How to avoid ATM and other bank fees

ATM fees, out of network fees, bank charges, transaction fees, they are all ways the bank can squeeze money out of you. Of course, for the convenience of being able to withdraw abroad, we do believe there should be a cost associated to that, however, when everyone in the chain takes a big(ish) cut, well… it leaves you feeling a little exploited. But, this blog post isn’t meant to hate on fees, it’s to understand them so we can avoid them.

What kinds of fees are you likely to face

When you are traveling, whether it’s domestically or internationally, all you really want is to have the cash to buy that delicious gelato. For purposes of this blog post, we’ll focus mainly on international travel, but many of these tips apply to domestic travel too.

• ATM Fees - also known as an Automatic Teller Machine

• Out-of-network fees

• Foreign transaction fees

• Foreign exchange fees

Let’s dive in!

ATM Fees

Automatic Teller Machines, also known as ATMs, are the easiest way to get money abroad; and assuming you always withdraw local currency, and let your bank do the currency exchange, you’ll also get the fairest exchange rate - more on this in just a bit.

The easiest way to avoid ATM fees is using a bank that 1) doesn’t charge you ATM fees and 2) reimburses you any fees the ATM you used, charged you. Yep, we know what you are thinking? what? that’s so confusing! Let’s break it down briefly - If you have your money with bank A and you can’t find a bank A ATM machine, you can use Bank B’s ATM machine. When you do that, Bank A (your bank) will charge you b/c now they need to give Bank B money that they wouldn’t have had to do if you just withdrew from Bank A. And also Bank B charges you, because you are not their customer and you are inconveniencing them - but they’ll be nice, for a price.

The first bank, we know, that broke from this double-charge convention was Charles Schwab (yes, they are more famous for their stock brokerage side) but there are many banks that work like Schwab now. In essence, Charles Schwab bank said, “we don’t have many ATMs so you can withdraw from any ATM you like, worldwide, and we (Schwab) will not charge you any fees. Also, if the ATM you use charges you a fee, we’ll reimburse you”. Booyah! and just like that the ATM fees disappeared. No ATM fees ever again! (insert happy dance here).

Ok, so you are thinking, “but I normally bank with someone else! I don’t want to change all my stuff to another bank.” (by the way, this post is NOT SPONSORED). No problem, neither did we! What we did is open an account with Schwab, but you can pick any bank you like that offers the same benefits, and just put the money we needed for the trip, there. Nowadays we use Schwab for much more, but that’s how we got started.

Side note, in the 2 years we were traveling around the world, we got a little over $500 USD in ATM fees, refunded to us - you can read all about our savings in our a matter of wallets, cards & savings blog post. Of course on a shorter trip the savings will be less, but still, that’s your hard earned money and if banks like Schwab are OK with you keeping it, why shouldn’t you?

Keep reading for more info on the foreign exchange rates we mentioned earlier.

Out of network fees (also knowns as out of network atm fees)

Sometimes banks don’t have an extensive network of ATMs and they band together to form ‘networks’. Sometimes these networks make perfect sense, like if you bank with Citi Bank USA, you can withdraw in Citi Bank in Germany (that technically is Citi Bank Germany) for free. These 2 banks belong to the same group but they are technically not the same bank. Or maybe you’ll look for a special symbol and any ATMs displaying that symbol will allow you to withdraw without a fee. As you can guess, if you withdraw from an ATM outside the network, you get charged an ‘out of network withdrawal fee’, both by your bank and the bank of the ATM you are using. The same principles of the ATM fees apply - if you skipped that part, go back.

Foreign transaction fees

Whenever you make a purchase in a foreign currency or the transaction goes through a foreign bank then YOUR bank (or Credit Card issuer) will charge you a foreign transaction fee. Usually this is a 3% charge of the value of the transaction for the trouble of having to pay a foreign merchant. These fees are common both for banking (like when you withdraw from a foreign bank) and for credit card charges - basically making your little getaway 3% more expensive. Avoid these fees by selecting a bank, or credit card, that doesn’t charge a foreign transaction fee. We use Schwab for our bank and Chase Sapphire Reserve for our credit card but there are lots of options for both, just look for ‘no foreign transaction fees’ - trust us, it’s a perk and you’ll see it all over their literature; if you don’t see it easily, run!

Foreign exchange fees

Exchanging money abroad can sometimes be subject to fees. If you exchange in the traditional way, taking your currency to a money exchange you will see that sometimes they tack on a fee for exchanging. This price has nothing to do with the actual exchange rate they offer, it’s only for the service. Nowadays less people use exchange houses to exchange their money and rely more banks or credit cards. Unlike with the foreign transaction fee, the foreign exchange fee is for the trouble of converting your money, whereas the foreign transaction fee is more for the trouble of having to pay abroad. The nitty gritty details change depending on the institution but this is the gist. Therefore you could very well get slammed with both a foreign exchange fee (the trouble of exchanging your money to the local currency) AND a foreign transaction fee (the trouble of paying the local merchant with your exchanged money). Some credit cards combine these two fees into one but why pay any when there are lots of banks and credit card companies that won’t charge you? We mentioned above but Schwab and our Chase Sapphire Reserve have us covered for all fees.

Lastly on foreign exchange fees - ALWAYS, always!!! select withdrawing in the local currency - do not be fooled by ATMs that want to ‘do you the favor’ of exchanging for you. Let your bank handle it, plus, you’ll probably have chosen a no foreign exchange, or transaction fee, bank so DEFINITELY let them handle that bit. The rate some of these local banks offer is borderline extortionate, don’t fall for their tricks.

Are all fees bad?

All fees are unpleasant but we wouldn’t say they are all bad. There is a cost of doing business and smaller exchange houses, for example, need the transaction fee to make ends meet. We are not against paying fees, we just want to minimize how these fees stack.

We hope this blog post helps clarify these somewhat confusing fees so that you can avoid them too. Until we can travel again, happy fee-free hunting!