Currency Exchange Study: How To Save On International Spending
Converting U.S. dollars into foreign currency is necessary for most trips abroad, and you have two general options for doing so: 1) automatically with a credit card; and 2) converting hard currency at a bank or airport kiosk. But which offers the best deal?
This might seem like a trivial concern, but the difference between the best and worst options could amount to as much as $600 over the course of a weeklong European vacation for a family of four, for example.
With that in mind, WalletHub surveyed the nation’s largest consumer banks and credit unions as well as the world’s two largest card networks (Visa and MasterCard) and the country’s largest currency exchange service (Travelex at New York City’s John F. Kennedy Airport) in order to help international travelers minimize costs and maximize comfort. Both for uniformity’s sake and because the Euro is the most prevalent foreign currency, we used the U.S. Dollar-to-Euro exchange rate as of May 12, 2016 as a barometer, determining the dollar amount needed to buy one Euro from each company.
Cheapest Option: A no-foreign-transaction-fee credit card saves travelers 10.84% relative to Travelex and 6.41% compared to the average bank/credit union.
Numbers are averages and use of a no-foreign-fee card is assumed.
Lack Of Consumer Awareness: Banks, credit unions and currency-exchange services don’t appear interested in reducing their significant markups.
Note: 2014 was the first year that Credit Union data was collected.
Bank vs. Credit Union: Surprisingly, it’s slightly more expensive to convert hard currency at a credit union than at a bank.
Best & Worst Banks/Credit Unions: State Employees CU and Northern Trust Bank are the best institutions for currency conversion, while RBS Citizens Bank and First Tech CU are the worst.
|Top 3||Bank/Credit Union||% Higher Than Credit Card / Debit Card||Bottom 3||Bank/Credit Union||% Higher Than Credit Card / Debit Card|
|1||State Employees Credit Union||1.51%||27||ESL Federal Credit Union||9.94%|
|2||Northern Trust||3.49%||28||First Tech Federal Credit Union||11.22%|
|3||BMO Harris Bank||3.83%||29||RBS Citizens||11.24%|
The credit cards and checking accounts below (which may include offers from advertising partners) were chosen by WalletHub’s editors not only because they lack foreign transaction fees, but also because they excel in various popular usage categories – including rewards, no fee accounts and 0% introductory interest rates.
Barclaycard Arrival Plus
|Rewards: This card offers a $400 travel credit to those who spend at least $3K in the first three months. You also get the miles equivalent of 2% cash back across all purchases and a 5% travel redemption rebate.|
Capital One Quicksilver Cash Rewards
|No Annual Fee: In addition to having no annual fee, this card gives you 1.5% cash back across all purchases and a $100 bonus after you spend $500 in the first 3 months.|
HSBC Platinum Credit Card
|0% APR: You get 0% on purchases for the first 18 months you have this card, which does not charge an annual fee.|
BankAmericard Travel Rewards for Students Credit Card
|Student: In addition to a 20,000-point initial bonus for spending at least $1,000 within 90 days of account opening, students earn 3 points per $1 spent on travel and 1.5 points per $1 spent on everything else. This card, which does not charge an annual fee and is thus perfect for cost-effective credit building, also helps you avoid interest by offering 0% financing on new purchases for the first 12 months.|
Capital One Spark Cash
|Small Business: A great option for everyday business spending, this card provides small business owners with 2% cash back across all purchases as well as a $500 initial bonus for spending $4,500 in the first three months.|
|Checking Accounts / Debit Cards||Offer|
Charles Schwab High Yield Investor Checking
|Low Cost: This account does not charge a monthly fee and refunds all ATM owner surcharges.|
AmericaNet Rewards Checking
|High Rate: This account does not have a monthly fee, and users receive a $25 monthly ATM-fee rebate as well as a 1.5% APY on balances up to $10,000.|
1. Use a no foreign transaction fee credit card for the majority of international spending (this includes purchases made through foreign-based companies while still in the United States)
It’s common for international travelers, especially first-timers, not to feel ready to leave until they’ve got some of the hard currency used in their destination country. It’s just one of those things that’s traditionally been recommended.
But with the banking system becoming increasingly digital, it makes sense for the easiest way to buy things in a foreign currency to be with plastic. Why waste the time exchanging physical currency and risk carrying it around when a credit card handles the process automatically and gives the best possible exchange rates in the process? You’re going to save relative to a bank or airport kiosk exchange no matter what card you use, but getting a credit card with no foreign fees is an easy way to reduce costs even more. Just remember to get such a card before booking anything through a foreign-based company because if the transaction gets processed outside of the U.S., it will trigger a foreign surcharge.
2. Bring a debit card with low international ATM withdrawal fees as well
You’re going to need cash at some point in your trip – whether it’s for a cab, tipping a bellboy, or something else entirely. The best way to accommodate that need is to bring a Visa or MasterCard debit card, as long as it doesn’t charge too much for international ATM withdrawals. This will enable you to not only get the same low exchange rate as with your credit card, but you’ll also be able to take out cash as needed and reduce the damage a pickpocket could do.
3. Notify your bank of your travel plans
Banks will suspend your credit and debit cards due to suspicions of fraud if you do not alert them to the fact that you’re traveling out of the country. This might actually be a good idea even if you're traveling domestically because banks have been known to suspend accounts that display transactions outside one's normal geographic area.
4. Get the phone number to call your bank collect
If your card gets lost or stolen, being able to contact your bank will not only help nip any potential fraud in the bud, but most banks will also overnight you a new card. The bank will pay for the call too, so you needn’t worry about international charges.
5. Steer clear of dynamic currency conversion
If a merchant offers to convert your purchase total from the native currency to U.S. dollars, they might be trying to help you out. Or they could be looking for an excuse to apply a high exchange rate and squeeze a bit more money out of you. It’s best not to find out, especially when you can use your phone or a small pocket calculator to make quick conversions and better understand how much things cost.
|2016 Exchange Rate for 1 Euro||2016 Fee||% Higher Than Best Option|
|Credit Union Avg.||$1.2161||$3.33||5.33%|
|2016 Exchange Rate for 1 Euro||2016 Fee**||% Higher Than Credit Card / Debit Card*|
|BMO Harris Bank||$1.1879||$0.0||3.83%|
|First Republic Bank||$1.1892||$0.0||3.93%|
|Bank of the West||$1.1741||$5.0||4.32%|
|Bank of America||$1.1971||$0.0||4.57%|
|Fifth Third Bank||$1.2339||$0.0||7.41%|
|State Employees Credit Union||$1.1600||$0.0||1.51%|
|Bank Fund Staff Federal Credit Union||$1.1940||$0.0||4.32%|
|Onpoint Community Credit Union||$1.2029||$0.0***||5.03%|
|United Nations Federal Credit Union||$1.2097||$0.0||5.56%|
|Visions Federal Credit Union||$1.2320||$0.0||7.27%|
|Citizens Equity First Credit Union||$1.2119||$10.0||8.87%|
|Redstone Federal Credit Union||$1.2435||$5.0||9.66%|
|ESL Federal Credit Union||$1.2686||$0.0||9.94%|
|First Tech Federal Credit Union||$1.2225||$15.0||11.22%|
** Fee collected for in-person exchange.
***$10 is waived when $300 or more is exchanged.
We contacted 40 of the 50 largest credit unions, and only nine offer currency exchange services.