Why are ATMs expensive?

There are 4 separate ATM fees when you're travelling to a different country

Fees vary in every situation, but the vast majority of fees will be within these ranges - see below for more detail on each fee.

Accounts with certain banks do allow you to avoid some of these fees (you might still need to use a specific bank's ATMs). But most people don't want the hassle of opening  an account specifically for using abroad. 

Let's look at the cost of withdrawing USD $100 as an example:

1. Local ATM fee: $0 to $3.00

2. Your home bank's overseas ATM usage fee: $2.50 to $5.00

3. Your home bank's foreign currency exchange fee: $2.00 to $3.00

4. Visa/MasterCard foreign currency exchange fee: $0 to $1.00

Total fees: $4.50 to $12.00

So here, the total cost of withdrawing $100 is is $4.50 to $12.00, which is between 4.5% and 12% for the $100 withdrawal.

Here's the detail:

1. Local ATM fee

This fee is usually displayed on screen when you use the ATM. It varies significantly by country and type of machine:

• US:  fees are typically USD 2.00-5.00 (or up to USD 15.00 in Vegas!)

• Thailand:  fees are THB 150-180 (USD 4.50-5.50)

• UK: many bank-owned ATMs do not charge, but you'll pay GBP 1.50-3.00 (USD 2.30-4.60) at private ATMs

This varies globally, but let's assume most will be in the $0-3.00 range.

2. Your home bank's overseas ATM usage fee

Most banks charge their account holders a fee for using their ATM card in another country (and sometimes for using their ATM card at another bank in their home country). 

These fees are typically a fixed amount between USD 2.50-5.00, which makes small withdrawals particularly bad value for money.

3. Your home bank's foreign currency exchange fee

Most banks charge a % fee for converting your home currency to the local currency you withdraw. This is either shown explicitly on your statement, or it's hidden in the foreign exchange rate that they use.

Typical fees are 2-3%.

4. Visa/MasterCard foreign currency exchange fee

This one is well hidden! Most banks use the official Visa or MasterCard foreign exchange rate, and add their fee to this rate (see point 3 above).

This is usually a pretty good rate, but it's not the same as the "interbank" rates that big companies get when they exchange large amounts (like a million dollars). 

This fee can be up to 1% for less common currencies.

How can international travellers pay lower fees on card?

Travellers can stay with or use activities and tour services that use payment providers like Tab (tab.travel). Payment providers like Tab absorb all of these international transaction fees. Tab charges a single 4% fee to the traveller for using card payments, which allows the traveller to pay in the currency of their bank account. Travellers then no longer have to worry about ATM fees, and foreign currency exchange fees!