When I got my first debit card, I rarely used ATMs because my dad warned me that it was a waste of money. Why spend $3 to access your own money?
But when I'm traveling abroad, either I have to use the ATM or carry cash for an exchange. The latter is risky and a rip-off (more on that later), so I had to figure out how to use foreign ATMs without paying massive fees.
When I learned how ATMs actually worked, I was horrified by how the banks were scamming people from their hard-earned money. I figured out a way to avoid that and now I'm going to teach you. Before I share my solution, let's break down a couple of myths.
Myth #1: There is only one ATM fee per transaction.
Truth #1: You could get hit with fees from your bank and the bank that owns the ATM.
When you're pulling money out of an ATM that is owned by a different bank, you could pay an ATM fee to that bank and your own bank. If you're traveling abroad, it's quite common for your bank to hit you with an international fee as well.
Myth #2: You can get a fair rate when exchanging cash at the "No Commission" kiosks at airports or local cash exchange places.
Truth #2: ATMs will give you a better exchange rate as long as you select the foreign currency option when you withdraw your money.
Simply put, you're getting ripped off by those "No Commission" places, especially at the airport. Think about it: they are businesses so how are they making money if it's not by commission? By giving you an awful exchange rate.
For example: let's say the exact exchange rate between the U.S. dollar to the Euro is
$1.00 = 0.85€
When you withdraw cash from an ATM in Europe, you will receive the actual exchange rate above (if you select Euros as the preferred currency) minus ATM fees (but I'll explain how you can get those fees waived).
But if you go to Travelex or any other cash exchange kiosks, they will give you an awful exchange rate like $1.00= 0.80€ which means that your dollar will be treated in lesser value than the actual exchange rate. In other words, if you wanted to withdraw 300€, it would cost you $352 at the ATM versus $375 at a "No Commission" kiosk. Is it worth losing $23 for absolutely no reason? If you plan on traveling for a while, then these costs can add up very quickly.
The Solution
Switch over to a bank that waives and rebates all ATM fees, including international ATMs. My top pick is Charles Schwab. They saved me so much money over the past 6+ years. Here's how it works:
Use an ATM (anywhere in the world!) to withdraw money in the local currency, and agree to pay the ATM fee.
Schwab makes a note of the other bank's ATM fee that you paid.
At the end of each month, Schwab rebates the ATM fees back into your checking account. In other words: they pay for all of your ATM fees!
This way you are paying for what the foreign currency is actually worth. What's the catch? Schwab offers an array of financial services and they are hoping to buy your loyalty. Well, they bought mine. When I left my first real job, I rolled over my retirement to a Schwab 401K account. A few years later, I opened up a Roth IRA. A few years after that, I invested in a mutual fund. Even though my friends suggested Vanguard for investments, I was so happy with Schwab that I wanted to continue my business with them.
The only downside about Charles Schwab is that there aren't any brick and mortar banks that you can go to (not conveniently anyway). But if you're comfortable with managing your banking needs on your phone, then the Charles Schwab app works well, which includes mobile deposits and excellent customer service.
Do you have a Charles Schwab account, questions about getting started, or another bank suggestion that rebates ATM fees? Please share with our community by commenting below!