I've heard that taxis will frequently scam foreigners by overcharging. How can I reduce the chance of this happening?
Always, ALWAYS get a metered taxi. If the taxi driver says no meter, get a different one. Meters almost always run cheaper than the flat rate taxis.
Also, know where you are going.
I usually have my iPhone with GPS so I can watch where we are going in case the diver decides to circle the block a few times. Getting to know the major street names is also good advice. 15 minutes with a map and a marker and you can save yourself a ton of money.
EDIT: You can ask the desk person at your hotel or hostel which cabs are reliable and trustworthy.
EDIT 2: Also, just a personal comment here. I'm an expat. I've been living in Taiwan for about 4 years now. I speak Mandarin reasonably well and can even yell some stuff in Taiwanese when the occasion calls for it. Yet, I still get scammed sometimes. Over a long enough timeline, it will happen... but the goal is to mitigate the amount of times it happens and how much they get from you.
During my trip to Costa Rica, we were advised to only take red taxis, as they are metered and regulated. But even when we got in the "right" cab, the driver didn't use the meter anyway, and so we had to negotiate the fare.
Despite our precautions, the drivers managed to pull a few tricks ("15 Dollars? No, 15,000 Colones!"), and over the course of the 4-day trip, we still managed to overpay by about $20-25 across all our taxi trips. Ah well.
From my trip to CR, here's what I learned:
Contrary to @Ginamin's answer, my advice, based on traveling in Mexico, as well as practically everything I've ever read on the subject, is to never use a metered taxi and always agree to a price up front.
The best prices are usually had when you pay at a kiosk, such as found at a bus station or airport.
Case in point: Yesterday I arrived in Morelia, Mexico, and took a taxi from the bus station to down town. I paid at the Kiosk. Cost: $35 pesos. Today when I returned to the bus station, I was lazy, and took a metered taxi. $70 pesos!!!
I've also been ripped-off by a metered taxi once in Tijuana, where the taxi driver kept the meter running while he filled up at the gas station!!!
Taxi meters can also be tampered with to run fast. Some are distance-based, some are time-based. Taxi drivers with time-based meters may drive extra slow. Taxi drivers with distance-based meters may take longer routes.
There are just too many ways to rig a taxi meter, unless you're in a jurisdiction where you trust the local government to enforce fair metering practices. So my advice is to never use a metered taxi, unless you're in such a place.
The book Travel Advisory, which I recently read, also suggests to always take only official taxis, and always agree to a price before entering the taxi. Never use a metered taxi.
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From experience in India, many popular tourist routes are prepaid. The amount is decided by a regulatory authority such as the government or transport commission. For instance, the drive from the airport to destination X will cost only a Y amount of rupees. This ensures that drivers do not (in their own interest) meander their way to your destination in an attempt to drive up meter charges. The prepaid charge is usually paid ahead of time at a kiosk, which then issues a voucher to be given to the driver.
For more custom travel needs, an option is to negotiate a flat daily rate based on duration (and not distance traveled). Again, there are standard rates for this hire in India.
Finally: If you do realise that you are actually getting ripped off (e.g. the driver is asking for more than was agreed, you realise the meter is totally rigged), remember that the money is in your hand.
You can just get out of the taxi, and you should do so before paying. That way, you are in control of what you pay. Note that this won't work if your luggage is in the back.
Depends on the country. Sometimes it's better to use meter, sometimes not.
Here are my tips:
Depends on the country.
Generally, in a place you're visiting for the first time and where scams are frequent, it's better to agree on the fare upfront. This way you will pay more than the ideal metered fare, but you limit surprises and scams.
If you know your way around already or the place is generally civilized and safe (e.g. Western Europe, Japan or Thailand), metered fares tend to be cheaper.
Knowing what the fare is supposed to be upfront helps in both cases, but is especially important with no meter. Looking at a map helps, and hotel front desk might help if they aren't in the business of hawking their own cabbies (in return for a commission).
It's good to know what the official or reputable taxi companies are (if they exist), and how to recognize their cars.
If you're going without meter, always clearly agree the amount and currency up front, and perhaps even write it down. If you have many pieces of luggage, and especially if you place it in the trunk, your bargaining power in case of a conflict is significantly reduced. Have small bills available (cabbies often pretend to have no change), and count your currency carefully when paying (some cabbies switch similar-looking bills).