Visiting India without Money


On Nov. 8 the government of India announced that its two most popular currency denominations, the 500 and 1000 rupee notes, would no longer be good as money effective at midnight. An exchange program to convert them to new rupee notes of the same amount at the bank was announced.

I had a trip to India already planned and was on a plane headed that way when the currency move was announced.

The effect of the currency ban was that no one in India would exchange money for U.S. dollars —because they did not have money to exchange — and locals mobbed banks, forming lines blocks long to turn in their old money for new bills. Many lines had to be supervised by police.
Other tourists staying at my hotel who had exchanged money in the U.S. before they left for India were stuck with Indian currency they could not use because the U.S. banks had given them the now-worthless bills.

All this meant I was stuck with using my credit card or not spending money while in India. India is mostly a cash-based economy, so not many places take credit cards. Those that do are more upscale and tourist-oriented places. So I was limited to spending at more expensive places.

This Indian currency move was meant to root out corruption in a society where corruption is rampant. Corruption is so bad that it hinders the Indian economy and keeps India in a perpetual state of poverty, except for a notable uber-wealthy class which, parenthetically, also views the banks as corrupt and keeps lots of money in cash or foreign bank accounts.

Corruption begins with barter or cash-based businesses which predominate. Many profits go unreported and thus not taxed. The government loses revenue on a significant segment of commerce.

Since the surprise move by the Indian government allows people to exchange a limited number of “old” bills for “new” ones of equivalent value, those with large stashes of the old bills instantly lose their value.

No provision was made for tourists showing up with the standard 500 or 1000 rupee bills who were left unable to find anyone to take them.

This misadventure re-emphasized for me a valuable lesson: you need multiple sources of money when you travel.

Cash is usually king. Usually people will gladly take U.S. dollars, a trusted currency. During my trip to India, my U.S. dollars provided my only spendable currency. A big disadvantage to cash: walking around—even in the U.S.—with large amounts of cash isn’t advisable, as you become a target for thieves and robbers.

Credit cards are rarely accepted in India but widely used in many places around the world — but only if they have a chip. ATMs are a good way to get cash. Using a debit card — which withdraws money from your bank at home but converts it to local currency — is usually a good way to go. The risk is that you might lose your card. Then a thief might have access to all your money in the bank. Using a debit card, you’ll have to pay three potential fees: your bank many have a fee for using a non-bank ATM. Your bank will have a fee for converting your money into foreign currency. Finally, your bank may charge a fee for any cash withdrawal. Check before you leave the U.S.

You can also use your credit card at an ATM. Doing this is considered a cash advance and interest usually starts accruing immediately. Check on the rate before leaving the U.S. Foreign transaction fees may apply as well, and your bank may not give you the best exchange rate, effectively making money on the currency exchange itself.

Traveler’s checks aren’t used anymore. Personal checks are also rarely accepted, except maybe in super high-end places and your hotel if you are a frequent traveler.

In all events, have alternative plans for getting local money. As my India experience proves, you never know what you’ll run into far away from your home bank.