What Is the Cheapest Way To Exchange Money? Monito’s 2022 Guide on Fees, Currency Exchange, and Best Alternatives

For most people, travelling abroad is an exciting and leisurely way to spend time off, characterised by new experiences, sights, tastes, and smells. However, while most people try to keep a check on the main costs of their trip abroad — e.g. hotels, transport, eating out, etc. — not everybody remembers to keep such a close eye on a less obvious expense — paying for foreign cash.

While cashless payments are on the rise, cash is still king in many parts of the world, including parts of Europe and Asia. As a result, dodging the (sometimes surprisingly exorbitant) cost of accessing foreign banknotes by finding the best way to exchange currency remains as important as ever.

In this guide, we explore the two main ways to get cash abroad: bank or credit union currency exchange and withdrawing cash from ATMs overseas. Then, we break down the costs of each and delve into if exchanging money before you travel makes the most sense for you. Finally, we end things off with general tips for finding the cheapest way to get cash abroad.

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Option 1 — Use a Bank or Credit Union Currency Exchange

Despite commonly given advice, banks and credit unions are rarely the best places to exchange currency nor are they the cheapest. You can exchange money this way either before you travel or during your trip at a credit union, bank, or bureau de change — both commonly found in airports and foreign cities.

Bank and Credit Union Currency Exchange Fees

This popular (but expensive) way to convert money will get you a physical stack of foreign currency banknotes. It is far from the cheapest way to get convert money because of the following three fees:

1. Transaction fee: Banks and credit unions often charge a fixed fee or variable commission onto every currency conversion you make.
2. Delivery fee: If you'd like to have the foreign cash delivered directly to your home before you travel, this will come with an additional delivery surcharge.
3. Exchange rate margin: In all cases, your money will be converted at an exchange rate that is weaker than the real market rate. Banks, credit unions, and other money exchangers will pocket the difference. This tends to form the highest cost of exchanging currency.

Credit Union Currency Exchange

We once found that America First Credit Union, a standard credit union in the United States, was converting $1 USD into 0.85019 Euros even though the mid-market exchange rate was at $1 USD = 0.90201 Euros*. That's a sizable 5.74% fee.

According to Monito's research, the total cost of ordering foreign banknotes combined tends to range from 2.15% to a whopping 16.60% of the total amount converted, depending on where you exchange cash and how much you exchange in the first place.

*Exchange rates recorded on 3 March 2022 11:27 CEST.

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Option 2 — Withdrawing Foreign Currency at the ATM

Withdrawing cash from a foreign ATM can either be a pricey endeavour or the best way to exchange currency, depending on exactly how you get the job done. Before we explore why, let's take a look at the costs associated with withdrawing money outside of your home country.

Foreign ATM Withdrawal Fees

According to Condé Nast, withdrawal fees typically range from US$2.00 to US$5.00 per withdrawal, in addition to other service fees for foreign currency services. Taken together, paying at foreign ATMs typically includes any combination of the following types of fees:

• Foreign transaction fee: Banks or ATM networks (such as Euronet) charge a fee for withdrawals from their ATMs. These fees range usually range between US$2.00 and US$5.00 per withdrawal but can sometimes be higher or include a commission charge of up to 3.00% of the transfer amount, in addition to the fixed amount.
• Dynamic currency conversion: A sneaky fee charged for converting a foreign currency payment into an ATM's local currency. These fees can be higher than 10.00% of the transaction value at the extreme (see more on avoiding this fee below).
• Exchange rate margin: In all cases, you'll be charged a margin that forms the difference between the bid price of the foreign currency from your card issuer and the ask price you'll be paying. This sometimes forms the highest cost to get cash abroad.
• Bank charges: This charge is made by your home bank. If the foreign ATM network you use is outside of your own bank's network or a partner network (which is often the case), you will likely be charged a fee by your bank.

What's the Best Way To Get Foreign Currency for Travel?

While these costs may seem like a lot (and they can indeed add up quickly) if you're planning to withdraw cash at ATMs while abroad, you'll be saving money in almost all cases compared to buying the foreign currency directly at a bureau de change, bank, or credit union.

Fortunately, many of the costs associated with the banks — and sometimes even the ATMs themselves — can be avoided when withdrawing cash from abroad by choosing the right card. For example, some banks offer debit card and prepaid card offerings that charge low or no fees for overseas cash withdrawals. These include:

• Charles Schwab's High Yield Investor Checking Account in the US, which comes with a Visa Platinum debit card offering free foreign ATM withdrawals (including reimbursing those charged by foreign ATM networks);
• Virgin Money's M Plus Account in the UK, which charges no fees on overseas spending. If you plan to frequently withdraw money while overseas, we recommend exploring among the card options available to you that charge low or no fees on overseas withdrawals, as you could save a lot over the long run by doing so.
• Take a look at Monito's guide to the best banks for international travel to find out more.

Convert Money with a Neobank Travel Card

Similarly, another savvy option is opening an account with a neobank or ordering a specialist service travel card. These cards typically work well alongside a primary bank account and offer extremely competitive pricing for foreign ATM withdrawals. These include Wise, Revolut, N26, Monese, and others.

