Using Money Wisely in Foreign Countries

I have been travelling to a number of foreign countries recently and have gained some experience in trying to get the best deal for my money in a number of situations. I will summarise them here with a view to advising would-be travellers.

Changing Money

When in a foreign country you will need substantial amounts of the local currency. Unlike the United States, plastic is not widely accepted. Of course, personal cheques made on US banks aren't exactly popular either. There are a number of ways you can change US$ into local currency. Not all of the methods will exchange at exactly the current exchange rate because of exchange fees and because dealers offer poorer rates. In the following sections, I will list the different ways to change your money with the pros and cons of each. In general, changing larger amounts of money is a good idea. However, you may end your trip with huge amounts of foreign currency that you may have to change cash to cash. Few big transactions are always better than many small transactions, but it means carrying a lot of money around.


When making purchases in a foreign country, your best bet is to use plastic. When you use your Mastercard or Visa or American Express, you get the rate of the day with no transaction fees and no dent to your hoard of local currency. However, not all establishments accept cards and those that do will often require a minimum amount of purchase. If you intend buying a lot, it's worth your while to hunt a bit for shops that accept cards even if such shops are a bit more expensive. By virtue of paying by card and getting a good exchange rate, you will end up paying less. Consider this example.

Let us say you go to a country whose local currency, the ¤, is quoted at ¤10 to 1 US$. You go to a shop and notice something you want to buys that costs ¤400. You do the math and figure this costs $40, right? Not quite. If you pay in cash, you have to factor in how you got that cash. Maybe you got the cash through an exchange in which you got ¤9.5 to the dollar. In addition, you probably paid $5 in fees for the $50 you changed into ¤. Therefore, your effective rate is (50 - 5) × 9.5 ÷ 50 = ¤8.55 to 1 US$. The trinket you plan to buy now costs 400 ÷ 8.55 = $46.78! Alert consumer that you are, you go to a neighbouring shop that sells the same item for ¤450 but accepts Visa. Now you end up paying 450 ÷ 10 = $45, a better deal, though not immediately apparent. This little example illustrates the mental math you have to do in order to conserve your money in foreign countries.

Of later, credit card companies have wised up to the fact that the cards are the best way to conduct business abroad, so they are now actively working to destroy that convenience by charging a foreign transaction fee. Typically, such a fee is around 3% of the purchase amount, which can add up to quite a bit. It befuddles me was to why the credit card companies feel compelled to grub this money because the alternative - pay by cash avoids all such fees and cause the credit card companies to lose business. If you get the cash efficiently, e.g., by using your ATM card, this is actually the best way to shop abroad, even if it means carrying wads of local currency.


Eating out is something you will do often when in a foreign country. Food is a major expense, hence it makes sense to spend a while planning how to eat out, yet save money. Here are a few tips.

Discount Cards

In a number of cities, you wil be enticed to buy cards that purport to give you discounts at various places, so much so that the cost of the card is covered in the discounts themselves. A few tips on these cards may come in handy.
Anand Natrajan, anand@anandnatrajan•com