Tips to Avoid Bank charges and extortionate Currency Conversion Rates

How to Avoid Bank Fees and Get the Best Currency Conversion Rate


Banks are greedy. They want your money. When you are travelling, seldom offer the best currency conversion rate and have all kinds of other ways of making you pay. Fortunately, it doesn’t have to be like that. There are ways to avoid bank fees and, if you are looking for the best currency conversion rate, it’s possible to save a fortune by forgetting about the banks and going an alternative route instead.

I’m going to begin this article by sharing my own experiences spending and withdrawing money abroad. Then I’m going to explain what I do now to ensure I always get the best currency conversion rate and avoid paying unnecessary bank fees. However, if this short lesson in the “history of Steve” does not interest you, please feel free to skip ahead.

The Problems I Used to Have Withdrawing Money Abroad

I travel a lot and, although my main bank account is in the Netherlands, I also have a few bank accounts in the UK. When I left the UK, three years ago, I only had British Bank accounts, money was tight, and I hated it every time my bank in the UK charged me for taking money out of a foreign machine. At the time, I tried to get around this by only making only one cash withdrawal per week and avoiding making any card payments at all. It seemed like a smart idea. If I was only withdrawing money once, the banks could only hit me with one charge per week, but I still felt like I was being robbed and wanted to find a way to avoid paying bank fees or, at the very least, significantly reduce them.

A Look at Some Average Bank Fees for Making Purchases or Cash Withdrawals Abroad

I’m going to use NatWest as an example. Other banks may charge fees that are a little more or a bit less, but they will all impose fees that will put a dent in our pocket.

At the moment, If I were to use my NatWest debit card abroad, every time I bought some groceries, paid for a meal or used it to pay for any goods or services at all I would be hit by a foreign purchase fee of at least £1. If I wanted to withdraw €100 from a machine, NatWest would charge me a £2 “Foreign Cash Fee” plus an additional £2.24 as a “Non-Sterling Transaction Fee“. That means I would be paying a total of £4.24, just to access my own money. Fees like that can add up fast.

The charges imposed are ridiculous. Most holidaymakers can find better things to do with their money. In many parts of Europe that £4.24 would be enough to pay for two or more large beers. The situation is even worse for expats, long-term travellers, or other people who are spending extended periods of time abroad.

If you want to avoid bank fees it’s also worth remembering the banks and commercial establishments that own some foreign cash machines sometimes add additional charges and, if you allow the machines to handle the conversion, they only offer the best currency conversion rate for the machine owner, who will be given a chance to profit at your expense.

Having a Foreign Bank Account Does Not Always Help

I work freelance and I’m normally paid in American dollars, so it makes no difference to me whether I convert those dollars to euros or British pounds. When I was living long-term in the Netherlands, one of the first things I did was open a Dutch bank account and link it to a newly-opened Dutch PayPal account. Prior to this, I had been sending money from my UK PayPal account to my Bank in the UK and then making a weekly cash machine withdrawal. I was paying PayPal to convert American Dollars to British Pounds and then paying bank fees for converting my pounds to euros. It was not a smart way to live. Having a Dutch bank account permits me to make card payments, free of charge, in any country that uses the euro currency. It also allows me to make free withdrawals from many cash machines in countries that use the euro. I made a good decision, but I later learned some banks would still try to make extra money from me.

Avoid Bank Fees by Choosing Your Cash Machine Carefully

How to Reduce Currency Conversion Rates and ChargesIt does not matter whether you are in Europe or elsewhere in the world, there are a lot of cash machines that are designed to rip you off. The free-standing terminals that are owned by shops and other businesses can be particularly bad. Even if you are trying to make a withdrawal from one in your own country, these machines will charge you every time you take money out, they seldom offer the best currency conversion rate, and you will still be paying your normal bank fees on top.

The machines owned by some banks can be equally bad. For example, when I’m in Spain, if I go to a terminal owned by Caixa Bank or Bankia and wish to withdraw euros from my Dutch bank account, there is no charge. If I wanted to use a terminal owned by the Spanish bank BBVA, there would be a charge added on top (imposed by BBVA). Consequently, I never use BBVA cash machines in Spain and recommend other travellers avoid them as well.

Although travellers who have banks in the USA, Australia, or other non-European countries would still be hit by their normal bank fees if they took money from a Caixa or Bankia terminal in Spain, using a BBVA terminal would present additional charges on top. That’s the main take-home point. A similar situation exists in all countries and many cash machines are set up to trick travellers into paying extra fees in other ways as well. If you are unsure which machines to use, try a few different banks and see if you can find one that’s not adding additional charges. It’s easy enough to cancel a transaction when machines are offering terms that are unfair.

Avoid the Perils of Dynamic Currency Conversion

The fact that you are reading this article shows you are keen to get the best currency conversion rate. Dynamic currency conversion is an option offered by cash machines all over the world and its primary function is to make the banks extra money by converting currency at unfavourable rates. It’s not a good way to go.

