What is the most effective way to bring money for a backpacking trip to India and Nepal? Are ATMs available and reliable outside of the main cities? Do they charge commission? Or is it better to have cash? What currency is best? Does the exchange rate depend on the nominal and visual state of the banknote?
What I did for my three months long backpacking trip is that I brought 500 Euros in cash and exchanged it on my first, second day. I probably shouldn't have done that as the exchange rate got significantly better in the next few weeks.
I also had rest of my money on my (Croatian) bank account and had my Visa debit card with me. Along with this card, I have a card for my foreign currency account just in case.
On top of all that, I have an Amex credit card for more expensive stuff and it proved useful when I had to buy plane ticket after I missed one of my flights.
And now to answer your exact questions:
- There are ATMs available in bigger cities but sometimes you have to walk for some 10-15 minutes to find the one that you prefer. I prefer AXIS Bank ATMs as I only get charged little over 200 rupees per withdrawal and on other ATMs I get charged around 420 rupees.
- In smaller cities and villages there is usually one or two ATMs, but that's usually in smaller tourist places and not in some "off-the-beaten-path" places. There, I would imagine, are no ATMs at those places.
- I have no idea whether I am charged by my bank or I pay the ATM fee but I do know that countries like USA, UK, Germany etc. (Croatia doesn't have one) have banks that charge no commission and you only pay the amount charged by an Indian bank at the ATM.
- You cannot withdraw money in a bank with your Visa card, you have to use an ATM.
- Maximum amount that you can withdraw in one turn is 10,000 rupees which is not that much considering you are still charged that 200-400 rupee amount for each withdrawal.
- For you question about the preferred currency, please read a related question posted as a comment. (But for now, I believe US dollar is the best currency to bring in case you have to have an intermediate one.)
- No, exchange rate doesn't depend on the visual state of the banknote. Bring new and crisp banknotes as you risk your money not being accepted at most of the places. Also, don't accept any torn or otherwise damaged rupee notes because you'll have hard time getting rid of them.
The amount you can withdraw from an ATM depends on the bank in Nepal. Some (usually old) ATMs only allow 10K, but if you ask around you can find ATMs that you can withdraw 20K and I found one in Pokhara which also allowed 30K.
The Nepal banks doesn't charge any fee when you withdraw so the only thing you pay is to your own bank. It's best to have a card that allow withdrawing money without any free and it's easy to get in my country.
I was recently in Nepal and I have compared the exchange rate with the VISA rate and it was more or less the same rate, so if you have a card that you can withdraw on without fee it will work well.
Important: note that hotels and your operators ALWAYS quote their price in dollars so having some dollars in cash for this is very good, but it has to be dollars. If you need to pay for hotel in rupee (don't have cash dollars) they should use the official quote (sometimes they try to use a different one) from that days paper. Buying a paper or going to a restaurant to check the quote is a good idea before paying large amounts in dollars. The papers official quote is fair.
If you brought other currency than dollars I think it's better to exchange them and then pay hotels with rupee or you will need to do some complicating math.
Carrying large amounts of cash in Nepal is not really a problem if you take regular precautions. People are very honest and crime against tourists are not tolerated in Nepal.
For Travelling to Nepal, This will provides you in detail about Money exchanging. But beside this, i would like to suggest you for carrying US dollar rather then other for travelling throughout Nepal.
I am in Nepal right now. Almost every ATM in Nepal can provide you maximum 10,000 rupees once for a commission of 500 rupees (5% commission). I've just found out today there is one bank in Nepal which allows you to withdraw 35,000 rupees once for the same charge of 500 rupees (1,43% commission). The bank's name is Nabil Bank. For the ATM locations, visit https://goo.gl/1mRYkX or www.nabilbank.com/ATM-Locations/140/