April 2008
Get the most for your travel dollar
How to find the best rate of foreign-currency exchange at home or abroad
Because of the weak U.S. dollar, you probably won’t find many bargains abroad this summer. But don’t make your trip even costlier
by paying more than necessary to convert your greenbacks into yen, euros, or whatever. You have several options for exchanging
currency, and each has pros and cons.
For starters, you should exchange a small amount of cash before leaving the U.S. This will cover incidentals such as taxis, trains, and meals while you’re en route. Once you reach your destination, you can use an ATM card at bank machines to obtain local currency. For large purchases and hotel bills, use a credit card. Here’s what you need to know.
Converting cash at home. This lets you lock in the exchange rate and reduces hassles when you arrive. But you’ll pay a built-in commission, so the rate is likely to be worse than the one you’ll get when you use a credit card or ATM card overseas.
You can convert cash at a bank, foreign-exchange office, or online. Travelex, which also operates exchange bureaus in airports and other locations, will exchange $200 to $1,500 into 55 denominations, and provides next-day delivery for $13. The company will also exchange about 45 “more exotic” currencies with advance notice. But the markup can cost you. Recently, when $125 equaled 85.16 euros at the market exchange rate, the same amount bought only 78.52 euros at Travelex.
Exchanging it overseas. You can get local currency at exchange bureaus in airports and other tourist venues, though the rate might not be the most favorable. You can also draw cash from an ATM, though your bank card might not be compatible with some machines in the countries where you are traveling. Look for ATMs that are part of the Cirrus (MasterCard) or PLUS (Visa) networks, and know your PIN as a number, since the keypads on some foreign ATMs don’t have alphabet characters.
Most ATMs, credit cards, and debit cards use an interbank exchange rate that is better than the one used by exchange services. The bad news is that both ATMs and your card issuer can hit you with network and issuing-bank fees totaling 1 to 3 percent, in addition to their standard transaction fees. Still, on the low end of that range, this is likely to be your best option. XE.com has a good tool for calculating fees.
Using credit cards. MasterCard, Visa, and American Express are widely accepted throughout the world for purchases and cash advances. What you’ll pay in conversion fees depends on the issuing bank. For example, most banks levy fees for foreign transactions on credit cards, though Capital One does not. Also be aware that many restaurants abroad and even some hotels do not accept credit cards. And the exchange rate you’re given by a hotel or store on your credit card could change before the charge is posted to your account.
It’s also a good idea to notify your card issuer beforehand that you’ll be abroad so that it won’t view your transactions as suspicious and freeze your account.
Buying a prepaid debit card. If you don’t have a credit card or want to set a limit on how much you’ll spend, you can buy a prepaid debit card or “travel money” card. But like other types of prepaid cards, these often carry a long list of fees for everything from withdrawals to reloading funds. For example, the Western Union Prepaid MasterCard issued by BankFirst includes a nonrefundable activation fee of $9.95 and a $4.95 reload fee.
Using travelers checks. You can get them from American Express, AAA, and large banks, though many people now leave home without them. Even Wesley Wright, general manager of Travelers Cheques for American Express, concedes that the checks can be difficult to use in some restaurants and shops. But they’re safer to carry than cash, since they can be replaced within 24 hours at more than 200,000 locations worldwide. And you can lock in an exchange rate if you buy them in a foreign currency.
For starters, you should exchange a small amount of cash before leaving the U.S. This will cover incidentals such as taxis, trains, and meals while you’re en route. Once you reach your destination, you can use an ATM card at bank machines to obtain local currency. For large purchases and hotel bills, use a credit card. Here’s what you need to know.
Converting cash at home. This lets you lock in the exchange rate and reduces hassles when you arrive. But you’ll pay a built-in commission, so the rate is likely to be worse than the one you’ll get when you use a credit card or ATM card overseas.
You can convert cash at a bank, foreign-exchange office, or online. Travelex, which also operates exchange bureaus in airports and other locations, will exchange $200 to $1,500 into 55 denominations, and provides next-day delivery for $13. The company will also exchange about 45 “more exotic” currencies with advance notice. But the markup can cost you. Recently, when $125 equaled 85.16 euros at the market exchange rate, the same amount bought only 78.52 euros at Travelex.
Exchanging it overseas. You can get local currency at exchange bureaus in airports and other tourist venues, though the rate might not be the most favorable. You can also draw cash from an ATM, though your bank card might not be compatible with some machines in the countries where you are traveling. Look for ATMs that are part of the Cirrus (MasterCard) or PLUS (Visa) networks, and know your PIN as a number, since the keypads on some foreign ATMs don’t have alphabet characters.
Most ATMs, credit cards, and debit cards use an interbank exchange rate that is better than the one used by exchange services. The bad news is that both ATMs and your card issuer can hit you with network and issuing-bank fees totaling 1 to 3 percent, in addition to their standard transaction fees. Still, on the low end of that range, this is likely to be your best option. XE.com has a good tool for calculating fees.
Using credit cards. MasterCard, Visa, and American Express are widely accepted throughout the world for purchases and cash advances. What you’ll pay in conversion fees depends on the issuing bank. For example, most banks levy fees for foreign transactions on credit cards, though Capital One does not. Also be aware that many restaurants abroad and even some hotels do not accept credit cards. And the exchange rate you’re given by a hotel or store on your credit card could change before the charge is posted to your account.
It’s also a good idea to notify your card issuer beforehand that you’ll be abroad so that it won’t view your transactions as suspicious and freeze your account.
Buying a prepaid debit card. If you don’t have a credit card or want to set a limit on how much you’ll spend, you can buy a prepaid debit card or “travel money” card. But like other types of prepaid cards, these often carry a long list of fees for everything from withdrawals to reloading funds. For example, the Western Union Prepaid MasterCard issued by BankFirst includes a nonrefundable activation fee of $9.95 and a $4.95 reload fee.
Using travelers checks. You can get them from American Express, AAA, and large banks, though many people now leave home without them. Even Wesley Wright, general manager of Travelers Cheques for American Express, concedes that the checks can be difficult to use in some restaurants and shops. But they’re safer to carry than cash, since they can be replaced within 24 hours at more than 200,000 locations worldwide. And you can lock in an exchange rate if you buy them in a foreign currency.
