7 Money Mistakes to Avoid When Traveling Abroad

You’ve used your airline miles to save on your flight, carefully shopped around for the best hotel or lodging prices and done the hard work to save money on your international vacation.

But there’s one potential financial catch you may have overlooked: how you’ll pay for things once you’re abroad.

Exchanging money, withdrawing cash and using your credit or debit card overseas can all come with added costs. Unfavorable exchange rates, foreign transaction fees and ATM charges can quickly eat into your travel budget, and some of the most convenient options can also be among the most expensive. Before you leave, it helps to understand your payment and currency conversion options. Here are some common money mistakes to avoid when traveling internationally.

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1. Accepting dynamic currency conversion

Some businesses offer dynamic currency conversion when you make a purchase using a credit or debit card. If you accept the conversion, you can complete the transaction using U.S. currency. The card processor automatically calculates the conversion and adds on any additional fees.

Dynamic currency conversion rates often include a markup over the exchange rate that your bank would use. Extra fees may also be bundled into the conversion rate, so you’ll often pay a higher rate for dynamic currency conversion than you would if your bank performed the conversion.

Generally, you will save money by choosing to complete the transaction using local currency, then letting your card network handle the conversion.

2. Exchanging money at the airport

An automated teller machine is seen at the entrance to a bank office building in Chicago, Illinois

Airport currency exchange booths are convenient, especially if you arrive without any local cash. But you may pay a premium for that convenience. These booths often offer less favorable exchange rates than banks and may charge additional fees, making them one of the more expensive ways to get foreign currency.

If you know you’ll need cash when you arrive, consider planning ahead. Check whether your bank allows you to order foreign currency before your trip and compare the exchange rate and any fees. Another option is to wait until you reach your destination and withdraw a small amount of local currency from a bank-operated ATM. Just be sure to check your bank’s international ATM fees before you travel.

3. Using the wrong ATM

When you need cash abroad, look for an ATM operated by a bank rather than an independent ATM in an airport, hotel, bar or other high-traffic area. Independent ATMs may charge higher fees or offer less favorable currency conversion rates. A bank-operated ATM, particularly one located at or inside a bank branch, may offer a better option.

But using a bank ATM doesn’t necessarily mean the withdrawal will be free. You could still face several ATM fees. The ATM operator may charge a fee for the transaction, and your own bank may charge an out-of-network fee. International withdrawals can come with additional costs, too. According to Bankrate, international ATM withdrawals often carry an additional fee of 1% to 3% of the amount withdrawn.

Before your trip, check your bank’s international ATM policy. Some banks reimburse certain ATM fees, while others have partnerships with overseas banks that may allow you to withdraw cash with fewer fees. Knowing which ATMs to look for before you arrive can help you avoid unnecessary charges.

4. Choosing U.S. dollars at a foreign ATM

Woman inserting bank card into ATM machine

When using an ATM abroad, you may be asked whether you want the transaction converted to U.S. dollars or processed in the local currency. You might see a message such as, “This ATM offers conversion to your home currency.”

This is another form of dynamic currency conversion, similar to what you may encounter when paying with a credit or debit card at a store or restaurant. Choosing U.S. dollars allows the ATM operator to perform the currency conversion, often using an exchange rate that includes a markup or additional fees.

The wording on the screen isn’t always straightforward. You may be asked whether you want to “accept conversion,” “continue with conversion,” or be charged in your home currency. In most cases, choosing the local currency and declining the ATM’s conversion allows your bank or card network to handle the exchange instead.

Before completing the withdrawal, review the exchange rate and any fees displayed on the screen so you understand what you’ll be charged.

5. Paying foreign transaction fees

A foreign transaction fee is an extra charge some credit card issuers apply when you make purchases outside the U.S. or with a foreign merchant. These fees are often around 3% of the purchase price, which may not sound like much until you add up everything you spend during a trip.

For example, if you charge $6,000 in hotels, restaurants, transportation, shopping and other expenses to a card with a 3% foreign transaction fee, you could pay an additional $180 in fees.

Before traveling, check your credit card’s terms to see whether it charges foreign transaction fees. Many travel credit cards don’t charge them. If your current card does, compare your options before your trip and consider whether a card without foreign transaction fees makes sense for your spending and travel habits.

Planning a trip abroad?

Before you travel: Check whether your credit card charges foreign transaction fees.

If it does, see our picks for credit cards with no foreign transaction fees to find an option that could save you money abroad.

6. Taking a cash advance on your credit card

A cash advance on your credit card lets you borrow cash against your available credit, but it can be an expensive way to get money while traveling. Unlike a debit card withdrawal, which takes money directly from your bank account, a credit card cash advance is borrowed money that you’ll need to repay.

Cash advances typically begin accruing interest immediately, without the grace period that often applies to regular credit card purchases. You may also pay a cash advance fee, often around 3% to 5% of the amount withdrawn. Depending on where you get the cash, ATM fees may apply as well.

If you need cash while traveling, withdrawing money from your bank account with a debit card will generally be less expensive than taking a credit card cash advance. Check your bank’s international ATM fees and withdrawal policies before your trip so you know what to expect.

7. Carrying too much cash

It might be tempting to withdraw plenty of cash for your trip, but think carefully about the potential theft or loss of that money. If you have leftover currency at the end of your trip, you’ll need to convert that back to U.S. dollars, which isn’t convenient and comes at a conversion cost.

Consider using a mix of payment methods to cover your expenses during your trip, such as a credit card that doesn’t charge foreign transaction fees and some cash that you’ve converted. Keep some backup cash separate from your primary wallet in case of theft or loss.

In certain situations, cash may still be necessary, such as for easily tipping hotel staff or when you’re making small purchases, like buying snacks. It’s also helpful to have cash as a backup in case you experience an issue with your card or a business’ card reader is down, but for safety’s sake, don’t go overboard with the amount of cash you keep on hand.

Preparing for your trip

There are plenty of ways to access and spend money abroad, but some options can cost significantly more than others. Before you leave, familiarize yourself with your choices and make a plan for how you’ll pay for purchases and access cash.

A little preparation can help you avoid unnecessary conversion costs, foreign transaction fees and ATM charges, leaving more of your travel budget for the experiences you planned the trip for.

Put your vacation fund to work

Avoiding unnecessary fees can help you stretch your travel budget once you’re abroad, but smart planning can start well before you leave. If you’re setting aside money for an upcoming trip, consider keeping your vacation fund in a high-yield savings account or CD, where it can earn interest while you plan.