What’s the best way to pay for things abroad?

Man and woman holding hands on top of a mountain, confident in their ability to pay abroad. Man and woman holding hands on top of a mountain, confident in their ability to pay abroad. Image:

In a Nutshell

Traveling internationally? You'll want to avoid travelers' checks when possible. The best way to pay for things abroad is likely a credit card with no foreign transaction fees.

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Ever since my friend moved to Kenya, we’ve been talking about traveling together.

I once had a college professor who said that Ethiopia was the most beautiful country she’d ever seen, so when my friend suggested going there, I jumped at the opportunity. Dramatic, craggy mountains? Ancient churches? Crazy volcanoes, lava lakes and salt formations? Not to mention one of my favorite cuisines? Count me in.

It’ll be the trip of a lifetime: 16 days in Ethiopia, followed by nine days in Kenya. To prepare, I bought a decent backpack, loaded up on travel vaccines and checked with my health insurance about coverage abroad.

But one pre-travel task involved answering a nagging question — what is the best way to pay for things abroad?

To finally set this question to rest, I researched the various options for on-the-ground payments in a foreign country.

Here’s what I found.


Avoid most foreign exchange bureaus and banks.

You’ll likely face unfavorable exchange rates if you try to trade money at your local bank before you leave, plus there might be fees associated with doing so. Similarly, using an exchange bureau at the airport is usually a bad choice — these bureaus typically make money by charging a “spread” between the wholesale exchange rate and what they’re charging you, plus there’s often a commission that’s tacked on. “No fee” exchange bureaus usually aren’t any better, as these tend to build their fee into the unfavorable exchange rate.

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Don’t waste your time with travelers’ checks.

You’ll generally need to exchange traveler’s checks at a bank, which is a pain.

The first time I left the country without my parents, I was 17 years old. My mom loaded me up with travelers’ checks, but I was hard-pressed to find anyone to accept them! And that was almost 12 years ago — nowadays, even fewer businesses accept them. You’ll generally need to exchange traveler’s checks at a bank, which is a pain, and then they’ll often charge you high fees simply for doing so… in addition to giving you unfavorable exchange rates. No good.

The ATM will probably be the best option for cash.

It can be nerve-racking to show up in a new country without any local currency, but there are almost always ATMs at the airport, so you won’t be cash-less for long. You may be hit with a number of fees for using an ATM in a foreign country, but at least they tend to offer the wholesale exchange rate, which is usually far better than at any bank or currency exchange kiosk.

What to know about using debit cards for international travel

I bank with Ally, which charges up to 1 percent for withdrawals in foreign countries and doesn’t charge an additional ATM fee in its own right (though the ATM owner may charge a fee). In comparison, Chase charges 3 percent as an “exchange rate adjustment” if you withdraw foreign currency, plus a flat fee of $5 in addition to whatever fees the machine owner charges. Each time I withdraw from an ATM, I’ll probably have to pay a fee to the company that provides the machine, but this isn’t usually more than a few dollars. My strategy is usually to take out a bunch of cash in as few transactions as possible to minimize the number of times I pay a surcharge.

My strategy is usually to take out a bunch of cash in as few transactions as possible to minimize the number of times I pay a surcharge.

One caveat: As the whole ATM-is-the-best-option has become common wisdom, travel companies have wised up. Some airports, especially in Europe, have replaced their regular ATMs with special ATMs that offer worse rates, targeted at tourists who don’t know any better. If you see an ATM by a money-exchange company like Travelex or ITT MoneyCorp, be wary. By some accounts, these machines can charge as much as 11 percent more than big-bank ATMs, and that’s often accompanied by an unfavorable exchange rate. Try to look for an ATM owned by a brand-name bank you recognize, or use an app from your financial institution to locate an ATM in your network.

Use a credit card as much as possible… if it doesn’t charge a fee.

There are a number of reasons why credit cards are often the best way to pay for things abroad:

  • You can generally dispute charges if anyone steals your card or makes a fraudulent transaction.
  • You don’t have to stress out about walking around with a wallet full of cash.
  • You won’t be saddled with lots of unspent currency at the end of your trip.
  • You can often earn rewards from your credit card even when you use it outside the country.
  • Credit cards often offer some of the best exchange rates — you’ll typically receive the wholesale exchange rate, or the “real” rate of exchange without additional markup. If you’re not getting the 100 percent exact wholesale rate, you’ll generally receive something awfully close. To keep up with the most recent exchange rates, I use the free xCurrency app. You can update the numbers anytime you have Wi-Fi and then pull up the app for reference even without an internet connection.

Now for the drawback: Many cards charge foreign transaction fees — often around 2 or 3 percent. Carefully check the terms and conditions of your card for foreign transaction fees.

Paying an extra 3 percent is obviously worse than paying 1 percent to take out cash from an ATM. In the past, I usually veered toward the lesser of the evils — ATM withdrawals — and lived on cash in foreign countries. But this time around, I decided to open a new credit card that didn’t charge any foreign transaction fees at all.

I chose my new card based on factors like rewards, the ease of redeeming those rewards, annual fees, my credit score, whether or not I plan to have a revolving balance and, of course, whether the card had a foreign transaction fee.

The essential guide to the best travel rewards cards

Safeguard everything before you go.

I try to minimize potential theft by splitting my cash and valuables into different wallets.

I plan to write down my credit and debit card numbers, along with the phone numbers for my card companies, and give that information to select family members. Generally, I try to minimize potential theft by splitting my cash and valuables into different wallets and compartments of my luggage.

I’ve also notified my card companies that I’ll be traveling. My card could be denied if a transaction suddenly appeared somewhere far away — it’s not unrealistic to think it could be fraud if I go from paying for a taxi in New York to buying a sandwich in Nairobi. To prevent that, it’s helpful to give the card issuer a heads up. In the past, you had to call and wait on hold, but now some companies let you notify them through an online form. My credit card lets me do this very easily.

Options fully researched and new credit card in hand, I’m just about ready to embark. The only thing left to do? Actually pack.