After pausing to write about, what I was going to write about, I return to the currency exchange dilemma. As you read in Part One, I have now gone over to the “dark side” and am using a charge card to pay for all our expenditures this year. Not just any charge card, but a special travel charge card that does not charge extra for currency exchange for foreign transactions. For the record, any new major writing I have done for this re-write will be highlighted as a quote like these first three paragraphs.
That all-talked-about, cash is still a very important part of your financial dealings when wintering in Spain, or any other foreign country for that matter.
Before I drill down into some new thoughts about that though, let’s return to my original article and wax poetic about when most of us were out travelling for the first time – when we were all long-haired hippie types wandering around Europe. Some of us still have the Jalabas we bought in Marrakesh from that time. 🙂
Ahh… The Good Old Days
Boomers! Remember when we were all hitchhiking around Europe and other far-off places in the 1960s and 1970s? Think back to what most of us did to have money available. There were no such things as ATMs and no real way of accessing any funds you might have in a bank account at home. I’m pretty sure that you, like me, packed up a bunch of American Express cheques to cash as you travelled. Ah, the good old days.
Do you remember as soon as you crossed the border… especially in Europe? … you immediately had to go to a currency exchange kiosk and exchange your leftover funds from one country for a new one. And this was not made easy. I recall having to flash the passport and sign documents each and every time I wanted to cash an Amex check or exchange money – usually after spending an inordinate amount of time searching for a location.
The hunt for money was all part of the experience at the time, and we generally took it all in stride. Still, through it all, we probably did not give a lot of thought to whether we were getting our money exchanged at a favourable rate.
The answer to that question was.… No… We were getting hosed on every single exchange. Every time we bought a cheque, cashed a cheque, or exchanged money, someone was making a small amount for handling the transaction and we were losing a small amount every time.
I must tell you; things have not changed all that much. Yes, it is easier to get money while we are travelling. You can walk up to virtually any ATM in the world and yank money out of your chequing account at home. Or you can wander into the great proliferation of currency exchange kiosks all over the world and exchange money from whatever country of origin you are from, or from whatever country you just visited. But we are still getting hosed on every transaction.
Not only are we getting hosed, we are also getting hosed in very creative new ways. Your financial travel goal should become, “How do I ensure that ‘they’ are extracting as little of my money in fees as possible?”
This article is meant to provide you with some insights on how our money is being syphoned off through various financial institutions or companies as we navigate turning our money into local money. And, it will explain how to turn the faucet down so the drain is just the absolutely necessary trickle.
I am going to be using Europe and Euros as my ongoing example in this article simply because we will be heading over there soon. But what I have to say, really applies to most places in the world.
You Don’t Need to Take Cash with You
First off, you don’t need to load up on foreign currency at a currency exchange office, or your bank of choice before you leave the country. They will certainly tag you for as much in fees as you will get hit up for in a foreign country.
And don’t go checking to see if you can still buy travellers’ checks… I’m sure you can because it is probably still a good way for financial institutions to pick up a few stray dollars. But getting cash in local currency wherever you are is just as easy as it is in Canada. You just walk up to an ATM, stick in your debit card, and “Bob’s your uncle”.
Having said that, let me add a bit of a caveat. I do like to have a little bit of the currency I’m going to need in my pocket when I land. If at the end of a trip to a place in the world that I know I am going to go back to, I will try and bring home some currency with me so that I have it immediately on hand for the next trip. Let me explain why.
We have travelled wide and far and very occasionally we’ve been hit with an unexpected drama immediately upon arrival. The last time we flew into Madrid, we discovered that all the taxi drivers were on strike, and we ended up having to figure out the bus system to our hotel… an unpleasant, stress-inducing surprise. When I arrive in a foreign country, I don’t want the potential “surprise” to be that all the bank machines are down, and I can’t get local money to pay for a taxi to our hotel. Arriving in Europe with €100 in your pocket is not a bad thing.
But You do Need Cash
At home, we are used to paying for virtually everything with our debit cards, or our charge cards, no matter how big or small the amount. Such is not the case in other parts of the world.
Even in Europe, cash is still heavily favoured for many day-to-day transactions. You will find this particularly true in restaurants and small businesses. Yes, you will be walking around with more money in your pockets, but that is not an issue as long as you are paying attention to the most basic ways to prevent pickpockets from relieving you of your cash.
