There are a lot of financial considerations when traveling outside of the US. What’s the best or cheapest way to obtain local currency? Are traveler’s checks still a thing? Should you pay in local currency or US dollars when paying with a credit card? What are foreign transaction fees? Which cards are accepted?

Read on as I break down these commonly asked questions.

Which cards are accepted outside of the US?

I’ll start with an easy one here. As a rule, Visa and MasterCard are by far the most widely accepted credit cards outside of the US. American Express is accepted in more and more places these days, but you’ll find it’s often restricted to more high-end or US-centric brands. You’ll most likely be able to pay for your hotel or a nice meal with your Amex card, but perhaps not your groceries or a hostel, for example. Discover cards were accepted in even fewer locations than American Express.

TLDR; always travel with a Visa or MasterCard, and take American Express or Discover with the expectation that it won’t be accepted everywhere.

Are traveler’s checks still used?

The use of traveler’s checks has really dwindled in recent years. Credit cards cover most of the functions that traveler’s checks used to, allowing you to avoid carrying large amounts of cash and have some security if they are lost or stolen. However, credit cards offer these protections as well so there’s no need to use traveler’s checks anymore.

Should you pay in local currency or US dollars when paying with a credit card?

This is the question that seems to trip up travelers the most. It’s tempting to pay in US dollars because it saves you the math of figuring out the conversion in your head, and some people assume this avoids foreign transaction fees as well.

You should always, always, ALWAYS pay in local currency.

Paying in US dollars utilizes what is called dynamic currency conversion. This means that the merchant converts the charges from the local currency to US dollars on your behalf. This is almost always a terrible exchange rate and your purchase will cost you more. Paying in local currency means that the issuing bank (i.e. Chase, etc) will convert the purchase. This is typically the best available rate and will be the cheapest way to complete the purchase.

TLDR; ALWAYS PAY IN LOCAL CURRENCY.  

What are foreign transaction fees?

Many credit cards charge a foreign transaction fee on any purchases made outside of the US. Travelers often mistakenly believe that if they pay in US dollars at a merchant in, say, Spain, that they will avoid being charged a foreign transaction fee. This is not true. Foreign transaction fees are assessed based on the location of the purchase, not the currency it was charged in.

The best way to avoid this fee (often around 3%) is to ensure you utilize cards with no foreign transaction fees. NerdWallet has a recent ranking of the Best No Foreign Transaction Fee Cards.

What’s the best / cheapest way to obtain local currency?

Another question that gets asked of me is what the best way to get local currency is. I always just pull cash out of an ATM using my Charles Schwab debit card. This has several benefits: there are typically ATMs at the airport, ensuring you have the cash immediately. The exchange rate is usually pretty good since it’s done at the bank’s rate. If you use the Charles Schwab ATM card, your ATM fees will be reimbursed. While there may be money exchange options with slightly better exchange rates, the overall convenience and low cost of this option wins for me every time