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Should I Exchange Currency Before I Travel?

Traveling overseas, you need to confirm how you’ll actually pay for things in a currency other than your own. How will you handle day-to-day expenses if merchants don’t accept your money? Naturally, people ask: should I exchange currency before I travel? We’ll use this article to outline pros, cons, and alternatives to exchanging your money at home. 


In addition to writing about his and Jenna’s travel and work adventures, Chipp is a CPA and founder of Walutes Capital, a real estate development and accounting firm. Wearing this “other hat,” Chipp offers real estate investment and development consulting services to clients. If you’d like help with your own real estate investing journey, contact Chipp here to set up an appointment! 

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How Does Currency Exchange Work?


Different countries use different currencies. For example, the US dollar is accepted throughout the United States, its territories, and a handful of other countries. In Europe, most (though not all) countries use the euro. Traveling in Mexico? You’ll need to use the peso. 


So what happens if you have US dollars but need to buy something in euros? You have to trade (i.e. exchange) your dollars for euros. And, like all markets, the values of different currencies fluctuate. Today, one dollar may buy .80 euros. Tomorrow, that same dollar may buy .85 or .75 euros. Currency exchange is the process of trading currencies based on the prevailing market rate at that point in time (NOTE: A more complex type of currency exchange involves trading based on future rates, but that technique doesn’t apply to most travelers). 


Many banks will allow you to trade currencies without a fee, meaning you just buy another currency at whatever that day’s market rate is. On the other hand, some places (e.g. airport kiosks) will charge a fee for these currency exchange services. For instance, say you want to exchange $100 for the equivalent amount of euros. A fee-based money exchange may charge you a flat fee or a percentage of the total amount traded, so you end up getting less in the new currency than you could buy at market rates. 

This background leads into the main question in this article: should travelers exchange money before they head to another country? No clear-cut answer exists. Instead, we’ll explain the pros and cons to trading currency before heading overseas in the next section.

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Pros and Cons to Exchanging Currency Before Travels


Here are three major advantages to exchanging money before you travel:


  • Pro 1: Peace of Mind. If you exchange all your money before leaving home, you don’t have to stress about finding a place to do so when you arrive in a foreign, likely unfamiliar, place. 

  • Pro 2: No-Fee Exchanges from Trusted Banks. If you have an account, many banks will exchange money (at least major currencies) for free. This can save you money that fee-based exchange houses will charge. 

  • Pro 3: Immediate Access to Cash Upon Arrival Overseas. When you arrive in a foreign country, you’ll likely need cash right away to get from the airport to where you’re staying. Plus, you’ll probably want to buy some food. If you’ve already exchanged money, you won’t have to worry about these arrival-related travel costs. 


On the other hand, here are three potential drawbacks to exchanging money before heading overseas: 


  • Con 1: Centralized Risk. If you exchange all your travel budget before leaving, you’ve put all your eggs in one basket. If you get pick-pocketed or somehow lose the bag with your cash, this approach can lead to a world of hurt. (NOTE: We highly recommend this travel money pouch to keep your cash and documents safe!).

  • Con 2: Exchange Rate Risk. Due to constant ups and downs in currency markets, exchanging all your money up-front can mean you miss out on better future exchange rates. However, the opposite is true, as well, meaning you may get the best rates if they continue to climb. 

  • Con 3: Cost of Living Risk. It’s good to have a travel budget, but let’s be honest - we’ve all broken budgets before. If you exchange all your cash before leaving and have no back-up plan for accessing more money in a foreign currency, what happens when you run out of money?  

Paying for a beer tasting with South African rand

Paying for a beer tasting with South African rand

Other Cash and Payment Options for International Travelers


So what’s the answer? As a result of our travel experiences, we fall in the middle. That is, we recommend exchanging some money before traveling, but definitely not all of it. Typically, we’ll exchange the equivalent of two days’ worth of cash needs in our new destination (which can differ significantly depending on where you’re going). This gives us a buffer for getting from the airport to where we’re staying plus some extra cash for daily expenses. 


Then, for the rest of our time traveling, we rely on the following techniques for getting cash and paying for stuff: 


Local ATMs


Local ATMs provide you cash at the current exchange rate without an exchange fee. But, you have to confirm with your home country bank that it won’t charge a conversion fee. Additionally, while you won’t need to pay an exchange fee, you likely will need to pay an ATM fee. To balance this, we typically hit an ATM every two to three days. This means we 1) have enough cash to get around and cover expenses, but 2) not enough where if we get pickpocketed the loss will derail the rest of our trip.


Credit Cards without International Transaction Fees 


Wherever possible, we try to pay with credit cards while overseas. If you get a travel card, you won’t get charged a foreign exchange fee by the card company. And, using credit cards has the added benefit of minimizing the amount of cash you have to carry, lowering travel risk. 


International Transfer Apps 


For larger purchases (e.g. booking accommodations for a self-guided safari in Namibia), we used Wise, an international money transfer app that lets you send funds in your own currency to a recipient in another currency. You definitely don’t want to carry around thousands of dollars (or any currency) for a big purchase, so apps like Wise 1) streamline, and 2) protect these transactions. 


How Much Cash to Carry Overseas


Related question: how much cash should I carry overseas? Once again, there’s no clear answer to this question. It depends on the situation. However, we’ve settled on a rule of thumb. Typically, we like to have two days worth of expenses in local currency for “walking-around money.” This gives us the comfort of knowing we’ll be able to cover most daily purchases if a place doesn’t accept credit cards. At the same time, would losing this cash suck? Absolutely! But, if we got pickpocketed and lost this amount, we’d still have enough of our travel budget we could pull from an ATM to keep enjoying our trip. 

At the same time, we alway keep some US dollars hidden as our “break-glass-in-case-of-emergency” stash. That way, you always have something in a worst-case scenario of losing ATM and credit card access. For longer trips, this may be a few hundred dollars. For shorter ones, a hundred may do. Ultimately, this amount should depend on 1) your financial situation, 2) cost of living wherever you’re traveling, and 3) how much emergency peace of mind you feel is necessary. 

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Affiliate Disclosure


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