Most travellers lose several per cent of their entire budget to currency handling without ever noticing, because it disappears into a slightly worse rate here and a three-dollar fee there. It is one of the easiest costs to eliminate, and it takes about an hour of setting up before you leave.
The four charges you are actually fighting
The exchange rate spread. The gap between the real interbank rate and the one you are given. Bureaux de change make their money here, and airport bureaux take an enormous cut — frequently 8 to 12 per cent.
Foreign transaction fees. Your bank’s charge for a purchase in another currency, typically 2 to 3 per cent on a standard account and zero on a good one.
ATM fees, in two layers: your bank’s, and the machine operator’s, which is separate and disclosed on screen.
Dynamic currency conversion, which is the sneakiest of the four and gets almost everybody at least once.
Dynamic currency conversion, in detail
When you pay by card abroad, the terminal or ATM will often ask whether you want to be charged in your home currency or the local currency. Being offered your own currency feels helpful and it is a trap.
Choosing your home currency lets the merchant’s payment processor do the conversion at a rate they set, which is typically 3 to 7 per cent worse than your card’s. Choosing the local currency lets your card issuer convert at close to the interbank rate.
Always choose the local currency. Always. It is the single highest-value sentence in this article.
Some ATMs pre-select the home currency and make declining it look like cancelling. Read the screen.
The card setup that works
Two cards, on different networks, from different providers, kept in different places.
A fee-free travel debit card for ATM withdrawals — the specialised digital banks and a handful of high-street accounts do this with no foreign transaction fee and a monthly free withdrawal allowance.
A credit card with no foreign transaction fee for paying directly, because a credit card gives you chargeback protection that a debit card does not, and because it does not expose your actual account balance if the number is stolen.
Both need to be on different networks — one Visa, one Mastercard — because acceptance genuinely varies by country and occasionally by whole regions.
Keep them separate: one in your wallet, one in your bag. The point of two cards is that a theft is an inconvenience rather than an emergency.
Cash
Card acceptance has spread enormously but there are still whole categories that are cash-only: rural transport, markets, small guesthouses, national park fees in several countries, and tipping.
Withdraw larger amounts less often. Every withdrawal carries a fixed operator fee, so five withdrawals of $100 costs five times what one withdrawal of $500 does.
Use bank ATMs, inside or attached to a branch, rather than the standalone machines in tourist areas — those carry the highest operator fees and are the ones that get skimmed.
Carry an emergency reserve of $100–200 in clean, unmarked US dollars or euros, stored separately from everything else. In much of Africa, Central Asia and Latin America, dollars are directly exchangeable everywhere, and in a few countries they are effectively a second currency.
Note: several countries reject US dollar notes printed before a certain year, or with any tear or mark. Ask your bank for new notes.
Before you go
Tell your bank where you are going, or use the app’s travel notification. Card blocks abroad are common and are resolved with a phone call you may not be able to make cheaply.
Check the daily withdrawal limit and whether it is set in your currency or the local one.
Set up app-based banking and check it works over wifi without SMS, because SMS two-factor codes to a home number are the single most common way people get locked out of their own money abroad. An authenticator app is better.
Photograph both cards, front and back, and store the images in encrypted cloud storage along with your bank’s international phone number — which is not the freephone number, because that will not work from abroad.
The countries that are different
Currency controls exist: Argentina has had multiple exchange rates simultaneously, and the situation changes; Cuba, Iran and a few others are effectively cash-only for most foreign visitors because international cards do not work at all.
Closed currencies cannot legally be taken out of the country — Moroccan dirham, Indian rupee, Tunisian dinar among them. Spend or change them before you leave.
China runs on WeChat Pay and Alipay to a degree that makes cash awkward; both now accept foreign cards but need setting up before arrival.
Japan is still surprisingly cash-heavy, and 7-Eleven ATMs are the reliable ones for foreign cards.
What not to bother with
Travellers’ cheques are effectively dead and increasingly hard to cash.
Pre-loaded currency cards are usually worse than a good fee-free debit card, with a spread built into the load rate.
Buying currency at home for most destinations. The rate is worse than the ATM at the other end, and you arrive carrying cash you did not need.