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Option 3 — Opening an Overseas Bank Account

Opening a bank account overseas may seem difficult or exclusive, but it can in fact be an excellent way to exchange foreign currencies while abroad when you travel to a specific country or region frequently. You generally have two options when opening a bank account overseas:

• Opening an account with a high-street bank in another country;
• Opening an account with an international digital bank.

Store Money in a High Street Bank

Opening a bank account with a traditional high-street bank in another country will likely require you to be present in that country. We further detail how to open a bank account as a foreigner in our many guides on the UK, Japan, the US, Germany, and much more.

Since these banks will require you to present a fair amount of documentation, including passports, visas, and (sometimes) proof of residency, we recommend the second option for your travel purposes.

Open an International Digital Bank Account

If you have no desire of becoming a resident of the country that you're traveling to, then you may consider an international digital bank — and withdraw money from ATMs with their travel card. (If you are planning to become a resident of a foreign country, then look at our in-depth guide on how to open a foreign bank account online.)

International digital bank accounts complement traditional bank accounts well. While you may access savings accounts, investments, and lines of credit with your high-street bank, you can use a digital bank for much more favourable foreign exchange rates and cross-border fees. 

These international digital banks, also known as neobanks, offer services exclusively online with a digital app. Neobanks like N26 and Monzo are legally recognized as banks and provide legitimate banking products, such as loans and deposit insurance. This distinction is what sets neobanks apart from E-money institutions such as Wise or Revolut.

Best Neobanks To Exchange Currency

For one of the cheapest ways to get cash from an ATM while abroad (and enjoy the additional products that come with more standard banking), then you may consider opening an account with a neobank.

N26 has partnered with Wise, allowing you to withdraw from an ATM using their travel card with a 0% foreign exchange rate fee. They do charge 1.7% as an ATM withdrawal fee, however, while Monese, Revolut, and Wise charge 0% on such transactions. Restrictions apply so check out our guide to choosing the best travel money cards in 2022.

N26 is only available to EU/EEA residents while Monzo is available for individuals with UK addresses. See our reviews on neobanks for more eligibility details.

Option 4 — Exchange Currency With an Online Foreign Currency Specialist

Do you like the feeling of security when you arrive in a foreign country with their local currency already in hand? Currency exchange providers may be a suitable option for you as they specialize in cash pickup services for small and medium sums of money. Compared to banks and credit unions, they are in most cases the easier and cheaper option to exchange money before you travel.

How To Get Foreign Currency With an Online Specialist

Unlike cashless transfer services such as Wise, foreign currency exchange providers like the Currency Online Group and ACE-FX offer cash pickup services. They’ll have your money ready for you at your local branch — or you can pay an extra delivery fee to conveniently send the cash to your door. Some providers do offer same-day delivery, but just make sure to do this in advance of your travel departure.

Their services will charge an exchange rate margin. You'll pay the margin between the market rate of the foreign currency and the provider's asking price. As mentioned at the beginning of this article, banks also offer this service but foreign currency specialists are often cheaper.

Compare the Best Ways To Exchange Currency

To find the best foreign currency exchange provider, tailored for you and your travel destination, use Monito's real-time comparison engine. You'll easily be able to compare banks and currency exchange providers and then select which service best fits your needs.

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How To Find the Best Way To Exchange Foreign Currency

Finding the cheapest way to get cash abroad doesn't necessarily need to involve withdrawing cash at foreign ATMs using a specialist travel card.

Rules of Thumb For Foreign Currency Exchange

While this method will make your cash withdrawals as optimized and low-cost as possible, there are nonetheless several general rules of thumb to follow to keep the costs down more generally:

• Check your bank's ATM network: Visit your bank's website or mobile app to see whether or not it operates an ATM network or has a partner ATM network in the country to which you're travelling. If it does, opt to withdraw cash only from those ATMs if possible, as you'll likely be charged lower withdrawal fees.
• Make fewer but larger cash withdrawals: Because of the costs associated with ATM withdrawals, it usually makes more sense to withdraw larger sums of money rather than making multiple smaller withdrawals.

Things To Avoid Before Exchanging Currency

On the other hand, here are the four main things to avoid when trying to find the cheapest way to get cash abroad:

1. Don't use bureaux de change: Currency conversion offices and bureaux de change at airports and in foreign cities typically charge a high exchange rate margin ranging between 2.15% and 16.60% of the value exchanged.
2. Don't withdraw from ATMs in your home currency: When withdrawing cash, always pay in the local currency and not in your home currency; otherwise, you'll likely pay a hidden dynamic currency conversion fee of up to 10.00% or more of the transaction value.
3. Don't withdraw from ATMs using your credit card: International credit card withdrawals can sometimes come with additional fees of up to around 5.00% due to cash advance, meaning your withdraw can be subject to snowballing interest rates. These costs are more typically associated with US credit cards.
4. Don't top up a travel card with a credit card: While quick, using a credit card to top up a travel card is generally the most expensive way to load money into a travel card. In general, we recommend using a bank transfer to get the job done instead.