When Does it Ever Make Sense to Exchange Cash at a Bank or Currency Exchange?

I see lots of threads where people always ask about exchanging currency. I just don't get why people continue to use traditional currency exchange methods. The fees charged via ATMs and Credit Card companies, assuming you pick the right terminal or card, just seem way better and more convenient converting one's home currency to another. Maybe in some super underdeveloped countries as well.

For me, I haven't taken cash with me on my travel for probably 20 years or more except when (1) I needed to pay for certain national entrance/visa fees at an airport - e.g., Chile's reciprocity fee for US visitors, or (2) when visiting a county like Argentina where a black market exists and the official exchange rate is vastly different than the official exchange rate. Except for these cases, I have always depended on my cards and ATM's.

What am I missing? Except for the cases I list above, why would one ever use these exchange services offered by banks and currency exchanges? Also, does anyone see a reason to use a service like XOOM to send money to yourself while travelling? Could this ever beat ATM's in terms of cost-effectiveness?

Thanks for any feedback.

It only makes sense when there is absolutely, positively no other option. EM

I agree with your general point. The other side of the coin is some people just don't feel comfortable landing in a foreign country with no local cash. I am sure you saw that in your reading of the many threads on the topic.

The fees charged via ATMs and assuming you pick the right terminal or card, just seem way better

Not sure I understand this statement. If you use a debit card in an ATM you will be charged the same exchange rate that you would be charged if you exchange money at your bank.

At least it is that way with any debit card I have ever used, I am charged the going exchange bank rate same as if I exchange in person.

So what am I missing?

Not sure I understand this statement. If you use a debit card in an ATM you will be charged the same exchange rate that you would be charged if you exchange money at your bank.

At least it is that way with any debit card I have ever used, I am charged the going exchange bank rate same as if I exchange in person.

 

So what am I missing?

This is not true, at least not at US banks. Many US banks charge fees, give you poorer exchange rates or add other costs on to the transaction. The US banks are in it to make a profit... The last time we got euros at our bank, the bank rate was 6 % above the exchange rate, ad they charged us a $12.50 delivery charge.

Getting money at an ATM in Europe, for example, gets you an exchange rate of usually about 1% above the official exchange rate. European ATMs, in most cases, can not charge fees. Your home, US, bank can add a fee, usually $3-5.

So, in a summary, Get Euros from an American bank, it will cost you 5-10% above the exchange rate. Get euros at an ATM in Europe, you will probably pay about 3% total in fees.

I agree with your general point. The other side of the coin is some people just don't feel comfortable landing in a foreign country with no local cash. I am sure you saw that in your reading of the many threads on the topic.

That is the best I can come up with at so far. It is like buying an insurance policy. I pay extra for the insurance, but it gives me some sense of peace of mind.

Not sure I understand this statement. If you use a debit card in an ATM you will be charged the same exchange rate that you would be charged if you exchange money at your bank.

At least it is that way with any debit card I have ever used, I am charged the going exchange bank rate same as if I exchange in person.

 

So what am I missing?

Maybe I don't understand you as well. The rate that I see when I go to my local bank and exchange dollars for currency x always seems worse than the exchange rate that is presented presented on my statement when I withdraw currency x from an ATM in its home country.

I think the cost of keeping foreign currency on hand in countries where it is not legal tender just has to drive up the cost and worsen the exchange rate.

Not sure I understand this statement. If you use a debit card in an ATM you will be charged the same exchange rate that you would be charged if you exchange money at your bank.

At least it is that way with any debit card I have ever used, I am charged the going exchange bank rate same as if I exchange in person.

 

So what am I missing?

You are missing the fact that when you withdraw local funds from an ATM in a foreign country you essentially pay the current bank=bank rate of exchange. When you go to a US bank and exchange $ for euro or GBP, you pay a substantial exchange fee - meaning that the amount of $ you spend gives you fewer euro or GBP than you would get for the same $ expenditure from your AC by using an ATM. The exchange fee penalty is much stiffer at an airport exchange agency.

Some people hate the idea of landing in a foreign country with no local funds, but every airport I've seen: London, Paris, Rome, Amsterdam, Toulouse, Venice, Milan, Athens, Istanbul, Stockholm, Helsinki, etc. has several banks' ATM's, and I have never had to spend more than a couple of minutes locating, and using, a working ATM.

So, in a summary, Get Euros from an American bank, it will cost you 5-10% above the exchange rate. Get euros at an ATM in Europe, you will probably pay about 3% total in fees.

And this is for one of the most popular currencies. I'll bet the costs are even higher for more thinly used/traded currencies.

So at best, for a person residing in the US, your fees are at least double when using the bank over the ATM.

