The currency of Indonesia is the rupiah. To date, the exchange rate between the US Dollar and rupiah is about 1:8,930. This is actually a pretty poor exchange rate, being that it was about 1:10,000 only a few years ago. Either way, its pretty easy to just round the math to 1:10,000 give or take a dollar to make it simpler in your head.
Don’t try to buy Indonesian rupiah in the States before coming to Bali, you will get royally screwed on the exchange rate and you don’t need have any rupiah before exiting the airport. There are about ten to 15 money changers right as you exit customs, and the easiest thing to do is exchange about 100 USD there to get you by for a couple of days until you find a good money changer with the best rate wherever you will be staying. You will probably only need 100-150,000 rupiah per person to get from the airport to wherever your final destination is anyways.
It is definitely the “safest” to travel with traveler’s checks. That way you money is insured if anything happens to it. BUT, you will suffer with the exchange rates when exchanging travelers checks, as they are always lower then exchanging bank notes. Travelling with cash really isn’t that risky as long as you have a good, portable, travel safe to keep your valuables in. You can also easily get money out of any atm, and you will probably get the best exchange rate through the atm anyways. I have heard of some atm’s being rigged (I heard one at the airport and a danamon in Ubud), so I try to go for atms that are either connected to a real bank or the commonwealth atm that is an australian company and not a balinese one. Make sure to tell your bank before you leave that you are going to Bali so that you don’t get charged any overwhelming fees. Also, ask what the fee is to use an atm that is not with your bank internationally. Usually the ATM fee is about $3-5 and fees on a purchase made with your credit/debit card are 3% of the purchase price. Most ATMs will only let you take out 1,500,000-3,000,000 rupiah at once, so take that into consideration when thinking about fees and how much money you want to take out as opposed to bringing the cash.
Know that when you come to Bali not very many places take credit cards, and if they do you usually have to spend a minimum amount (2-300,000) and they charge you 3% for the transaction (on top of the 3% your bank will charge you). And, even if they say they take credit cards, their connection may not work and its not 100% reliable. It is much easier to carry rupiah with you, and try to have small bills (5,10,20,000) as much as possible.
The final thing you must know about Bali is that it works 100% on the barter system. That means that in most places, the price is totally negotiable. Exceptions to this include restaurants, supermarkets, or most fancy stores where there is a specific price tag on the item. Other than that, you can and MUST bargain for everything, or you will get totally ripped off. The main example of this is shopping in little shops on the streets, jewelry stores, and taxis. The rule of thumb is to start at about 25-30% of whatever price they offer you at first. Even if that price is totally ridiculous, know that they will go down and you will go up, so you will probably end up paying around 50-60% of the first offer. For instance, say I wanted to buy a sarong. She would offer me a price of say… 60,000 (they will change their starting price depending on how much of a touristy dumb ass you are, so be prepared for totally jacked up prices.). I would come back with (usually after laughing at this first suggestion, just to seem like I know what things cost) 15,000, she would argue a bit but come back probably at 50,000. You then say you need better and offer 20-25,000. She will maybe say “ok, my last price, 30,000, very good deal for you, for good luck” (every sale is for good luck), and when you are satisfied, you accept the price. I have actually found that I get the best prices for things when I show a slight interest in something, and act like I MAY buy it, but then start to get uninterested when I hear the price, and they will come down a LOT just to get you to buy something because most people are pretty desperate here. You may feel bad bargaining over what equals a dollar here or fifty cents there, but just do it, it’s the way Bali works, and no one will look at you differently for it. Know that if you buy a bunch of things from one shop at once you will also be able to work out a better price overall and bargain more. For instance, if I buy one pair of pants it may be 60,000, but if I buy two there I could bargain two for 100,000, which is a better deal. Here’s a list of some examples of what you should be paying for things (this is what I and most people I knew paid in Ubud):
Thai fisherman full length pants- 50,000
Thai fisherman short pants- 40,000
Tank tops- 25-30,000
Bags- 30-80,000, depending on the size
Bracelets- 10-20,000 depending on the style
Note: When coming to Bali, I would bring about half of what I expect to spend in cash, half of it in travelers checks and then have an ATM card with you if you spend more than you expected. Actually, I would probably bring most of it in cash because travelers checks are a pain in the ass and I am now comfortable in Bali and not worried about getting robbed every second, but as a first time visitor I would give the above suggestion. Also, if you bring 100 dollar bills, they MUST be printed after 2004 and look crispy and new. This is because there was a problem with forging US 100 bills before that date. Exchange 1-200 at a time, depending on how much you are spending, and only carry about 5-700,000 rupiah with you, max, at any given time. I haven’t had any problems with robbery or heard about any pick pocketing, but its always good to be safe.