Dear Creditnet: I don't like carrying cash when traveling, but I'm about to take a trip overseas and I know I'll need plenty of cash while I'm there to cover expenses I won't be able to pay for with my credit card.
How can I get local currency at the best possible rate? Should I use a my credit card or debit card to withdrawal cash at an ATM, or should I plan on exchanging dollars for local currency when I get there?
Answer: Don't even consider using your credit card to take out a cash advance. Not only will you get hit with a cash advance fee of somewhere in the neighborhood of 3%, but you'll also end up paying a ridiculous interest rate from the moment the cash is withdrawn. Add in the ATM fee you'll probably be charged, and you'll quickly see why cash advances are nothing more than a good way to waste your hard-earned money on unnecessary fees and interest charges.
I've done a lot of traveling overseas, especially in Asia, and my experience has been that the optimal way to get local currency at the best exchange rate is to find an ATM and use your debit/ATM card to withdrawal cash. This almost always ensures you get the best interbank exchange rate, which is usually 2 to 7 percent better than what you could find anywhere else. If you have a personal checking account with a bank that waives your ATM fees or actually has international ATMs where you'll be travelling, then you will obvioiusly be in an even better position to get the most local currency for your dollar.
This is the main reason I keep a personal bank account with HSBC. For example, I was recently in Mexico and found HSBC ATMs all over the place, as I have in many other parts of the world as well. While my hotel was offering 12 pesos per dollar and other money changers on the street were charging all sorts of confusing fees coupled with less than ideal exchange rates, I was able to walk over to an HSBC ATM and get over 13 pesos per dollar with no fees whatsoever.
HSBC even gave me the option of withdrawing cash in pesos or greenbacks, which I had never seen before, and it came in quite handy since I had brought very little cash and one of our dive guides required payment in US dollars. Thanks HSBC!
