7 ways to save on overseas ATM withdrawals

Oct 13, 2019

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As you arrange travel for this fall and winter, don’t overlook your plan for withdrawing cash abroad. As TPG Senior Points & Miles Contributor Jason Steele explains, if you don’t prepare for the situation by bringing a debit card that waives fees, you can get slammed with some huge charges.

No matter how much you plan ahead, you’ll often need to withdraw money in the local currency when you’re overseas. While cash has always been king in developing countries, on my last trip to Japan I was surprised to find that credit cards were not accepted at nearly as many places as they are in the U.S. You never know when the need for cash will come up, so it pays to be prepared by having a debit card that won’t charge exorbitant fees.

In today’s post, I want to show you seven ways to save on ATM withdrawals during overseas trips.

Know if your card charges ATM fees

There are plenty of reasons to hold and use travel rewards cards, but they shouldn’t be your go-to when it comes to withdrawing cash at the ATM. Even if you use a card with no foreign transaction fees, the withdrawal will likely entail a large cash advance fee. 

And it gets worse: There’s no grace period on cash advances, so you’ll be incurring interest charges from the day of the withdrawal, usually at a rate that’s even higher than the purchase rate. 

There are travel rewards cards, such as the Chase Sapphire Preferred® Card, that will refund ATM fees — it’s just a matter of whether the ATM will accept the card or not. Bottom line: know before you go and bring backup.

Understand how debit card ATM fees work 

There are three ways you could be hit with fees when using your debit card overseas. First, your bank could charge you a fee for using an out-of-network ATM. Second, the bank that owns the ATM could tack on additional fees. Finally, you can be charged foreign transaction fees, just as with a credit card. Make sure you assess whether a given ATM will incur these fees before you withdraw money.

Look for a debit card that has no out-of-network fees 

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If you’re not careful, you can incur multiple fees with an ATM withdrawal. (Image courtesy of Shutterstock)

There’s nothing worse than being charged twice to use your ATM card at an out-of-network machine (once by your bank and once by the owner of the ATM). To avoid this, open an account that doesn’t impose out-of-network fees.

Use a debit card that’s part of a large network 

One way to avoid the fees from out-of-network transactions is to use a debit card that’s part of a large, international network. For example, Bank of America is part of the Global ATM Alliance, which has international partner ATMs in the UK, Italy, France, China, Germany, Mexico, Canada, Peru, Chile, Ukraine, Australia, New Zealand and the Caribbean. That said, Bank of America does add a 3% foreign transaction fee when you withdraw money abroad.

Look for a bank account or credit card that reimburses ATM fees 

Several banks and credit unions offer reimbursements for ATM fees charged by other banks. Some cap these fees, often at $10 per month, while Charles Schwab offers unlimited ATM reimbursements worldwide.

Watch out for foreign transaction fees 

When you’re taking out smaller amounts of money, a 3% foreign transaction fee is far preferable to a $3 ATM fee. But if you need to withdraw hundreds of dollars outside of the U.S., you should look for a debit card with no foreign transaction fees. This includes debit cards from Capital One, Charles Schwab and Discover. As for credit cards, check out our list of best no-foreign-transaction-fee credit cards.

Avoid changing money at the airport 

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Avoid exchanging currencies at the airport to get a better deal. (Image courtesy of Shutterstock)

If there’s one place where you’re guaranteed to get the worst deal, it’s at the arrivals area of an international airport. Here, you’ll always find the largest ATM fees, the least-favorable exchange rates and the highest likelihood of being short-changed. Avoid exchanging money at international train stations and ferry ports as well.

