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
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.
- Cash to Cash: Changing from cash to cash gives you the
best exchange rate, however, usually at a high transaction fee. It is
unclear to me why the transaction fee should be high at all for
cash, but this seems to be the trend. The transaction fee may be a
fixed amount or varying amount depending on the size of the
transaction. Always ask about the fee before you change your
money and then decide how much you want to change. In a cash to cash
exchange, you may change any currency to the local currency (or even
the currency of some third country). The risk is that you will be
carrying lots of cash around, and cash in different currencies is
just as palatable to a pickpocket as cash in the local currency.
- Traveller's Cheques to Cash: It's time to explode the myth
that TCs are your best bet to carry money around in a foreign country.
Hardly. The exchange rate that you get for converting TCs is often
poorer than the cash-to-cash rate. In addition, some exchange
centres will levy a fixed or variable transaction fee. Always
ask about the fee before you change your money and then decide on
how much you want to change. Many a time, the American Express
office in the foreign country will not charge a fee for changing
AmEx TCs into cash, but will charge a fee for changing Thomas Cook
TCs or other TCs into cash. Likewise, Thomas Cook may follow a
similar policy. TCs are accepted only at exchange centres and large
establishments who are willing to convert money, like 5-star hotels
(read: poor exchange rate). However, TCs are burglar-proof and are
a good backup plan even if you choose to spend money the other ways
I suggest. They are a bit of a nuisance to carry around.
- Credit Card to Cash: You can use your Mastercard or Visa
to withdraw money from the many ATMs in Europe and the increasing
number available in developing countries like India. You must know
your pin code in order to use the credit card to withdraw money, so
go prepared. You are dependent on the presence of an ATM nearby
before you do anything in a strange country, but the exchange rate
is the prevailing rate of the day. However, you are usually charged
a small fee for making a transaction. Often, the good rate makes
credit card withdrawal more attractive than other options despite
the fee. Go to ATMs in well-lit and crowded areas and hold on to
your plastic safely.
- ATM Card to Cash: This is the best way to change money.
The rate is the prevailing rate of the day, and the transaction fee is
usually limited to the nominal amount banks charge when you withdraw
from an ATM not their own. The downside is that not many ATMs in
foreign countries may accept your card. If you have a debit card
(usually, these double as ATM cards and can connect to the Visa or
Mastercard network), you're all set. Once again, ensure that you
withdraw from a safe ATM.
- Talent to Cash: This involves possessing a modicum of
artistic talent. In many European cities, you could set up stall and
sing, paint or play music at impromptu public concerts. Locals and
tourists (especially tourists!) are apt to fling large sums of money
and unusable change into your bag. Added up, this money will buy you
food for sure. Think about it... it means carrying your messy paints
or your guitar around, but it may well be worth it.
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
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.
- What you see is what you get: In most countries, with the
US being a very notable exception, the menu price of a dish is exactly
what you will be charged for that dish. This may be an important
factor when you are trying to stick to a budget when eating out.
However, WYSIWYG does not imply that there are no hidden charges.
- Sales Tax, Gratuity: In some European countries, you will
be charged a sales tax of around 15% on the food you eat. This policy,
followed by Italy and by some restaurants in France and India, is
very similar to the US policy of tacking on taxes at the end of a
meal. However, the implications are slightly different. In the US,
the tax is really a tax. In other countries, the tax is in lieu of a
tip, i.e., the moment you see that tax attached to your bill, you are
not obligated to tip.
- Cover Charge: Some countries (Italy, for example) follow a
despicable practice of charging you a cover charge for just sitting
at a table. The cover charge is a fixed, per-person amount that will
be added to your bill whether you order a seven course meal or just
a cup of coffee. Along with the compulsory gratuity, you can end up
paying double of what you expected to pay for your meal. Eating at
the bar may be one way of escaping the dreaded cover charge.
- Groceries: A way to eat inexpensively in all countries is
to walk into a grocery store or its equivalent and buy readymade food.
It's not quite as thrilling as eating in a restaurant and parleying
with the waiters, but it's far cheaper and you may be able to choose
your milieu, such as the base of the Eiffel Tower. Of course, if you
managed to pay for the groceries with ATM-derived cash, you should
really buy an extra bottle of wine for saving yourself a lot of money.
- Lunches vs. Dinners: In general, lunches are cheaper than
dinners despite the menu being the same. It's a wise idea to lunch
at a restaurant and dine at home. In most countries, the size of the
servings are not as much as the US. Also, there are no "sides" to a
dish unless the menu explicitly says so.
- Menu: French restaurants offer a combination of menus and
items à la carte. The menu meal is cheaper and involves
going through three courses: entrée, plat and
dessert. You may choose what you wish for each course from a
fixed list of items. There may be 2 or 3 menus for different price
ranges. If you go for the à la carte menu, you pick
and choose whatever you want to eat, but pay more.
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
- Youth Hostel Card: You could become a member of Youth
Hostels International by paying $25 per year (if you are below 26 years
of age). For additional amounts you can get maps and guides to Youth
Hostels in whichever continent you are travelling. If you are on a
tight budget, this is certainly the way to go. Youth Hostels are not
exactly the upper end of accomodations, but if you want to seriously
save money, you have to stay in these. Most Youth Hostels will require
you to show proof of membership, i.e., the card.
- Bulk Tickets: If you plan to stay in a particular city for
a while, it may be worth your while to procure a pass or bulk tickets
to the metro. For example, in Paris, a regular metro ticket costs 8
francs each way. However, you can buy a packet of 10 tickets (le
carnet des dix billets) for 46 francs, if you can manage to speak
enough French to get it. If you are travelling in a group, this is
certainly the way to go about the metro.
- City Cards: These are of doubtful value. An example is the
VeneziaCarte in Venice. It costs 5000£ (that's 5000 lira, or
roughly US$3), and purports to give discounts of 10-20% at restaurants,
stores and on boat rides. However, we found these discounts to be
non-existent. Firstly, the restaurant and store discounts were useless
because they were for somewhat expensive restaurants where even the
discounted charges were higher than what we could afford. Secondly, the
boat discounts were certainly not for the gondola rides. In fact, they
weren't for the public transport motorboats either! For that, you had
to buy yet another card. Buy a card only if you have been told by
someone that it is indeed a good deal.
- International Student Card: This did not seem like a useful
card at all. The only place where I saw a discount being offered on
this card was at the Louvre, where the price was cut by half if you had
this card. However, we visited the Louvre on a Sunday when all the
prices were halved anyway, card or no card, so it didn't seem like a
useful thing to have the card.
- Museum Cards: Many cities offer a museum card that lets you
get discounted tickets at all the museums in the city. This is useful
if you plan to visit a whole bunch of museums only, not just one. If
you want to spend all your days in Paris inside the museums, go for
this card. If you want to walk along the Seine, climb the Eiffel Tower,
eat crepes and maybe visit a museum, don't buy this card.