Credit cards are even cheaper (assuming the merchant doesn't change your price) as you just pay the 1% and maybe nothing after you consider the "points" you receive on the purchase.

... every airport I've seen: London, Paris, Rome, Amsterdam, Toulouse, Venice, Milan, Athens, Istanbul, Stockholm, Helsinki, etc. has several banks' ATM's, and I have never had to spend more than a couple of minutes locating, and using, a working ATM.

This reminds me of an experience I had sometime in the 90's. I had an overnight flight from Chicago to Milan on AA. Flight was early on a Sunday and the currency exchange wasn't open. All these people were waiting for the exchange to open so they could buy some lira. Close by was an ATM for a bank. I walked up, got my money and was on my way in under a minute. The people in the line starred at me and I starred at them. It was so bizarre to see these people waiting for nothing that I can still see the image in my mind today.

We have traveled extensively all over the world (about 100 countries) on both cruise ships and independent land trips. In the past 25+ years we have never exchanged a penny at a bank or money changer and now totally rely on ATM cards. DW and I hold 3 ATM cards drawn on accounts at 3 different banks (this is a perfect back-up plan) with 2 of those cards charging zero fees for foreign ATM withdrawals. All foreign ATM withdrawals are subject to a 1% transaction fee imposed by the expediting institution (usually Visa International) but that is simply 1% off the wholesale rate of exchange. You cannot get a better (or even close)exchange rate any other way. There are also a few credit cards that charge zero fees such as the popular (with frequent travelers) CapitalOne MC. Most other credit cards charge anywhere from 2.5% to 3.5% on each transaction. Even the expensive AMEX card charges 2.7% except on their Platinum card which has zero fees (but the card now costs $450 a year).

When it comes to both Europe and most popular Asian countries...using ATMs is the norm for locals and travelers. Many banks in Europe will no longer exchange any money (except for their account holders) and the money changing places usually charge at least 3% (sometimes a lot more) which is either in their exchange rate, commission (if any) or a combination of both.

For many cruisers (especially those that take cruise line excursions) the cost of foreign currency is really not much of an issue. Even if you pay 3% more on a $1000 this is only $30! But for those of us who spend months at a time in Europe (and elsewhere) that 3% can turn into "real money." Another issue is that most wise travelers do not want to carry a lot of cash. For us, ATMs are the primary way of getting cash and a credit card cash advance would be the emergency back-up.

By the way. For those that believe in Travelers Checks you should think again. While TCs can usually be cashed on cruise ships (often for US dollars) they have become near useless in most places. Many restaurants and merchants will no longer accept TCs and even hotels are reluctant and might only do it for their customers who are sometimes also asked for a major credit card. TCs have become obsolete (except on ships). We used to carry some as a back-up, but now they are a lousy back-up since they are difficult to cash. Some money changing kiosks will take TCs, but they charge a big premium in their exchange rates.

Hank

I never say never. I prefer to use ATMs, but there have been a few times that I've been grateful that I had a small wodge of cash with me. In Brazil two years ago, four of us, with seven different ATM/debit cards from a variety of UK banks, could not find an ATM that would give us money. The cards had worked fine in other countries, the banks knew we were in Brazil, etc. So changing a little bit of cash worked well in that case, even if the rate wasn't the best.

Almost always we use ATM's. However, on a recent Black Sea cruise we stopped in Ukraine, Romania, and Bulgaria. For each of those stops we needed just enough local currency for a couple of beers and a local lunch. It was just easier to use a currency exchange for $15-$20 when we got a very reasonable rate of exchange with no commission.

Yes, it's like a very cheap insurance policy - I always have at least a little bit of local currency when I land, so that I am not at the mercy of the immediately available ATMs......will they be crowded, broken, or charge service fees, etc. That means I have about $50 worth of local currency, so that I can grab a cab or pay for a meal in cash if I need to. The difference in exchange rate on that volume of money is minimal, and it's not too much that I worry carrying it through an airport. Why stand in line for the one remaining operational ATM for the sake of less than a buck in exchange rates? And, for Europe and the US, I have that amount of local currency left from a previous trip, so I'm not actually buying it at current bank exchange rates.

"When Does it Ever Make Sense to Exchange Cash at a Bank or Currency Exchange?" There are a few exchange bureaus that are cheaper than some debit card withdrawals or credit card charges. If your debit or credit card marks up foreign activity by 3%, Thomas Exchange Global will beat them, for instance. https://www.thomasexchangeglobal.co.uk/

Canadians may still be able to obtain foreign currency from a local exchange bureau more cheaply than by using plastic abroad.

