How I Get Foreign Cash For Travel: Currency Exchange Guide

Key Points

I save time and money on cash conversions. And so can you.

• My travel-friendly debit card refunds ATM fees worldwide and gives me better exchange rates than other banks.

• ATMs want me to overpay, but I don’t.

I travel often and I’ve worked on international payment systems as a software engineer. I’ll teach you how exchange rates work so that you’ll always know if you’re getting a good deal.

What Service I Use & Why

I use a Schwab Bank debit card for foreign cash withdrawals. It’s a great choice for Americans.

• Note: If you’re from elsewhere, check how to evaluate your alternatives below to make sure you get the same benefits.

Schwab gives me unlimited ATM fee rebates, zero markups or fees on top of the Visa network exchange rate, and zero monthly account maintenance fees.

Opening a checking account does require you to open a brokerage account at the same time, but both are free and have no minimums.

That means I walk up to any ATM in any country any time I need cash, without having to think about it.

Watch Out: ATMs Want You To Overpay

That said, ATMs will try to make money off of you by offering to handle the currency conversion instead of your bank.

You’ll be asked to choose what currency to withdraw from your bank account—either your home currency where the ATM handles the conversion (bad), or foreign currency where your bank handles it (good).

Always choose the foreign currency.

If you don’t and the ATM handles the conversion, you get a worse exchange rate plus a fee that will not be reimbursed. This is called Dynamic Currency Conversion (DCC).

When you get to a screen with buttons for choosing a currency, ignore any intentionally confusing or misleading messages and always select the foreign currency—the one that’s local to the country you’re visiting.

That way, you’ll never overpay.

How Exchange Rates Work

Exchange rates include spreads, markups, and fees.

Businesses involved in foreign exchange markets buy or sell a given currency at different prices and they make money from that difference. This is called a spread.

• Example: If the mid-market USD to JPY exchange rate is $1 for ¥150, a business might offer to buy USD with JPY at ¥149 and sell JPY for USD at ¥151.

There’s a chain of middlemen between the central banks that issue currencies and the businesses that swap them for you.

Some charge markups on exchange rates through a wider spread and others charge additional fees, which mean that you can’t get the lowest exchange rates available to banks and large businesses that trade with each other at the interbank rate or better.

In the future, central bank digital currencies might give consumers access to wholesale rates, but there are pros and cons associated with the removal of all middlemen between consumers and currency issuers.

For now, your best rate comes from minimizing the number of middlemen involved in your transaction.

How To Compare Your Alternatives

A good exchange rate for major currencies is one that’s within 0.5% of reference rates published by central banks like the U.S. Federal Reserve, the Bank of Japan, or the European Central Bank. Minor currencies can have higher markups.

Unlike with stocks, there’s no law requiring foreign exchange to be offered to you at the best available price, so it’s up to you to minimize unnecessary fees.

Some businesses, like Visa, are transparent. They have an exchange rate calculator that tells you exactly how much of a markup they charge on top of the European Central Bank Rate.

• Note: As I’m writing in early August 2024, Visa’s USD to EUR markup is 0.13% and for USD to JPY it’s 0.57%. When the value of a currency is volatile, as is the case with the Japanese Yen right now, markups trend higher.

With a Schwab debit card, those are your rates because there are no markups or other fees on top of Visa’s rate.

Chase has a Sapphire Banking account that also meets my criteria, but to avoid their $25 monthly account fee you need to have at least $75,000 banked or invested across Chase products. I don’t use them because I strongly believe in equal access to financial services, but I have acquaintances who speak highly of it.

When you look at other options, your rates will be close to mine if you:

• Avoid banks and money transfer services that charge a markup on their wholesale exchange rate (~1–5%).
• Avoid banks and money transfer services that charge flat or percentage-based fees separately from any markup on the exchange rate itself.
• Avoid services that claim to charge no fees while offering unreasonable markups (~20%) on their wholesale exchange rates.

And that’s everything you need to know to get foreign cash at the best rates possible.

Why Do I Know All This?

I’ve worked on international payment systems handling millions of dollars across a dozen major and minor currencies as a software engineer.

Plus, I travel pretty often and spend most of the year in Tokyo.

Beyond that, I write to answer the kinds of questions I get offline about money and technology. There’s plenty of useful knowledge out there that isn’t widely known, and my experiences have given me a lot to share.

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