So, you do not load up with foreign cash before you leave home to make all the cash payments that will be required of you, AND if you want to minimize the currency exchange rate, and other fees involved in most financial transactions abroad, you will need a way to turn your financial resources at home into local cash in a cost-effective manner… the good old ATM.
So let me provide some updated thoughts on the use of cash. If you have read part one, you will know that credit cards are now much more widely used, or at least accepted, in pretty much all venues in Spain. Cash payment is not required to the same extent it once was.
And to repeat, I’m pretty sure we have the pandemic to thank for this. Remember when we were all washing down our multitude of boxed online purchases when they arrived at the door? Even having done that, we still isolated them in the garage for a couple of days? It was the exact same thing with paper currency. Nobody wanted to touch it because they thought they could get infected that way.
Hence, a total 180° turn to charge card acceptance in Europe and other places I am sure.
BUT!
Even now with the wide acceptance of charge card use in Spain and other parts of Europe, you will still require cash to pay for many things – e.g. taxis and some small businesses. And, if you do not have one of the fancy new fee-free travel cards, paying with cash remains a better option than using your conventional charge card.
The ATM… Is the Answer
What it all boils down to is that getting cash out of an ATM is your best means of getting money… and getting it in the very cheapest way possible.
We have been doing this for years. Whenever we get to Europe, the very first thing we do is find an ATM in the airport and withdraw some cash. We started doing this after listening to Rick Steves offer this up as a smart thing to do. He has long been a proponent of using cash to pay for most of your purchases in Europe and getting that cash out of local ATMs. I would like to think that a guy who has spent several months a year in Europe for decades would have it all figured out.
To quote from Rick’s great ATM tips article…
“An ATM will normally give you a better exchange rate than you’d get if you were buying foreign currency with cash or travelers’ checks, since the exchange is made at the interbank wholesale rate. “
As I look at the exchange rate that I am receiving at ATMs here in Spain in 2024 I’m beginning to get a little bit suspicious of this claim. I’m going to try and die deeper into this after I get home. Stay tuned.
The “Interbank Wholesale Rate” is absolutely the best you can do when converting your own currency into… in this case euros. But what about fees? You will still get tagged for fees by the financial institution operating the ATM you are using and probably by your bank at home for making the withdrawal from your Canadian account. And those fees can either be a percentage of the withdrawal or a flat rate… It varies.
So, the second thing you need to be aware of when using ATMs abroad is how to minimize those fees. The easiest way to accomplish that is to make fewer transactions by taking out large quantities of cash instead of making many small withdrawals. Typically, we will take €500 out of an ATM at a time. As I write this in 2024 that is about CAD $750.
Additionally, be aware of what your bank charges you to undertake international transactions on your debit card. For example, we get two free international transactions per month, but after that, we pay $5.00 per withdrawal. If we can get away with making only two withdrawals in a month, we don’t get charged anything. Some Canadian banks do offer unlimited free international debit withdrawals under certain banking plans.
Not all ATMs… or Banks… are Created Equal
It also matters whose machines you choose to draw your funds from. As a rule, it is best to go to a local bank’s ATM rather than to one operated by a business (e.g. Euronet in Europe). The private companies that operate these machines tend to charge much higher fees than the banks. You may have experienced this in Canada when using a machine that is clearly not operated by a financial institution.
Even foreign banks tend to charge different rates for individuals using a foreign debit card to access their personal accounts on their machines. This caught my attention this past winter when I got cash out of a Santander Bank ATM in Spain. They were clearly charging way more than any other bank that I had withdrawn cash through previously. It was an eye-opener.
To get a handle on which banks’ ATMs are the most cost-effective to use, you should do a quick Google search and find out what these local banks are charging foreigners to use their ATMs. I did this in preparation for our return to Spain in 2023 and discovered that there was a wide range in the fees charged amongst Spanish banks. The following are a few examples itemized on a website I found that addressed that question:
“ING: no fees
Unicaja Banco: no fees
BBVA: no fees
CaixaBank: no fees – €2.00
Sabadell: €1.80 – €5.00
Cajamar: €1.85 – €2.00
Santander: €2.00 – €8.00”
And here I must interject some relevant 2024 information. The amounts that Spanish and international banks charge for foreign card transactions appear to be ever elusive and fluid. The list of banks and rates just above here certainly does not apply anymore. Except for one.
