Although quite a few governments formerly controlled exchange rates, exchange is now a free, unregulated market in most of the developed world. My comments apply strictly to exchange in countries that do not control their exchange rates. Exchange in controlled countries is an entirely different game—one I can't begin to cover now.
A look at the scoreboard
On my last trip to London, I ran a comparison of how many dollars you'd have to exchange to net 100 pounds in cash or a charge. Here's what I found, using the various options, as adjusted for the current wholesale exchange rate of $1.77 per pound.
To charge a 100-pound purchase:
- $179 with a no-gouge MasterCard or Visa credit card
- $180 with an AmEx card
- $183-$184 with gouge MasterCard or Visa credit cards
For 100 pounds currency, using a debit (ATM) card at an ATM:
- $179 using a Bank of America ATM card at a Barclay's Bank ATM or a Citibank ATM card at a Citibank branch in London
- $181-$185 using most other ATM cards at most London banks
For 100 pounds currency, exchanging U.S. dollar currency or travelers checks:
- $187 at Lloyd's Bank
- $188 to buy a 100-pound travelers check in the U.S.
- $189 at Heathrow Airport
- $192 at Coutts Bank
- $193 at San Francisco Airport
- $196 at a typical London street "bureau de change"
Some basic game plans
Given the complexity of the situation, it's hard to develop "one size fits all" recommendations. Still, here are a few good general approaches:
- For credit card purchases, use a card issued by a bank that does not add a surcharge to foreign billings. Among those banks are Capital One, USAA, and quite a few smaller banks and credit unions.
- For cash, use a low-fee ATM card. If you're heading for Australia, Britain, Canada, France, or Germany, you can use a debit card from Bank of America without any fees at ATMS owned by one large bank in each of those countries. You can use a Citi debit card at Citi-owned ATMs in lots of foreign countries, although Citi's coverage is spotty in many places. Debit cards from quite a few smaller banks also allow no-fee or, at worst one-percent-fee, withdrawals from foreign ATMs.
Next week, I'll provide more extensive tables of fees and charges from some of the largest banks and credit-card issuers.