We just returned from a 21-day adventure trip on the Trans-Siberian Railroad from St. Petersburg to Beijing. It was a tour (12 people, mostly Australians, with a Russian guide) and so much of the trip cost was prepaid. We did need local, foreign (to us) currency for food, water, souvenirs, and incidentals. I did some things right and I did some things wrong regarding foreign currency. Let me share.
Get your foreign currency ahead of time. It is always a good idea to have some local currency when you arrive when you arrive in a new country to facilitate travel to your first hotel. A good rule of thumb is not to exchange money at the arrival airport (or other port of entry) where rates are not good and commissions can be high. Larger banks in the U.S. do have currency exchange services, but the rates tend to be lousy. I bought Russian rubles in the U.S. at 28.32 for each $1; in Russia the rate for one U.S. dollar was 31.20 rubles. This represents a 9% rate difference. In other words, for my $100 in U.S. money, I received only $91 of buying power in rubles in Russia. I purchased way too much foreign money in the U.S. My recommendation: purchase $100 in local currency for each country visited prior to leaving the U.S.
Buying foreign money abroad. Back last century I would purchase foreign currency with U.S. dollar traveler’s checks. For some reason traveler’s checks don’t work as well today. Best now is to use U.S. dollars cash (downside, of course, is the risk of losing a large amount of cash). Take $100 and $50 bills and make sure they are the newest vintage and very crisp. Avoid street vendors who approach you with large purses full of money. No telling if the rates are fair or the notes counterfeit, and your unfamiliarity with the local currency is your disadvantage. I do not recommend getting cash advances from ATM machines with credit or debit cards. The reason is fees; fees for ATM use (from your bank, the foreign bank, and the ATM machine itself); fees for the cash advance; fees for currency exchange; etc. Use U.S. dollars to exchange money. Find banks or “foreign exchange” facilities with published rates and no or very low commissions. Don’t be afraid to shop around.
Credit and Debit cards. Most cards have foreign exchange fees of at least 3%. Find a card with a zero exchange fee rate (like I have) or a 1% exchange rate (like my girlfriend). Use the card for large purchases – hotels, travel, souvenirs. If the restaurant will take your credit card, use it. The idea here is to preserve your U.S. dollars in case things cost more than you anticipated.
Safety. Note that over many, many years of foreign travel, I have had only one incident – my pocket was picked in the Rome subway. The theft was done by an expert because I felt nothing. The wallet contained only a small amount of cash, but losing it was not a pleasant experience (see the picture of me sitting in the Rome police department waiting room). Always use a money belt for passport, travel documents, and the bulk of your cash. Have only $20-$30 equivalent in foreign currency available and keep that in a zippered pocket in your shirt. I now carry a fake money belt and a fake wallet in case of a strong-armed robbery attempt. Be careful of carrying money in backpacks and vests which can be searched without your knowledge. I would never leave money or other valuables in your suitcase in a hotel room. Don’t use outside ATMs; don’t exchange money at night; if possible, have a companion accompany you to exchange money. Read your guide book and listen to your tour guide to find out the areas where pickpockets do their dirty work.
Common mistakes. It is hard to figure out ahead of time just how much foreign currency you will need. It is a bad thing to run out of money before you leave a country. It is also a bad thing to have to exchange the left-over foreign currency to another foreign currency or back to U.S. dollars at the end of your country visit. We changed our left-over rubles for Mongolian money at a bank in Ulaanbaatar (it is not possible to get some foreign money in the U.S., Mongolia is an example). We decided to give our left-over Mongolian money as a tip to our tour guide who travels frequently there. Use up all your coins – they won’t exchange coins. I broke my “don’t exchange money at the airport” rule in Beijing at the end of the trip. I had $60 in Chinese money left over; with commission, they gave me a $50 bill. Generally, don’t pay for anything in U.S. dollars when bargaining in a store or market; the rate will be unfavorable.
The biggest foreign exchange mistake is not to have a plan before you go. Give foreign some thought well before you leave, and have a great trip.