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When Debit and Credit Cards aren’t your best choices on the Road

Argentine currency

Decades ago traveler’s checks were the “king of the road”, but now are obsolete.  With the revolution of software and personal computing, financial transactions at home and abroad have moved largely to an electronic format.  Today most people travel with just an ATM (debit) card and a credit card – perhaps with a spare credit card just in case your main card is lost or stolen or doesn’t work properly.  In Europe and most other countries this makes a lot of sense where the currency and exchange rates are stable, and there are many places you can use your cards.  The fees for ATM withdrawals can be significant, as both the foreign bank and usually your domestic bank will charge you for the transaction.  Some credit cards, like Capitol One, a few Chase cards and soon American Express don’t charge foreign transaction fees so use one of these if you travel a lot.

But there are times, even in today’s computer age,  when cash is king.  As a matter of habit (and a sense of personal security), I usually travel with some cash in a money belt when abroad just in case of emergencies.  Rarely do I use this cash reserve but there are times when it can be very handy to have cash, as I just found out on my latest trip to South America.

I recently visited Argentina, a country known for political and hence currency instability.  At the time of my trip, the Argentine government had set the official conversion rate between the Argentine Peso and US$ at about 8:1.  The official rate of inflation was said to be about 8% but people in Argentina know better.  They know their peso is worth significantly less than the official exchange rate and that their real rate of inflation is somewhere around 40%.  As an example, restaurants print menus without prices on them; prices are penciled in and updated as often as on a weekly basis to reflect the higher costs of doing business.

There is a hunger for hard stable foreign currency in Argentina and it’s very easy to get a better exchange rate from business people and folks on the street than you can from banks.   The highest exchange rates will be given to you by shady characters in back alleys – beware of these individuals because there is a significant chance they will cheat or rob you.

Besides the ease of spending cash, there are some real advantages to it in Argentina.  ATM fees were high – around $US 7 from the Argentine bank for a withdrawal plus several buck fee from my American bank.  Limits on withdrawals are small, usually 1000 Argentinian pesos a day (around 125 $US at the official rate), so you easily could spend 6-7% of the value your withdrawal just on bank fees.  And often Argentine ATMs run out of cash, especially in small towns, so good luck finding one that works, whose directions you can understand (most did not have English as an option), and which has cash to dispense.  The disappearing “eaten” ATM card was something we witnessed firsthand this trip, fortunately not involving us, but people’s ATM cards were not returned from the machine at the conclusion of the transaction.  Many smaller businesses and restaurants in Argentina do not accept credit cards, limiting their usefulness.

So educate yourself about the place you’re traveling to and consider bringing along more cash than you otherwise might if it makes sense to do so.  If you can get 25% or more local currency by using cash rather than a credit card or ATM card, you’ve greatly reduced the cost of your trip.

Some important words of caution:

1)      Be very careful exchanging money with guys on the street.  There’s a lot of counterfeit currency in most countries and you likely wouldn’t know if you are exchanging your US dollars for counterfeit currency until you’ve been in the country for some time and familiarized yourself with that country’s money.  Plus guys in the alley have friends will gladly relieve you of your cash and possessions.

2)      Best to be safe and see if your hotel or restaurant will accept US currency.  We were generally able to exchange our US$ for about 10 – 11:1 at these places, a 25-35% higher return rate than the official currency exchange, and we used cash to pay for services provided.  For example, a restaurant tab of 400 Argentinian pesos could be paid with $US 40 cash.  In these types of transactions we got no change back and didn’t have to worry about getting any counterfeit Argentine currency.

3)      Never carry a lot of cash in your wallet or purse.  ALWAYS carry your cash under your clothes in a money belt or a “leg wallet”, like these or these.

4)      Take mostly $20 dollar bills (not $50s or $100s) with you and make sure the bills you take are pristine (new looking).  Folks overseas don’t want torn, worn, or marked up currency.  They like clean, fresh Yankee bills, Euros or British pounds.

5)      Don’t exchange more money than you’ll use.  It can’t converted back to $US when you leave and it’s likely to be worthless if you were ever to return to Argentina.

Of course if you’re not comfortable traveling with cash, I can understand that and if it makes you worry, don’t spoil your trip by using cash.  Use the ATM and credit cards you’re used to understanding there’s a cost in doing so.  Everyone needs to work within their comfort/tolerance levels.  But if you’re on a tight budget, the cash option in some countries is a way to make your hard earned cash stretch farther.

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