When traveling abroad, you need to do your research to make sure you’re getting the absolute best exchange rate—but even if you touch down in a foreign country having perfectly budgeted out your spending, the best laid plans can go awry. In particular, if you find yourself using a foreign ATM, it’s important you don’t make this costly mistake.
After you’ve entered your debit card, the machine is going to ask you if you’d prefer to be charged in your home currency (instead of the local currency), prompting you to “accept” or “decline.” Some people choose “accept” because they don’t quite understand what the prompt is asking. But if you see this prompt, it’s in your best interest to click “decline.” This is because if you accept the ATM’s offer to convert your withdrawal into your home currency, they will tack on an additionally hiked-up exchange rate fee for you to pay on top of whatever base fee the ATM charges. This practice is known as “dynamic currency conversion,” and it’s designed to take advantage of naive travelers to maximize the ATM’s profits.
If your modus operandi when you go abroad is to avoid the hassle of the ATM altogether, you have a few options. First, you can check to see if your credit card company will cover foreign transaction fees. While not a given, it’s a relatively common benefit, with certain credit cards from Chase, Bank of America, and Capital One all giving customers this perk. Additionally, you can try to get all of the currency you’ll need for the whole trip from the bank before leaving the country. Bank of America charges customers no fee on foreign currency exchanges over $1,000, and only charges a flat fee of $7.50 on orders below that figure. TD Bank has a similar $7.50 fee for currency exchanges, but with a minimum order amount of $250 and a maximum order of $1,500. Both options are much more competitive prices than what it would cost you to get money out of a foreign ATM.