Where to Exchange Currency Without Overpaying

The cheapest place to exchange money is usually your own bank before you leave

Your bank's exchange rate is almost always better than what you'll find at an airport, hotel, or currency exchange booth. Banks buy and sell foreign currency in bulk, so they move money at rates closer to the real market price. Airport exchanges and tourist-area booths buy in small amounts and mark up the rate by 5 to 15 percent to cover their costs and profit.

Order currency from your bank a few days before your trip. Most banks keep common currencies in stock (euros, pounds, Canadian dollars, Mexican pesos) but may need to order less common ones. You'll pay the bank's exchange rate on the day you order, not the day you pick it up. Some banks charge a flat fee ($5 to $15) for the service; others don't. Call ahead to ask what your bank charges and whether they have the currency you need.

If you're leaving in a few days and your bank doesn't have the currency, a local currency exchange shop (not an airport one) is your next option. These independent businesses often beat airport rates by 2 to 5 percent, though they still mark up the real rate. Search online for "currency exchange near me" and call a few places to compare their rates before you go.

Key Takeaways

• Your bank's rate is better than airport or hotel rates, and ordering a few days ahead locks in that rate before you travel.
• Airport currency exchanges charge 5 to 15 percent more than the real market rate, making them the most expensive option.
• ATMs in the destination country usually offer rates close to your bank's, but you'll pay a foreign transaction fee ($2 to $5 per withdrawal).
• Credit cards with no foreign transaction fees let you pay directly in local currency without exchanging cash at all.
• Never exchange money at hotels, tourist shops, or street vendors — their markups are the highest of all.

ATMs abroad often beat currency booths if your bank doesn't charge foreign fees

Withdrawing cash from an ATM in the country you're visiting gives you an exchange rate very close to what your bank pays for currency wholesale. The catch is the fee: most U.S. banks charge $2 to $5 per foreign ATM withdrawal, and the foreign bank may charge another $1 to $3. If you withdraw $100, you might pay $4 to $8 in fees total.

This math works in your favor only if you're withdrawing a decent amount at once. A $200 withdrawal with a $5 fee costs you 2.5 percent. A $50 withdrawal with the same $5 fee costs you 10 percent. Withdraw larger sums fewer times to keep fees from eating into your savings.

Some banks and credit unions don't charge foreign ATM fees at all — Charles Schwab Bank, Ally Bank, and some credit unions reimburse the fee the foreign bank charges. If your bank is one of them, using ATMs abroad is often your cheapest option. Check your bank's website or call before you leave to confirm whether they charge foreign ATM fees.

Credit cards with no foreign transaction fees eliminate the exchange step

A credit card that charges no foreign transaction fee lets you pay in the local currency without exchanging cash at all. The card company converts the amount at their rate (which is usually very close to the market rate) and you pay the bill when you get home. You avoid the markup that comes with exchanging physical cash.

Not all credit cards charge foreign transaction fees, but many do — typically 1 to 3 percent of each purchase. Before you travel, check your card's terms online or call the number on the back. If your card charges a foreign fee and you have another card that doesn't, bring the one without the fee.

Using a credit card also protects you if something goes wrong. If a merchant overcharges you or charges you twice, you can dispute it with your card company. Cash exchanges have no such protection — once the money changes hands, it's gone.

Avoid these high-markup places even in a pinch

Airport currency exchanges are convenient but charge some of the highest markups. They know travelers are in a hurry and have few other options. Rates are typically 5 to 15 percent worse than your bank's rate.

Hotels and resorts often exchange currency for guests, but their rates are even worse than airports — sometimes 10 to 20 percent over market. They do this because they know you're already there and unlikely to leave to find a better rate.

Tourist shops and street vendors in popular areas offer the worst rates of all. Some also short-change travelers or hand over counterfeit bills. Never exchange money on the street, no matter what rate they quote.

Prepaid travel cards that you load with foreign currency before you leave sound convenient but often charge hidden fees for loading, withdrawing, and converting. Compare the total cost against using your bank or ATM before you buy one.

How to compare rates before you exchange

The real exchange rate — called the mid-market rate — is published free online by XE.com, OANDA, or Google (type "USD to EUR" to see it). This is what banks pay each other. Any rate you see will be worse than this, because the business exchanging your money needs to make money on the deal.

When you get a quote from your bank or a currency exchange shop, subtract the mid-market rate from their rate. That difference is their markup. A markup of 1 to 2 percent is reasonable. A markup of 5 percent or more means you're paying too much.

Example: The mid-market rate for USD to euros is 0.92. Your bank quotes 0.91. That's a 1 percent markup — reasonable. An airport booth quotes 0.87. That's a 5 percent markup — expensive.

What to do if you need cash fast and didn't plan ahead

If you're leaving tomorrow and your bank doesn't have the currency, call a local currency exchange shop and ask if they have it in stock. Many do keep common currencies on hand. Their rate will be worse than your bank's, but better than an airport booth.

If you can't find a local exchange shop or they don't have what you need, withdraw cash from an ATM once you arrive. Yes, you'll pay a fee, but it's usually smaller than the markup at an airport exchange. Bring a debit card linked to a checking account and plan to withdraw enough to last a few days.

If you arrive with no cash and no way to get to an ATM immediately, use a credit card with no foreign transaction fee to pay for what you need. This is more expensive than an ATM withdrawal but avoids the worst markups.

Currency exchange for less common destinations

If you're traveling to a country where the currency is hard to find in the U.S., order from your bank as early as possible — sometimes two weeks ahead. If your bank can't get it, ask them to recommend a currency exchange shop that specializes in that region.

For very remote areas or countries with unstable currencies, exchanging money in-country is often your only option. In these cases, use ATMs in major cities where the rates are most competitive. Avoid exchanging money in small towns or rural areas, where markups are highest.

Some travelers to developing countries bring U.S. dollars and exchange them in-country. The rate is usually worse than an ATM, but sometimes it's your only choice. Never rely on this as your main plan — always have a backup way to get cash.

Frequently Asked Questions

Should I exchange money before I leave or wait until I arrive?

Exchange before you leave if your bank has the currency and doesn't charge a fee, or charges less than 2 percent. If your bank charges more than that or doesn't have it, wait and use an ATM abroad or pay with a credit card. Airport exchanges are always the most expensive option.

What's the difference between the mid-market rate and what I actually get?

The mid-market rate is what banks pay each other. When you exchange money, you get a worse rate because the business needs to profit. A markup of 1 to 3 percent is normal. Anything above 5 percent means you're paying too much.

Can I use my debit card to pay for things abroad, or do I have to exchange cash?

Yes, debit cards work like credit cards abroad — the bank converts the amount at their rate and you pay the fee when you get home. Check whether your bank charges a foreign transaction fee first. If it does, use a credit card without that fee instead.

Is it safe to carry a lot of cash when I travel?

Carrying large amounts of cash makes you a target for theft. Bring enough for a few days of expenses and use ATMs to withdraw more as you need it. Keep cash in different pockets or a money belt, and leave most of it in your hotel safe.

What if I exchange money and then my trip gets canceled?

Most banks will exchange foreign currency back to dollars, but they charge a fee and give you a worse rate than you paid. You'll lose money on both the original exchange and the return exchange. Travel insurance that covers trip cancellation is cheaper than this loss.