The problem is, the offer of dynamic currency conversion is presented in a way that can make it seem very attractive to people who are not used to using the currency of the country they are in at the time. For instance, an American who is used to thinking in cents and dollars, may find it very confusing if they are using a cash machine in the Czech Republic and see the minimum amount they can withdraw is 500—1000CZK. In other parts of Europe, the options presented for euros may seem less frightening, and the same can be said for British Pounds when visiting the UK, but many people prefer to know exactly how much money they are taking out in their own currency. Dynamic Currency Conversion makes this possible, but it also gives the banks the opportunity to make people pay through the nose. Go this route and you won’t be getting the best currency conversion rate and, in some cases, the markup can be as high as 18%. So if you truly want to hang on to as much of your cash as you can and get the best currency conversion rate, Dynamic Currency Conversion is not a good way to go and it’s worth being aware many merchants offer travellers the opportunity to pay using Dynamic Currency Conversion as well. Everyone wants a slice of the pie.

If you are shopping in a store and the merchant offers to charge you in your own currency by using Dynamic Currency Conversion, you have the right to insist on paying in the national currency of the country you are in. If the merchant is unwilling to let you do this, the best thing to do is turn and walk away. If you are using a cash machine that offers to “guarantee” or “lock-in” a favourable conversion rate, don’t be fooled. The rate will only be favourable to the bank or establishment that provides the machine. It will not be favourable to you. The only way to get the best currency conversion rate from one of these machines is to choose the option “proceed without conversion” or, in some cases, avoiding pressing “yes” for your own currency. Select the national currency instead.

The No. 1 Best Way to Avoid Bank Fees and Benefit From the Best Currency Conversion Rate

In my experience, the best way to avoid bank fees and secure the best currency conversion rate is to open a TransferWise Multi-Currency Account. It’s free to open the account, there are no annual charges, and the company also provides a multi-currency Mastercard debit card. If you are travelling when you open your account, don’t worry. TransferWise will send the card to your present accommodation instead of your home address (presuming you have one).

I’ve had a TransferWise Multi-Currency Account for quite some time now and it’s saved me a lot of money. If you haven’t skimmed the early section of this article, and have taken the time to look at the foreign transaction fees charged by NatWest, you will remember NatWest charge their customers £4.44 each time they take €100 out of a cashpoint in Europe. A British person who is travelling Europe would be able to use their TransferWise debit card to withdraw the same amount of euros at a fraction of the cost and the system is set up to always provide the most favourable currency conversion rate. At the time of writing, taking €100 out of a machine with my TransferWise card or making a €100 card payment would only cost me 31 pence (£0.31). That’s an incredible saving.

How to Avoid Bank Fees and Get the Best Currency Conversion Rate

My TransferWise Multi-Currency Account has helped me to avoid bank fees in other ways as well. I still occasionally use a British credit card. In the past, I used to have to transfer money from my Dutch bank account to my account with NatWest. Every time I did this, my Dutch bank charged me €7. Now I just log in to my TransferWise account and transfer the necessary amount of euros from my Dutch bank account to my Multi-Currency Account. The process is easy, it only takes a few minutes and the funds arrive straight away. Then I use TransferWise to convert the euros to GBP, pay the tiny fee for doing this, and then use my TransferWise debit card to pay my credit card bill. It’s so simple.

Most people are eligible for a TransferWise Multi-Currency Account, it’s possible to open an account quickly and easily and, once you have requested your debit card it should arrive quite fast. I was told to expect mine in a couple of weeks tops. It was with me within just a few days. When I move to a country with a different currency, I just add a new currency to my account. The TransferWise Multi-Currency Account has been a real game changer for me and, if you need to move money between currencies, because of travel, due to a need to send money to a loved one abroad, or for any other reason I highly recommend TransferWise. The service the company provides is second to none and can save you a small fortune. You can find out further details about the benefits of a TransferWise Multi-Currency Account and how the system works by visiting the TransferWise website.

The Bottom Line

Spending money abroad or withdrawing foreign currency from machines can be an expensive business, but it is possible to avoid bank fees and secure the best conversion rate. A TransferWise Multi-Currency Account helps make this possible, but it’s still Go Borderlessimportant to avoid using Dynamic Currency Conversion and stay well clear of cash machines that apply additional charges. This will allow you to keep more of your money for yourself and stop lining other people’s pockets.

I’ve been travelling full time for quite a long time now. The tips and information provided in this article come from personal experience. I’m not an expert on personal finances or international banking, but I do know what works well for me. Hopefully the methods I use to avoid bank fees and save money while travelling will work for you as well. However, if you know something I don’t, or think there is anything I’ve missed, please feel free to share your experience and let me know in the comments section below.

WISE UPDATE (March 5, 2021)

In March 2021, TransferWise rebranded and became “Wise.”

The account that was formerly known as a TransferWise Multi-Currency Account is now known as a Wise Multi-Currency Account. When the account first became available, it was called a TransferWise Borderless Account.  So, if you are confused about the difference between a TransferWise Borderless Account, a TransferWise Multi-Currency Account, and a Wise Multi-Currency Account, don’t be. Although the name has changed, all three accounts are the same.