How to Avoid Paying Bank Fees While Traveling

Saving money for travel is one of the biggest obstacles that keeps people from realizing their travel dreams.

And, when they finally save up enough for their trip and hit the road, what do they do?

Throw money away on avoidable bank fees.

Banking overseas is more than just putting your card in an ATM and taking out money. When you travel on a budget, it involves knowing three things:

1. How to avoid paying bank fees.
2. How to eliminate foreign transaction charges.
3. How to get a good exchange rate.

I know too many people who travel abroad and end up paying obscene ATM fees and credit card transaction fees.

These days, there’s absolutely no need to do that. You didn’t save up all this money in order to give it to the banks, right? I know I didn’t. I want to keep it all for myself because every avoided fee is more money for food, drinks, and activities on the road!

Here is how you eliminate ALL bank fees when you travel in 5 easy steps:

 

1. Eliminate ATM Fees

ATM fees can really add up — especially if you’re traveling for weeks or months at a time. Let’s think about it: While you’re on the road, you might withdraw money from an ATM twice a week.

If you withdraw money from an international ATM with your regular debit card, you’ll be hit with 3 different fees:

• Your bank’s fee for using an ATM outside of their network (usually $2.50-5 USD)
• The ATM’s fee (usually $3-5 USD)
• An international conversion fee (usually 1-3% of the transaction)

As you can see, these fees very quickly add up. Fees vary around the world, but let’s say that you end up paying around $7 USD per withdrawal. That is $14 per week, $56 per month, or $672 per year! Do you know how many days you could spend in Southeast Asia for that amount? Almost 3 weeks!

Even if you only use the ATM once a week, that’s still $364 USD per year. And most travelers I know go to the ATM even more than twice a week, which only increases the amount in fees they pay. Why give banks money you need for travel? You worked hard saving your money — don’t waste it by giving it to a bank.

To help you avoid fees, here are four things you’ll want to do on your next trip to eliminate those pesky fees:

First, if you are a US resident, the best bank to use is Charles Schwab.

Why?

Charles Schwab has no fees and reimburses all your ATM fees at the end of each month. This is significant because, while there’s a growing number of banks that don’t charge ATM fees themselves, there are very few that offer unlimited reimbursement on ATM fees.

You need to open a high-yield checking account in order to qualify, but there is no minimum deposit required and no monthly service fee. Their ATM card can be used in any bank machine around the world, and you’ll never pay a fee. This is my primary bank card and I’ve been using it for years. Since getting it, I’ve avoided all ATM fees. It’s literally saved me thousands of dollars. If you just get this card, you don’t need to do anything else.

Another option is to pick a bank in the Global ATM Alliance. This is a network of large banks that have come together and waived fees, allowing for free ATM withdrawals. While they have the high fees ($5 USD per withdrawal) for banks outside their network, by using partner ATMs you can avoid ATM charges.

Below is a list of major banks in this alliance:

• Bank of America (United States)
• Barclays (England, Wales, Spain, Portugal, Gibraltar and certain countries in Africa)
• BNP Paribas (France, Ukraine, Turkey, Poland, Morocco, Italy, New Caledonia, Réunion, Guyane, Guadeloupe, Martinique, and Luxembourg)
• Deutsche Bank (Germany, Poland, Czech Republic, Spain, Portugal and Italy)
• Banca Nazionale del Lavoro (Italy)
• Scotiabank (Canada, Caribbean, Peru, Chile, and Mexico)
• Westpac (Australia, New Zealand, Fiji, Vanuatu, Cook Islands, Samoa, Tonga, Papua New Guinea, and Solomon Islands)

Be sure to check with your local bank on specific coverage areas. There are some exceptions, i.e., if you use your Barclays card in one country, there might not be a fee, but in another, there may be. Other fees, such as an international transaction or foreign currency fee, may also still apply so double-check before you go! Note: Bank of America charges a 3% foreign transaction fee on all withdrawals not in USD.

Finally, you can get a low-fee card. I use HSBC as my backup because HSBC has ATMs all over the world and charges only $2.50 USD per ATM transaction when you use a non-HSBC ATM. While it’s not as good as zero, it’s still better than what a lot of other banks charge. Additionally, Capital One doesn’t charge any withdrawal fees, but you do have to pay any fees charged by the local bank.

Be sure to ask your local bank or credit union too. Not charging fir ATM fees has become a widespread practice so make sure to ask your local bank as they might offer this too.

