In the United States banks typically charge a two to six dollar “transaction fee” when you withdraw from an ATM outside of their network, from a Bank of America machine using a Wellsfargo debit card for example. In your hometown this fee is avoided easily enough—withdraw only from your financial institution’s Starbucks-like ATMs on every corner.
Internationally, however, this is not an option.
There are many ways to reduce ATM transaction fees. Some suggest withdrawing the maximum (typically US $300) to minimize ATM visits and transaction fees. Others ask cashiers to charge their debit card for more than the total due in order to receive “cashback.”
Both of these techniques are problematic, especially when traveling by bicycle. First, it’s never advisable to travel with large amounts of cash. Three hundred dollars is a lot of money to keep in your backpack, the equivalent to a month’s salary in some South American countries. Theft is more likely when traveling with cash. Don’t ask me how, but thieves know when you’re concealing money in that super secret undergarment belt. Unnecessary stress is created because you constantly feel on-guard.
Second, the cashback approach is not always an option where you travel. In my experience in Latin America, few retailers will charge more than the total due for fear of fraud.
WHAT DO I SUGGEST?
1) KEEP YOUR CURRENT BANK ACCOUNT. If you’ve been with Wellsfargo or Bank of America for years, don’t drop them. Besides the likely Billpay services, mortgages, loans, etc. connected to your account, there are benefits to being a long-time customer (e.g. they’ll drop certain charges if you complain to a manager). Get an ATM debit card through your current bank. This will be your back-up card.
2) OPEN AN ETRADE ACCOUNT. From this account you can transfer money online to any number of accounts, including to the one connected to your current bank’s ATM debit card. DO NOT connect this Etrade account to an ATM debit card.
3) OPEN A CHARLES SCHWAB INVESTING CHECKING ACCOUNT. Why? Because this bank DOES NOT CHARGE FOR INTERNATIONAL ATM WITHDRAWLS. Ok, that’s a lie. Actually, they reimburse all transaction fees at the end of each month. Without fail. I don’t worry about carrying too much cash, where I’ll get cashback, or which ATM to use. I simply go to any ATM when I need money. Charles Schwab customer service is great too. When I lost my debit card in Colombia—it fell out of my pocket—they sent a new one to Bogota. Free of charge.
WHY THREE ACCOUNTS?
Just as it’s unwise to walk around with a hard three-hundred cash, it’s plain stupid to keep all your money in one debit account. ATM fraud and online hackers are real threats. I’ve met two Americans in Brazil who lost over US $30,000 because they were careless with their ATM accounts (this is not the norm but apparently happens).
Keep your savings in the Etrade account where it cannot be accessed via an ATM, then periodically transfer money to your main Schwab ATM debit card when necessary. (If transferring money on a public computer, clean the history/cookies afterward). Keep a small amount of money (around US $200) in the account connected to your current bank’s ATM debit card. Maintain this back-up card separate from your main Charles Schwab debit card. Since you’ll be charged up to US $6 per withdrawal, only use the back-up card if your main card goes missing.
This technique has saved Team MB&S money on transaction fees throughout South America; however, you may also want to look into the Global ATM Alliance.