There was an interesting thread on the Italy board a few weeks ago about Travelex machines replacing bank ATMs in some airports - specifically London Heathrow. The OP indicated that it was getting more widespread. Travelex will rip you off on Xrates, so the thread caused some concern. Last year I remember a long search for a real bank ATM in the Copenhagen Airport...but I can't remember if it was because the other machines I found were generic ATM's or Travelex. I also avoid generic ATM's, both here in the U.S. And abroad.

We also ran into another method of currency exchange once in a third world country. The hotel bellhop would call over a street kid who would go to the street money changer with your dollars and bring back the foreign currency. Doesn't really matter what exchange rate you get in countries like that, because the U.S. Dollar equivalent usually goes a long way, since prices of things are so cheap.

"When Does it Ever Make Sense to Exchange Cash at a Bank or Currency Exchange?" There are a few exchange bureaus that are cheaper than some debit card withdrawals or credit card charges. If your debit or credit card marks up foreign activity by 3%, Thomas Exchange Global will beat them, for instance. https://www.thomasexchangeglobal.co.uk/

 

Canadians may still be able to obtain foreign currency from a local exchange bureau more cheaply than by using plastic abroad.

Ahhh, you have hit the nail on the head. Many credit cards and ATM cards take advantage of their card holders. The solution for us was to simply dump most of those cards and obtain ones that do not take advantage of the customer. The worst offenders are the major commercial banks who love to make customers pay for their own money. The alternative is often a good Credit Union or smaller bank (both of which usually will also give loans at better terms). For example, my 2 ATM cards are from 2 different major credit unions (located in different states) which charge zero fees for withdrawals. I already mentioned one of the most popular (with frequent travelers) fee free credit card (CapitalOne) which still charges zero foreign exchange fees.

A banker friend once told me the best friend of the commercial banks are the customers who will pay most fees without whining or changing banks. So, if your bank is hitting your with fees and you refuse to change, then you have nobody to blame but yourself. When customers start complaining by moving their money the banks do quickly get the message.

Hank

Not sure I understand this statement. If you use a debit card in an ATM you will be charged the same exchange rate that you would be charged if you exchange money at your bank.

At least it is that way with any debit card I have ever used, I am charged the going exchange bank rate same as if I exchange in person.

 

So what am I missing?

This is not true, at least not at US banks. Many US banks charge fees, give you poorer exchange rates or add other costs on to the transaction. The US banks are in it to make a profit... The last time we got euros at our bank, the bank rate was 6 % above the exchange rate, ad they charged us a $12.50 delivery charge.

 

Getting money at an ATM in Europe, for example, gets you an exchange rate of usually about 1% above the official exchange rate. European ATMs, in most cases, can not charge fees. Your home, US, bank can add a fee, usually $3-5.

 

So, in a summary, Get Euros from an American bank, it will cost you 5-10% above the exchange rate. Get euros at an ATM in Europe, you will probably pay about 3% total in fees.

Our Canadian banks are in it to make a profit too but I've never paid anywhere near 6% above, or a delivery charge. Not sure if it's because of more competition or more regulation up here but those fees are very high compared to what Canadian banks charge. Today's U.S. rate is 2.26% over at one bank (the Euro is 3.52% over). I guess that's why I prefer to invest in U.S. banks vs. Canadian banks.;) No wonder many of you use ATMs. Next time I'm going to use an ATM just to see how the rate compares to the rate at our banks. Thanks for the info!

But for those of us who spend months at a time in Europe (and elsewhere) that 3% can turn into "real money." Another issue is that most wise travelers do not want to carry a lot of cash. For us, ATMs are the primary way of getting cash and a credit card cash advance would be the emergency back-up.

For those long duration trips, have you ever thought about using services like Zoom to transfer money to you while travelling? I could possibly see this for paying large expenses when credit cards aren't feasible and the money needed exceeds your daily ATM withdrawal limits?

I agree on not carrying too much cash. It really doesn't matter where I am.

By the way. For those that believe in Travelers Checks you should think again. While TCs can usually be cashed on cruise ships (often for US dollars) they have become near useless in most places. Many restaurants and merchants will no longer accept TCs and even hotels are reluctant and might only do it for their customers who are sometimes also asked for a major credit card. TCs have become obsolete (except on ships). We used to carry some as a back-up, but now they are a lousy back-up since they are difficult to cash. Some money changing kiosks will take TCs, but they charge a big premium in their exchange rates.

 

Hank

I am glad you mentioned TC's. It was a product for a different time and I agree with you that it is really obsolete.

Almost always we use ATM's. However, on a recent Black Sea cruise we stopped in Ukraine, Romania, and Bulgaria. For each of those stops we needed just enough local currency for a couple of beers and a local lunch. It was just easier to use a currency exchange for $15-$20 when we got a very reasonable rate of exchange with no commission.

