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Updated on Wednesday, July 6, 2016
Even if you’ve got a wallet packed with credit cards, you’ll likely need cash at some point when you’re traveling abroad.
But managing cash abroad can get tricky — and downright expensive. Carry too much cash around and you might make yourself a juicy target for a pickpocket. Carry too little cash and you’ll wind up making frequent trips to the ATM, racking up a bruising trifecta of bank fees in the process.
Most banks charge foreign transaction fees (up to 3%) and fees for using your debit card at foreign ATMs (from $1 to $5 per transaction). On top of that, whichever vendor owns the ATM you’re using will probably tack on a surcharge of their own. One of the nastiest foreign ATM fees out there is levied by Bank of America. To take out cash abroad using your BofA card, you’ll get hit with a $5 flat fee, plus 3% of the total amount you withdraw.
Fees aside, there’s another reason to worry about using your debit card abroad: fraud. If your card is stolen or you use your card at an ATM that’s been fitted with a skimmer (a device that can copy your debit card number and PIN), you’re in a very vulnerable position. By the time you realize your card info has been stolen and you’re able to get in touch with your bank, your account could already be drained, leaving you cash poor in a foreign country.
Debit cards are treated differently than credit cards by banks. You may find yourself on the hook for some of the money stolen from you, depending on how long you wait to report it.
If you need cash abroad, here are a few savvy strategies you can use to avoid fraud and fees.
The best option: Use a bank account that has low or no foreign transaction fees
If your primary bank account has foreign transaction fees, it can make sense to open a separate account that has lower or no fees. You can use this account when you travel abroad. This way if you do experience fraud or are a victim of card skimming, you’ll still have your main checking and savings accounts to fall back on.
Here are two good options for low-fee checking accounts:
Charles Schwab High Yield Investor Checking
The Schwab Bank High Yield Investor Checking account is our top pick to handle your money while abroad. It’s an online checking account with no monthly fee or account minimum. There are also no foreign exchange transaction fees. You get unlimited fee rebates from any ATM in the entire world, which means Charles Schwab will reimburse you whenever you’re charged an ATM fee overseas. The account is also FDIC insured up to $250,000.
Aspiration Summit Account
The Aspiration Summit Account has no minimum monthly balance or maintenance fees and has FDIC insurance as well. Fees from foreign ATMs are reimbursed but there is a 1.1% foreign transaction fee.
The Aspiration Summit Account is fairly new and marketed as an exclusive product. You have to “secure a spot” on a waiting list before getting approved for an account. In a recent MagnifyMoney Aspiration Summit Account review, we found the approval timeframe can take about a month. However, a recent test found an invitation was immediately sent. If you’re traveling soon, you can see if you’re immediately invited, otherwise you might need a backup.
Although signing up with one of these checking accounts separately is safer, there are a few downsides to keep in mind:
- Opening up a new checking account that you don’t use often may not be convenient.
- Aspiration has some fine print fees. One that stands out besides the 1.1% foreign transaction fee is the $5 per month fee charged if your account goes dormant past 12 months.
- Checking accounts don’t have the same liability protections as credit cards. If your card gets skimmed, you need to report unauthorized purchases right away or you could be found liable for some of the loss.
For Zero Liability: Use a Credit Card Cash Advance
Credit card cash advances are typically a last resort when you’re in need of cash. If you are unable to pay your balance off before your bill comes due, you could get hit with interest rates of up to 25%. You will also likely get hit with a transaction fee, which can be up to 4% of the total cash advance amount.
But if you can use them responsibly — and pay them off right after you get your cash — they can be a decent alternative to paying a load of bank fees. The other benefit of using a credit card cash advance while traveling is that you will have all the fraud protections that come with credit card purchases. Furthermore, your bank account isn’t linked to the card so you can keep the majority of your cash safe from theft.
Again, only use a credit card cash advance if you are able to pay off the balance in full right away. And read the fine print carefully. Some credit cards will begin charging those double-digit interest fees from the first day you withdraw funds.
