What follows is a summary of information I gleaned last year for the October trip. Let me know if you have questions or other information to pass on.

When you travel to Japan, you need to use their currency of course (see currency).

The Japanese are big on cash. They routinely carry the equivalent of $200-$300 around on their person (at least, the middle class do). Credit cards are not widely used except in the major establishments of the major cities. Even many tourist spots like ryokans or restaurants might not accept credit cards.

ATMs are not widely available, and often they will not accept foreign credit cards (although this is changing).

Talking with frequent travelers to Japan, the advice is surprising in this day and age:

• Take travelers checks (or "cheques", if you prefer) - you get the best exchange rate that way. Period.

If you shop around at local banks in the Denver area, you should be able to find one that will sell you travelers checks with no fee; you may have to open an account. Do it. American Express brand are the most widely accepted.

From the official Narita (Tokyo airport) document on 2011/02/16,

$1 cash -> ¥80.58;

$1 travelers check -> ¥82.58 .

You can check this yourself anytime.

 

• You can exchange money (cash and travelers checks) in the customs hall at Narita, even before you go to the terminal arrival area (but you can also exchange money in the general arrival area).

 

• Later, you can exchange money (cash and travelers checks) in banks, department stores, and hotels (banks give you the best rate).

The recommendation: use traveler checks in $50.00 denominations; they are easier to cash more places.

 

I found this page to be illuminating about ATMs in Japan also.

A friend told me the travelers check information is still not the whole story. The rate being quoted on the Narita site, for example, is not the interbank rate: it has been adjusted to allow a profit for the currency exchange.

So I went to
     the Narita airport site,
and to
     a site that has the current interbank rate.

Sure enough: the Narita site quotes $1 = ¥82.37 for travelers checks and ¥80.37 for cash; but the interbank rate is quoted as ¥83.19 per dollar.

Still, you and I will not get the interbank rate for cash or travelers checks: we are simply not dealing with large enough amounts to get that. So, I believe that to exchange dollars for yen that travelers checks are still the way to go.

But there is another side to this story: when you can use credit cards, you want to get the best value. My friend pointed out that most credit cards add 3% to the foreign exchange rate. A known exception is Capital One's Venture and Venture One cards.

There are literaly hundreds of credit and debit card products out there, and this is a constantly changing field. It is impossible to do exhaustive research (and it's exhausting, too!). So, we recommend you talk to the customer service reps for the cards you currently hold and find out:

• If you charge an item on the card, what fees are involved (transaction fee, currency exchange fee, etc.)

 

• If you get money from an ATM, what fees are involved; note: for credit cards, ATM monies are considered loans, and interest accrues from day one at their classic rates (high rates, like APR of 29% or more!).

It might be that debit cards work better for ATMs, I don't know. And the word is credit unions give the best deal for foreign exchange transactions. So please check around, and report back so I can pass on what you find out so that we can all benefit. Thanks.

This site gives an exchange rate of 83.125 yen per dollar (the current interbank rate)

At Narita today you will get 82.09 for travelers checks and 80.09 for cash

    So the exchange charges rates are:

         (83.125 - 82.09) / 83.125 = 1.035 / 83.125 = 1.245% for TC
         (83.125 - 80.09) / 83.125 = 3.035 / 83.125 = 3.651% for cash
              

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My concern with ATMs is that they are cash advances that start charging interest immediately.

Say the APR is 29.5% (this is the rate Capital One charges, and I'm sure it's pretty much the same on other cards). Then according to this interest calculator, this works out to 2.178% a month.

Suppose you withdraw $500; then you will pay .02178 * $500 = $10.89 in interest if you wait until your next payment period to pay your bill. Granted, you can make a payment on arrival home and cut that amount by a fraction. But you cannot pre-pay and have that apply to ATM advances; I asked.

Now, Capital One does charge an exchange rate fee for foreign ATMs; the person I talked to wouldn't (or couldn't) tell me what that rate was. Their no-foreign-exchange-rate policy only applies to credit card purchases of goods and services, not cash advances.

The person I talked to did say that if I were a customer and called customer service they could tell me what the rate would be, so maybe they would tell you what the rate is. In any case, for Capital One (or most any other credit card) when you get yen at an ATM, you will pay a cost too, I just don't know how to figure it.

In addition, you may or not pay a transaction fee (I don't recall what Capital One said on this and I can't find my notes right now); for most cards, though, the fee is the higher of 3% or $10; this is in addition to any currency exchange fee.

It may cost a bit more to handle conversion by dollars / travelers checks, but that's not what drives the banks today: it's how much can they get away with. (Not that I'm a cynic. :-) )

You are right about using a credit card i.e. Capital One's card at an ATM. You will be charged interest from day 1. I have been referring to using a debit card issued by the bank where you have a checking account. When you use a debit card at an ATM, the money comes straight out of your checking account. Interest is not charged. A foreign transaction fee might be charged but my understanding is that credit unions do not charge foreign transaction fees.

OK, here is what seems to be the best deal: Schwab Bank High Yield Investor Savings

This account has no minimum balance, provides a small interest (currently .4% APY), and has these especially enticing features for the debit card you get: 1) there is no charge for using ATMs anywhere in the world; 2) if you use an ATM that charges you a fee, Schwab will reimburse you the next month; and 3) (an undocumented feature) there are no currency conversion fees: you get the interbank rate!

Note: there are some limits: $1000 / day ATM withdrawal; you are only allowed six debit transactions (that is, charging for goods or services) per statement period.

The account rep I talked to, Rich Pearsall, gave me his direct phone number if you have questions: 1-888-294-7281 x 30450. He works M-Th from 7:30am - 6:00pm Denver time.

If you want to download an application form, simply go to:

http://www.schwab.com/public/schwab/nn/customer_service/forms.html#savings

and click on the "Download" link for the first form; you need to print off the form, fill it out, and mail it in (addresses are on the form); Schwab needs at least two weeks for processing. (Note: you can actually fill in the form while it is on your screen then print it out! But you must still mail the original to Schwab.) Feel free to contact me if you have questions.

So here is a summary of what I think is the most effective way to deal with currency exchange on our trip to Japan:

• Get a Schwab savings account and use the debit card to get yen from ATMs

Alternatively, check with a credit union, if you are a member or elegible to become a member

Alternatively, Capital One has a checking account that has a debit card with no ATM charges and no currency exchange fees!

They reimburse ATM fees up to $10 per month (the Schwab card has no stated limit)

• Get a Capital One Venture or Venture One credit card for charging good and services

Alternatively, check with your credit or debit card carrier for their rates

• For cash backup, get travelers checks (if you can get them for free) or just bring cash

 

Finally: get some perspective. Do not rearrange your personal financial tools if it is just for this trip! The actual costs, charges, and fees might add up to $100. Maybe. Maybe less. So consider the trade-offs for you personally in terms of costs vs. hassle. If you will be doing more travel, especially internationally, it might make sense. But if you don't think you will use any of these recommendations after this trip, then maybe you should just not worry about it.

 

Well, just when you think a question is settled, new information enters the picture. Based on an email from my friend and an ad in the Wall Street Journal, you might consider these additional resources

• Bank Direct, an online bank, has an excellent American Airlines rewards affiliation; their exchange rate seems to be a little less than the interbank rate, and they only reimburse up to 4 debit ATM accesses a month, but they provide many ways to add to your AAdvantage account if you are an American Airlines fan.

 

• Continental Airlines and Chase have a card called Presidential Plus that advertises no exchange fees, but it's got a hefty annual fee of $395

 

• Here is an excellent site for comparing credit cards