Save Money on Your Money While Traveling Abroad

Traveling abroad is rarely a cheap proposition. For a recent trip to Europe, I searched for bargain airfares and lodging online, which helped rack up some savings. But another area I found ripe for trimming: the fees on the money you use to pay for goods and services overseas. I'd rather put my money toward admission to a historic site, for instance, or to taste the local cuisine than waste it on obtaining the foreign currency I need to pay for those treats. Here's how you can save:

Go plastic. Credit cards offer some of the most favorable currency exchange rates. The exchange rate through Visa and MasterCard was recently 0.743 euros for one U.S. dollar, compared with 0.669 euros for a dollar from Travelex, one of the major exchange bureaus. "It's a noticeable difference," says Matt Schulz, senior industry analyst for CreditCards.com.

It's best to take a card with an embedded chip that uses a personal identification number for verification at purchase instead of a signature. (Some use both.) Chip and PIN technology provides extra security from data thieves and is the standard used worldwide, Schulz says.

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Big banks tend to charge annual fees for chip cards, so look to credit unions affiliated with the government, military and international organizations. Andrews Federal Credit Union's GlobeTrek Visa Rewards card is a chip and PIN card free of standard fees. Pentagon Federal Credit Union also offers several chip cards with no fees, including the PenFed Promise Visa. (You'll need to join the credit union, usually for a small fee.)

Although the need for a chip card "is a little overblown," says Ed Perkins, contributing editor for SmarterTravel.com, "it is a good idea to have one." Without one, you won't be able to use automated machines at train stations or gas stations, for instance. My chip card came in handy late one evening in Venice when I needed to buy a pass for the vaporetto, or water bus, to get back to my hotel. The ticket office had closed for the night at that vaporetto stop, but I was able to quickly do the transaction at an automated kiosk, which took only chip cards.

Ditch conversion fees. Get a card that doesn't levy a foreign-transaction fee, which can cost 1% to 3% of your purchase. In a 2014 study, CardHub.com found that, on average, using a credit or debit card with no foreign-transaction fee on the Visa and MasterCard networks was the cheapest way to convert currency.

Schulz says a fair number of these cards don't have annual fees either, such as Capital One's VentureOne Rewards and Quicksilver Cash Rewards cards. Bank of America's BankAmericard Travel Rewards card comes with a chip but uses a signature. Of the chip and PIN cards, the Andrews Federal card has no annual fee and no foreign-transaction fee. The PenFed chip cards don't have a foreign-transaction fee and most have no annual fee.

The savings can start even before you leave U.S. soil. For instance, before I left the U.S., I purchased airfare directly on BritishAirways.com for an intra-Europe leg of my trip. While I got charged in pound sterling, the conversion to dollars on my statement didn't include an extra fee because I used my no-foreign-transaction-fee credit card to buy the ticket.

Say no to dollars. Some retailers overseas will ask if you want to pay in dollars instead of the local currency. That sounds convenient, and at the end of a long trip, I said okay a couple of times on a day when I did a lot of Irish souvenir shopping. Big mistake! When you pay in dollars, the amount you're charged includes an exchange rate with a markup—meaning you just paid a sneaky conversion fee, even if you are careful to use a no-conversion-fee card like I was. And if you use a card that does charge conversion fees, you'll suffer a double whammy because you'll get socked with that fee, too.

Slash fees on cash. I planned to use my no-foreign-transaction-fee credit card whenever I could, but I couldn't avoid getting cash because I traveled in the Balkans, where cash is king over credit. Even in countries, such as England, where credit is readily accepted, you'll need some cash for small purchases.

But wait to get foreign currency until you arrive at your destination. Then go to a local ATM—it is the cheapest way to get currency, often at a wholesale rate. I was a bit unnerved to arrive overseas with no local currency, but as soon as I got off the plane, I hit an ATM in the airport and quickly had some local currency in hand and at a favorable exchange rate. If possible, wait until you get into town and go to a local bank's ATM, which can have better exchange rates than an airport ATM. Skip the currency exchanges. "Bureaus of exchange generally have the highest transfer rates," says Pauline Frommer, editorial director of travel publisher Frommer's.

Of course, ATMs have costs. Before traveling, check your bank's overseas policy. "Some banks charge $3 to $5 per withdrawal, some charge a 3% conversion fee, and some bad actors charge both," Perkins says. If your bank charges a flat fee, withdraw larger amounts fewer times.

If you're going to travel a lot, Perkins says, "open an account at a bank with a good overseas policy." Perkins says he keeps an account at Bank of America for traveling purposes because account holders can benefit from its international bank partnerships. You can use a Bank of America debit card at the ATMs of France's BNP Paribas and United Kingdom's Barclays, for instance, without paying an out-of-network fee. (Go to www.bankofamerica.com for the list of partner banks.)

A few banks refund ATM fees worldwide. Account holders of Charles Schwab High Yield Investor Checking, Bangor Savings Bank Benefit Checking and Capital One 360 Checking offer this feature. These three also offer no-foreign-transaction-fee debit cards. A bonus, says Odysseas Papadimitriou, chief executive officer of CardHub.com: You'll save time because you won't have to go searching for an ATM that is in network to cut costs.

Avoid using your credit card at the ATM. Such a withdrawal is usually considered a cash advance, with interest racking up immediately.

Cut out the middleman. You're headed to France and know a couple who just came back from a trip to Spain? Ask them if they have any leftover euros they'd like to sell you. And when you return from a trip, see if you know anyone who has an upcoming trip to a country that uses any leftover currency you have. When I returned to the U.S., I was quickly able to unload my remaining 15 euros fee-free to a co-worker headed to Europe a few days later. We both got a favorable exchange rate, and I had dollars back in my wallet.

Exchanging with people in your sphere means you can also offload coins, which exchange bureaus and banks won't take. With coins in larger denominations, such as two euros, commonly used abroad and often given back as change, it's easy to amass a mound of coins, even if you're careful to use them while traveling. Selling those coins to a friend could result in a sizable amount of dollars back in your wallet. At recent exchange rates, if you come back into the U.S. with coins worth 20 pounds, that's an unusable $33.62 if you can't offload them.

Another way to make good use of your remaining foreign currency before you come home: Put leftover coins and paper currency toward your last hotel bill, and pay the balance on your credit card.