This makes sense to me for short port stops. I am sure dollars/euros are especially valued in Ukraine these days. Does the Ukraine have a black market in currency? It wouldn't surprise me.

Hank does travel a lot more than I do, and having 3 bank cards certainly could make a difference.

I take a trip once a year or every other year, I have 1 bank account with 1 debit card. And it stays at home when I travel. My credit card is all that goes with me. And I do get my cash at home (sometimes US $, sometimes foreign currency).

I've even stopped using the debit card much at home, since the Target breach. If I go to my bank, I will use the ATM machine, but elsewhere I use the credit card or cash. And if I go to Target, I stop at my bank first and get cash.

I had an interesting occurrence (not travel related), I had an account at the credit union at my work. There was an ATM as well as a small 1 person satellite office. On a Friday night I tried to withdraw cash from the ATM, and for some unknown reason the machine kept my card. So not only didn't I have my money, I no longer had my card. AND THE OFFICE WAS CLOSED. On Monday I was able to go into the office and retrieve my card. Can you imagine that happening in a foreign port?

That occurrence, as well as all the information breaches, has made me leery of using the Debit card. Call me old fashioned, but I prefer to have cash when I travel.

It makes sense when you're so rich that the three or four pounds extra you may be paying for your currency is worth the three or four minutes it takes you to get the cash.

But that's in the UK. I gather that American banks charge a flat commission as well as a differential buy/sell rate. In the UK, it's commission free, and the profit comes only from the differing rates.

We go to the Post office for our cruise port money purely because it will be more expensive in the airport/on the ship/at the terminal and don't want to waste precious time in port.

For normal holidays we are more flexible where we buy.

This reminds me of an experience I had sometime in the 90's. I had an overnight flight from Chicago to Milan on AA. Flight was early on a Sunday and the currency exchange wasn't open. All these people were waiting for the exchange to open so they could buy some lira. Close by was an ATM for a bank. I walked up, got my money and was on my way in under a minute. The people in the line starred at me and I starred at them. It was so bizarre to see these people waiting for nothing that I can still see the image in my mind today.

A similar thing happened to us some years ago. Our chartered flight was 12 hours late, getting into London at midnight. We were bused to Victoria Station, and there was a huge line at the one exchange booth open.

We had gotten some pounds at home and walked straight through to the taxis.

It makes sense when you're so rich that the three or four pounds extra you may be paying for your currency is worth the three or four minutes it takes you to get the cash.

 

But that's in the UK. I gather that American banks charge a flat commission as well as a differential buy/sell rate. In the UK, it's commission free, and the profit comes only from the differing rates.

Many US banks and some exchange booths worldwide tout their no fee service. The uninformed do not know that the exchange rate is set by the exchange bureau at the exchange bureau's advantage. I have seen currency marked up by more than 20%.

Many US banks and some exchange booths worldwide tout their no fee service. The uninformed do not know that the exchange rate is set by the exchange bureau at the exchange bureau's advantage. I have seen currency marked up by more than 20%.

This is the problem: exchange bureaus advertise that they charge no fee or commission; what they do not mention is the exchange RATE they apply.

As a real-time example, the interbank exchange rate (what is applied when you use an ATM) now is 1$ = .8995 euro, or 1 euro = $1.1117. Travelex is offering $1 = ,7997 euro --that means for $100 they would give you 79.97 euro, rather than the interbank rate of 89.95 euro for $100. That difference of 10 euro costs you $11.17. So even if you pay a non-refundable fee of $3, you are down $8. Not bad if all you spend overseas is the equivalent of $100 - figure how much you would be exchanging.

There was an interesting thread on the Italy board a few weeks ago about Travelex machines replacing bank ATMs in some airports - specifically London Heathrow. The OP indicated that it was getting more widespread. Travelex will rip you off on Xrates, so the thread caused some concern. Last year I remember a long search for a real bank ATM in the Copenhagen Airport...but I can't remember if it was because the other machines I found were generic ATM's or Travelex. I also avoid generic ATM's, both here in the U.S. And abroad.

 

We also ran into another method of currency exchange once in a third world country. The hotel bellhop would call over a street kid who would go to the street money changer with your dollars and bring back the foreign currency. Doesn't really matter what exchange rate you get in countries like that, because the U.S. Dollar equivalent usually goes a long way, since prices of things are so cheap.

I missed the thread, but ran into the Travelex machine that looks like an ATM in LHR about a year ago. Fortunately, I spent a bit of time reading the signs . , . even then I wasn't certain. When I realized that it dispensed dollars, euros, pounds and Swiss francs and would charge me in $ regardless of what currency I got I knew it wasn't an ATM.