When we started planning we had no idea how we were going to manage our money abroad.  We knew we didn’t want to pay ATM and foreign exchange fees every time we got cash or we’d knock our budget down by a full 5% right off the bat.  We did our research and to date we haven’t paid a single fee.

Here are the financial tools we’re using:

• Schwab High Yield Investor Checking – This is our ‘internet’ bank. Schwab reimburses ATM fees worldwide, charges none of their own, and even lets us get away without a foreign exchange fee when we use those ATMs. It is a free account, pays interest, and the only catch is that we have to do is open a free Schwab brokerage account to go with it.  Yes, it works as advertised.
• Schwab Invest Visa Card – Just like the Investor Checking account, no foreign exhcange fees and no annual fee either. We also get 1% cash back. It’s important to note that while Schwab doesn’t charge a fee, Visa can have a built in foreign exchange fee.
• Capitol One MasterCard – This MasterCard, like the Schwab Visa, claims to charge us no foreign exchange fees. We need to have both a MasterCard and a Visa card because in some countries it’s either one or the other. Plus, this card has a beautiful picture of the Grand Canyon we took when we went there in 2004 to remind us how beautiful our home country is. We also get 1% cash back on most purchases and 2% on purchases related to travel and lodging. It’s important to note that while Capitol One doesn’t charge a fee, MasterCard can have a built in foreign exchange fee.
• Hilton Honors American Express Card – American Express, don’t leave home without it. This card makes no promises to be accepted everywhere and does charge us a foreign exchange fee. (Will this be larger than the fee we get charged by Visa and MasterCard for the other two cards, we’ll find out?) We will use this card if and when we need to rent a vehicle (it includes insurance) and being card members entitles us to a variety of benefits such as mail service at AMEX offices worldwide.
• Citi Premier-Pass MasterCard – We use this card when we purchase plane tickets. We get one point for every dollar we spend and then more points for the miles we fly. It’s a win-win.  Citi does charge foreign exchange fees, usually around 3%.
• Vanguard Prime Money Market – This is our main savings account. Typically beats most money markets. We transfer money from this account to pay our other bills as necessary.  Money goes automatically from this account to our Schwab account so we don’t have to access it very often.
• Traditional Wachovia Bank Account – Nothing special here. This account pays a couple of regular bills automatically and is a backup source of cash if something happens to our other ATM cards.