Other tips for saving money on currency conversion

  • Never underestimate the power of the U.S. dollar. While it’s important to have local currency, you may be able to receive a better effective exchange rate when using American dollars. I’m often surprised by how much demand there is for U.S. currency in foreign countries, and I’ve had great success when offering to pay in dollars, especially at smaller stores and with merchants in a large bazaar. On the other hand, hotel operators and other large companies often impose their own exchange rates, which can be very unfavorable.
  • Be extremely careful in paying in the local currency. Dynamic Currency Conversion, or DCC, is a popular scam with merchants and credit card processors. Supposedly, this “service” offers you the opportunity to pay in your local currency, but it really just adds a huge commission. In theory, you’re supposed to be asked to agree to this “service,” but between language barriers and the merchant’s incentive to earn a commission, many travelers are simply duped into these inflated charges. This happened to me when Hertz in Italy fraudulently added a 4.5% commission to my bill, but I successfully received a refund when I contacted its executive customer service. For more information about this issue, read TPG Director of the Points Lab Nick Ewen’s post, Dynamic Currency Conversion and Why You Should Avoid It.
  • Always contact your bank before you go. The only thing worse than paying extra fees for an ATM transaction is having your withdrawal declined. Yet this can happen if you travel overseas without notifying your bank in advance and it suspects fraud. Before you leave, call your bank and provide a list of the countries you plan on visiting, even if you just have a layover.

What to know before using ATMs in different regions

Regardless of where you’re traveling, a general rule of thumb is to always use ATMs in public spaces where you feel safe and secure. Be sure to check the card reader for anything suspicious like card skimmers, so you don’t become a victim of identity theft. Finally, always be aware of your surroundings when withdrawing money and entering secure personal information.

Here are some pointers for those traveling through different regions:

Europe: Similar to the U.S., ATMs are nearly everywhere and not too hard to find. Europe hasn’t completely adopted paperless payments in the way the U.S. has, so it’s always good to have some cash in your wallet when traveling through the region. This is especially important if you plan to travel to smaller towns or shop at local markets.

Middle East: Credit cards are generally accepted throughout the Middle East, but if you plan to go to smaller towns or certain countries — like Iran — you’ll want have U.S. dollars or the local currency and a no-fee debit or credit card for back-up. If you need to get cash out, you shouldn’t have any issues finding an ATM.

Asia: Cash is definitely still the main method of payment in most Asian countries, especially in Southeast Asia. ATMs aren’t too hard to find, but that’s highly dependent on what country you’re in. U.S. dollars are sometimes more valuable than the local currency in countries like Cambodia, Vietnam or Myanmar, so carry around some dollars for backup. Regardless, remember to pack a card that doesn’t charge foreign transaction fees and reimburses ATM fees. If your debit card charges foreign transaction fees, make larger withdrawals in the local currency to minimize those add-on charges. Make sure to have a secure wallet to carry all of your cash in. Cash is also important as you’ll occasionally have to pay for certain visas, like for Bangladesh, with cash upon arrival.

Africa: You likely won’t run into any issues finding an ATM in the big cities, but you may not be so lucky when on the outskirts. The U.S. dollar is highly valuable across the continent. In fact, many national parks only accept U.S. dollars, so you should come prepared with a decent amount of U.S. cash in an assortment of bills. The local currency is preferred in smaller towns, which you can withdrawal from local ATM.

South America: Cash is king in South America and credit cards are often not accepted. You’ll definitely be making lots of ATM trips while traveling through the continent so be sure to alert your bank about where exactly you’ll be traveling. The U.S. dollar is also commonly accepted, so it’s always good to have some dollars in case. Note that all 12 countries on the continent have different currencies, so you won’t want to take out too much of one currency if you plan to hop around.

Caribbean: U.S. dollars are the most widely accepted currency in the Caribbean, with the Euro and other local currencies behind it. Similar to traveling through other regions, it’s always good to carry around some cash in cash in case, but credit cards are pretty widely accepted throughout the region. When you need to replenish your cash head to the ATM, as that’s where you’re likely to get the best exchange rate. Note that if you’re traveling to Cuba, the cash situation is much different than the other islands. U.S. dollars are not widely accepted. In fact, if you try to convert U.S. dollars to Cuban Convertible Pesos (used by foreign visitors), you’ll often be charged a 10% commission by the government. Your best bet is to carry cash, since U.S. credit and debit cards are not accepted in the country.

Bottom line

There’s a time and a place to earn valuable points or miles by using a travel rewards credit card. Unfortunately, withdrawing money abroad is not one of them. By understanding the different ATM surcharges you could face and choosing the best debit cards to help you avoid them, you can access cash in other countries at little to no cost.

Additional reporting by Liz Hund.

Featured image by Getty Images.

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