The Money Post

If you’re worried about getting ripped of while traveling internationally, you should be. You will get ripped off. By your bank.

So, here’s a few random pieces of information about how we handle money. The only caveat is that you really shouldn’t be taking financial advice from bums living in a VW bus*.

How do we get money and pay for stuff? The simple answer is… cash. This might change, but we’ve mostly been dealing in cash.Now that we just got a better credit card, this might change.

The Options:

ATMs -they are everywhere. Well, not everywhere, but most places. With a little planning, you can have a pocketful of cash at all times. Most machines in Latin America also dispense US dollars (for some reason) in case that makes you feel any better. Watch out for ridiculous fees (see below).

Credit cards – We rarely use them, and they have rarely been accepted where we’ve travel. For example, in Bolivia, people usually don’t even have change for their smallest printed bill, so handing them a credit card is pretty much out of the question. Aside from that, swiping credit card numbers and ordering 10 new laptops on the internet is still a pretty easy gig – even for novice crooks. We’ve just avoided it entirely.

Cash – we’ve met a few folks who have brought giant wads of cash from home and then hidden it all over. It won’t last forever, but you can often get a pretty good rate in the street with no fees at all (risk counterfeits at your own peril). Note: the legal limit to cross a border in most countries in $10,000 USD cash. Whatever. I prefer to sleep at night.

Our experience:

When traveling abroad, you’ve got to watch out for a few things. One is the ‘foreign transaction fee’. If the word ‘VISA’ is printed on anything you are using, you are pretty much stuck with this and it’s going to be a 1% fee on top of any transaction. Credit or ATM. Why worry about 1%? It adds up. And, there all often all sorts of other  fees related to the vendor, the local bank, your bank, the ATM, etc that ultimately mean you’re getting screwed. It can quickly add up to 5% or more if you’re not careful. If your traveling for a long-weekend, you might be able to shrug it off. Not us.

When we first started, we had a Bank of America account. This bank sucks. It really does, and it doesn’t seem to be getting any better.  For the past decade, we had a friend that worked there and could help us out with any problem we had – waive any fee, etc. Having a personal banker is the way to go – and it was the only reason we stayed there. After she left, we were seemingly tied down to this bank, so we just kept it. Not because we liked it, but because it would be such a pain in the ass to change. This is the key to their entire business plan and fee structures and the reason everyone in the US should jump through all the hoops and switch to a local credit union. But, I digress…

When we left on this trip, we had only this bank account/ATM card and one VISA credit card. That’s it. If you’re not going far, you can actually make this work. In Canada, Mexico, and the Carribean, B of A is affiliated with ScotiaBank and you can use their ATMs with no extra fees. Bingo! Easy-peasy – just drive around looking for only this bank. It can be done. You can access your own money without being charged for it.

But, as we learned when we got to Guatemala, this stops and the fees start. They do have ScotiaBank, but it’s no longer affiliated with B of A. So, we switched to BBVA. We thought BBVA would be a good choice because they have branches in every country (actually, this doesn’t seem to matter at all – we’ve never dealt with staff at a local branch) and because they reimbursed all fees from other banks and “did not charge extra fees for foreign transactions” (except that VISA issued the ATM card and they did still add the 1%  foreign transaction fee). Anyway, this worked well for a while. We had to save the receipts from the ATMs and mail them back to the US every 90 days and then we would get reimbursed for all of the ATM fees that we had to pay on the spot. Kind of a pain in the butt, but they did actually pay us back, so we were content. That is, until Sept 30th 2011, when they changed their policy and decided to stop refunding these fees.

Time to switch again.

So, before we left Chile back for the US in January, we did a little test. We took the B of A card out of storage and tried it in an ATM. Then, we used the BBVA card for the same amount. Result?  BBVA charged us about $6 and BofA charged us $11 for a single ATM transaction. We even called and talked to someone at B of A to make sure we weren’t missing something. Really, 11 bucks?  The answer? Yep – that’s what they charge to put your card in the machine.

Since we were back in the US, we did our research and found that none of the big banks had any better deals. However, the credit unions did. And, as it turned out, so did Fidelity. Not a bank per se, but I did already have an account from a previous employer’s 401k and it was effortless to get a card. Since VISA is on the ATM card, we still get stuck with what appears to be the 1% foreign transaction fee (although it doesn’t explicitly show up on any printed record anywhere). Still, they do automatically refund all other fees from the foreign banks and there are no other fees.

As for credit – we always shied away from using our credit card because of the fees, rareness of acceptance (good luck in a Peruvian town in the Andes), and propensity for fraud. After a little more research, we found that there is a card from Capitol One (MasterCard) with no foreign transaction fees or any other fees as far as we can tell. Hell, it even looks like they will give us 1% cash back for each purchase. We’re still not going to hand it over to just any Jose-Shmoe behind a counter, but we may just start charging things more often if it’s that easy. In Chile and Argentina, MasterCard seems to be accepted in most major businesses.

So, we are currently looking at a possible 1% fee on ATM transactions (VISA’s foreign transaction fee) and zero fees on the credit cards (1% cash back, actually.) Not too bad – it could definitely be worse.

Since we returned to South America the last time, we tested it all thoroughly – it’s legit.  No complaints. Everything is automatic.

So there you go – boring and practical information. But, don’t listen to us – do your own research. Terms change all the time. It looks like there are lot’s of small credit unions and brokerage accounts that waive foreign fees and probably have better service than everyone mentioned above, so we would recommend checking out the other options as well.

*Past performance may not indicate future returns.

While we’re at it, I’ll also mention that I’m a fan of Mint.com. Pretty handy – you don’t have to remember 10 passwords, and you can track all your accounts in one place.