Check out our list of 20 credit cards that have NO cash advance fees. Here’s a deeper dive on one of our favorites, offered by PenFed Credit Union:
PenFed Credit Union Credit Cards
There are some smaller banks and credit unions that do not charge crazy high cash advance fees, such as PenFed Credit Union. Fortunately, anyone can join PenFed Credit Union. This credit union is unique because cards offered have no cash advance or foreign transaction fees. There is, however, interest to consider. PenFed credit card interest rates start as low as 10.24% for cash advances.
PenFed charges interest on the cash advance from the day it hits your account, no grace period. And if you are already carrying a balance on your credit card before you take out a cash advance, any payments you make will go toward your existing balance, not the balance from your cash advance.
There are some ways you may be able to get around the interest, however. You can make a payment on your card that would result in having a negative balance. For example, if you have a $0 balance on your card, making a payment of $500 would result in a negative balance of $500. This way, you’d be using the credit card more like a debit card and not racking up a large balance.
You can also make a payment online from your bank account as soon as you request the cash advance. Again, this will only work if you don’t have a pre-existing balance on the card. Otherwise, that payment will go to your previous charges first and cash advance last.
PenFed cash advances aren’t completely free, so we have to point out the negatives:
- Interest applies to your cash advance if you don’t pay it off right away.
- Applying for a PenFed card requires a hard pull on your credit report.
- PenFed does not reimburse ATM fees.
For Convenience: Load a Prepaid Travel Card
Your next option is using a prepaid travel card. The benefit of using a prepaid travel card is you don’t need to open a new bank account or sign up for a credit card. You can also go online to add more money on the prepaid card throughout your trip.
Travelex Multi-Currency Cash Passport Prepaid MasterCard
You can load the Travelex Cash Passport with currency of the destination you’re visiting. The website says there may be a purchase fee depending on where you get the card. Expect to pay a fee if you get the card at an airport. For instance, a call into a prepaid card counter at Baltimore-Washington International Airport uncovered a $9.95 purchase fee.
You should be aware of some other fine print fees as well. If you hop to a different country and need to exchange currency, the transaction fee is 5.5%. Travelex doesn’t charge you an ATM fee internationally, but the ATM operator may have a surcharge which will not be reimbursed.
Lastly, there’s a $3 per month inactivity fee if the card goes unused over 12 months. And if you want to refund money back into the US dollar there’s a $20 fee on top of the 5.5% foreign exchange fee.
AAA Visa TravelMoney
Another option is the AAA Visa TravelMoney card. The purchase fee for the card may be up to $14.95 but varies by AAA club. The international ATM fee is $3, and that doesn’t cover the surcharge of the host ATM you use. There’s also a foreign transaction fee of 3%. If your card goes inactive for over 12 months, the fee is $1.25 per month.
These cards are heavy on the fine print. Beware of the downsides:
- You’ll incur monthly inactivity fees if a prepaid travel card collects dust in your wallet.
- Zero liability doesn’t cover all transactions. For the AAA Visa TravelMoney card specifically, there’s Visa zero liability, except the coverage doesn’t include foreign ATM withdrawals.
- You can get hit hard by ATM and exchange fees.
The Old Fashioned Way: Take a Trip to Your Bank
Finally, there’s something to be said about walking into your brick-and-mortar bank and exchanging your cash for foreign currency. You can call your home bank or credit union first to compare exchange rates and then order currency. Traveling with cash will help you avoid fees and skimming scams overseas.
Traveler’s checks are decreasing in popularity, but are still an option. A traveler’s check is written out from the issuer (typically a bank or credit card company), and it’s like cash you can use to make a purchase. If you want money instead, you can take the check to a bank abroad to cash out.
If your traveler’s checks are lost or stolen the issuer can refund you. The downside is international exchange fees can apply. Some issuers charge a fee for checks as well. Lastly, finding banks and merchants that will accept your checks overseas or even know what a traveler’s check is can be a hassle.
In the excitement to get out and travel the world, don’t forget financial aspects of the trip. Not having a money plan and getting trapped with gotcha fees or having your money stolen can put a damper on your experience, so think ahead.