Since I write a lot about living abroad and being a digital nomad, I get a lot of questions about money access. “Do you get a local bank account?” “Where should I put my money back home so I can get to it easily?” “Won’t I have to pay a fee every time I take cash from an ATM?”
For most people, it’s not all that complicated. You usually do not need a local bank account unless you have a local job or you need to deposit money to meet a retirement visa requirement (such as when living in Thailand). On the other hand, you do want to keep at least one account in your home country, for credit and tax purposes if nothing else.
The ways to access your money while traveling have narrowed to a few simple choices. In most destinations, you want to carry a bit of cash and access the rest with your ATM card. Then you want to use a credit card for big bills (like local plane tickets) and situations where you need protection if something doesn’t materialize (like a local tour).
The problem is, banks keep piling on fees to put more of that money on their own balance sheet each time, regardless of whether the transaction actually requires any effort on their part. If you’re not careful, the fees can add up to a night’s lodging expenses every few weeks, cutting into your budget.
Here’s how to keep the fees down or get rid of them completely, plus a tip on always having access to funds.
Avoid Credit Cards With Fees
Foreign transaction fees are less prevalent than they used to be thanks to heavy competition, but I still get socked with one by surprise now and then when I use a card I thought was safe and it’s not. When a card has these fees, they will soak you for 2% to 3% on each transaction abroad, on top of what they make on the transaction and exchange fees. This can happen even if you’re paying in dollars or are in a country where everything is in dollars, like Panama or Ecuador. It’s a virtual pickpocketing job.
The only issuer you can trust across the board with this is Capital One. None of their cards has a foreign transaction fee, so you don’t have to worry about which version you are getting. Most credit unions don’t either. For all of the other companies, some cards ream you, some don’t. In general, if it’s a premium card, an airline card, or has “travel” in the name, there won’t be a fee, but you always have to read the conditions before applying. The Amex green card has a 2.7% fee, gold, platinum, Hilton, and Delta ones do not. Some Chase and Citi ones charge 3%, some don’t. Don’t be a sucker: carry one without a fee when you travel abroad. If you have decent credit you can get multiple cards, so get a new one if yours has a fee. Preferably one with a nice sign-up bonus that gives you free travel.
Get an ATM and Debit Card Without Fees
The really big gotcha is ATM fees, where the local bank may charge you and then your bank at home will charge you again. Many banks will double-dip, charging you these fees on top of a monthly account fee. Then they’ll skim more off the transaction and call it an exchange fee, especially if you charge in your home currency instead of the local one. How can they get away with this? They pay a lot of money buying votes from Congress and most people don’t see the fees until they’re back home from vacation.
If you’re a frequent traveler or are permanently abroad, however, these multiple fees can really add up. Some of the worst offenders will charge a set amount on every transaction and then a percentage on top of that. It can easily exceed $10 with them just to get a few hundred bucks of your own money.
Thankfully, there are ways to get around these fees if you align yourself with the good guys. There are not many of these good guys though, so follow one of these four methods:
- Use a credit union with no fees that also reimburses local fees.
- Establish a cash account linked to a brokerage firm such as Schwab or Fidelity. They waive fees and reimburse the local ones,
- Get a checking account through Capital One 360.
- Only use the ATMs affiliated with your own bank and only IF they waive the fees for those (ScotiaBank for instance). You may need to maintain a minimum balance or be a “premium” account holder for this.
Have a Backup Plan
I took my cash, grabbed the receipt, and walked out the door…without my debit card. It was still in the machine. I went back later, but the bank said they don’t keep those cards and I would have to get a new one. No biggie normally, but I was in Mexico.
What would you do in this situation if that card provided your only access to cash?
Thankfully, I was able to compensate until another card arrived two weeks later. My wife was with me, first of all, and she had her own checking account. We could transfer between them electronically. Also, I had another debit card for a backup account. Plus I had credit cards I could at least use for restaurants and stores. I had redundancy, in other words. I had a backup plan.
If you’re traveling as a couple, don’t be in a hurry to consolidate your accounts. If one of you loses a card, gets robbed, or has to cut it up because of fraud, the other can step in and take over. Ideally both of you have at least one credit or debit card that’s not on you, that is placed somewhere else just in case. Ideally you have your accounts set up so that you can transfer between them. Having a Paypal account linked to your main bank account as well–with a Paypal debit card—gives you yet another backup option. (They now charge a $2.50 fee though for ATM withdrawals.)
In many countries, cash still rules, so it’s pretty tough to travel or live on a budget without pulling out the local currency on a regular basis. Set your finances up right before you leave and you could avoid a whole heap of fees on the road.