I have gone to several banks, because there are many close by where we are living, and tested whether they charge fees or not. When they get around to telling you that there will be a fee of a few euros, it’s right at the end of the process. This probably results in people who have gone through all the work to get to that point from continuing and paying the fee… not me!
I intentionally went through the process at several banks and cancelled my transaction at the last second when I saw that they were going to tag on a few euros. So far this year the only bank I have found that charges no fees is the one pictured above; that is Unicaja Banco (it was also listed above as having no fees in 2023).
We always make a point of seeking out bank ATMs at an actual bank whenever possible. Our thinking is the people around us are not paying attention to what we are doing because everyone is there to make some sort of financial transaction.
You will notice that there are frequently other ATMs located close to these banks … often operated by private companies. I suppose the idea is if you get bored with waiting in line at the bank ATM, you may just slip over and use one that doesn’t have a big lineup.
There is no more risk when using a foreign bank’s ATM than there is when using one at home. Yes, you do have to be mindful as you do in Canada for criminals, who might be “shoulder surfing” in hopes of identifying someone’s pin for a card that they will later attempt to steal. But you are no more at risk of being robbed than you would be at home. European criminals do use “card skimmers” on ATMs just like they do in North America, so it’s not a bad idea to make sure the device you are using looks and feels authentic.
When we do a cash withdrawal, both of us usually go, and one of us provides a mindful buffer for the other during the process.
Foreign Currency Conversion Kiosks
It is tempting to stroll up to a currency conversion kiosk in an airport as you are disembarking and exchange a bunch of Canadian money for foreign currency. But don’t do it. You are taking an unnecessary financial hit simply for convenience. Hang onto those Canadian dollars that are burning a hole in your pocket until you get home.
And, as I mentioned, don’t make a currency exchange before you leave home at either your bank or an exchange office. But, after making that pronouncement, I offer up a possible exception.
The possible exception involves exchanging one foreign currency for another. I did this in 2023, and it made a whole lot of sense. Like many Canadians, we used to go to the United States with some regularity. Florida was our destination for winter getaways before we switched and started going to Spain. And, I typically go on at least one US golf getaway during the winter… not since the beginning of the pandemic, of course.
The net result of all that is that we had a US dollar bank account in which we kept US dollars as a hedge against currency fluctuations to finance these travels. Because we no longer winter in Florida or have any interest in travelling to the US for that matter, those funds had become “dead money”.
Last year, I took some of that “dead money” to a local currency exchange bureau and exchanged some US dollars for Euros. Part of the rationale for doing that was that the US dollar was trading strongly against the euro, and we ended up getting a much more favourable exchange rate than we would have if we had exchanged Canadian dollars. Interestingly, it was our banker who told us to go there rather than do the exchange at his bank.
Euro Currency Bank Account
I did think that the way to go might be to set up a bank account in Canada that allows you to save euros in the same way we have been saving US dollars. For the record, several banks do offer these types of accounts. The two I investigated were obtainable through HBSC and Scotia Bank.
My thought was that I would set up an account and purchase euros when the exchange rate was favourable. When I came up with this idea the euro was worth about $1.30 Canadian, while now it has drifted up to just over $1.50 Canadian… that part of the plan would have worked out very nicely.
The second part of the plan was that I would use the debit card issued by whatever bank I set up the account with to withdraw funds in Europe directly from my Canadian euro bank account. Unfortunately, you are not allowed to do that. Canadians can only draw on Canadian dollar bank accounts when they are travelling internationally.
As it turns out individuals can only do “in-bank” withdrawals from a foreign currency account in Canada. The net result was that if I wanted to use the money in my euro account, I would have to draw the funds all out before travelling… Sheesh!
It All Comes Back to ATMs
There you have it. When you drill down into all the various fees that can trip you up while performing international transactions, it is clear that withdrawals of larger amounts of cash out of local ATMs is probably the best way to go… unless you want to pay for the use of a transaction fee free special travel card.
I was thinking about talking about some other “money” related aspects of international travel, like tipping, but I think this is enough money information for you to digest right now.
If you would like to take a broader look at money-related travel issues, then I would suggest that you go to the “Rick Steves’ website”. He has an entire section on international money-related subjects that you can find here.