Here are some suggested ATM cards for non-US travelers:

Canada: Scotia or Tangerine are a part of the Global ATM Alliance.
Australia: ING, Citibank, or HSBC have no fee cards.
UK: Starling lets you avoid ATM fees abroad. Monzo has fee-free international transactions for your first 200 GBP withdrawn every 30 days.

If you are looking for other ways to cut wasteful expenses on the road, visit this collection of all my best tips for further money savings.
 

2. Avoid Credit Card Fees

The next major fee we need to get rid of is the credit card foreign transaction fee. Most credit cards charge a 3% fee on purchases made overseas. That can add up since most of us use our credit card for everything. It’s become a lot more common for credit cards to have “no foreign transaction fees” so it’s unlikely you’ll have a card that does but be sure to ask.

My favorite no overseas transaction fee cards are the Chase Sapphire Preferred, Capital One, and Citi Premier. (For more suggestions, you can find all my favorite travel cards here.)

For non-US citizens, check the following websites that list cards that might not charge any overseas fees:

• Australian Frequent Flyer (Australia)
• Credit Cards UK (UK)
• Prince of Travel (Canada)
• Credit Cards Compare (New Zealand)

 

3. Minimize the Exchange Rate “Penalty”

Every time you use your card overseas, your local bank converts the transaction into your local currency for billing purposes and takes a little off the top for doing so. Thus, the official rate you see online is not what you actually get. That’s the interbank rate and, unless you become a major bank, you’re not going to get that rate. All we can do is get as close to that rate as possible. To do so, you need to:

Use a credit card — Credit card companies get the best rates. Using a credit card will get you an exchange rate closest to the official interbank currency rate so avoid an ATM or cash if you can.

Use an ATM — ATMs offer the best exchange rate after credit cards. They aren’t as good as credit cards since commercial banks take a little more off the top, but it’s much better than exchanging cash. Money exchange offices offer the worst rates because they are so far down the food chain, they can’t get the best exchange rate (plus, they usually charge a commission as well).

Don’t use ATMs in weird locations — Using those ATMs you find in hotels, hostels, local 7-11s, or some other random place is a bad idea. They’re convenient, but you’ll pay for that convenience. They always charge high ATM fees and offer horrible conversion rates. Skip those ATMs and find a major bank.

 

4. Don’t Change Money at Airports

Most exchange bureaus in airports are so far down the financial food chain they don’t have the clout to offer good exchange rates. The rates you see at airports are the worst — never, ever use an exchange bureau there unless you absolutely have to.

Another tip: avoid using the company Travelex at all costs — they have the worst rates and fees. Never, never use them. Avoid their ATMs too!
 

5. Always Pick the Local Currency

When you use your credit card abroad, you will often be given the option to be charged in your home currency (i.e., instead of being charged in euros, they will charge you in US dollars). Never say yes. The rate at which they are converting the currency is always worse than the rate your bank will give you.

Pick the local currency and let your credit card company make the conversion. You’ll get a better rate and save some money in the process.
 

6. Don’t Get Currency at Home (and Skip Foreign Currency Cards!)

While buying currency at home might seem like a good idea, you’ll end up getting a worse exchange rate. Unless you are 100% sure you’ll need cash right on arrival, avoid exchanging money in your home country.

Airports all have ATMs where you can withdraw money if you desperately need it. (However, I suggest you wait until you get to your destination and withdraw money downtown/from an ATM away from the airport. You’ll get a much better rate and pay a much lower fee. Use your credit card on arrival and then get cash later.)

Additionally, avoid any “foreign currency cards” (like those offered from currency exchange companies) where you can pre-load money at a set exchange rate. The rates given are also terrible and they often have all sorts of additional fees.

Getting one of these cards is basically trying to predict the exchange rate and betting you can beat the market. You’re saying this rate is not going to get worse but what if it gets better? You don’t know! And, if you do know, you should be placing bets in the market. So, rather than try to hedge one way or the other, just use the ATM at whatever the current rate is when you travel!

***

Bank fees can add up to some serious money over the course of a long trip. If you want to save money, you need to be proactive when it comes to banking and currency exchanges. A little planning can go a long way and save you a ton of money over the weeks, months, and years of your travels.

Be smart and bank smart. I haven’t paid a bank fee while traveling the world in over fifteen years and you shouldn’t either.

And, with these simple tips, you’ll never have to again.