly higher than you'd pay at banks abroad, but this approach could make sense if you won't have a chance to get to a bank promptly after your arrival.
Personal checks. Rarely is it advantageous, or even possible, to use personal checks drawn on a U.S. bank for overseas purchases. However, it doesn't hurt to carry a few checks with you. In an emergency, they give you one more option. With proper ID, you may be able to negotiate something through a bank, or through an individual with whom you have an established relationship.
Cash. Converting U.S. currency while you’re abroad generally gets the worst exchange rate. That’s because U.S. dollars are notoriously easy to counterfeit; furthermore, accepting cash involves handling and safeguarding expenses for the bank.