Credit Cards and Money Exchange

You’re rarin’ and ready to go on your big international trip. You’ve got the best deal on your plane tickets and avoided the common mistakes when booking a hotel room. Your luggage is tamper-proof and you know how to beat roaming fees on your smartphone. Start the adventure!

Then you step off the plane and realize you forgot about the currency; you’re only carrying U.S. dollars. Fortunately, the airport has a currency exchange.

Unfortunately, in many places the U.S. dollar isn’t as strong as the local currency, which means the money you brought with you isn’t going to go as far as you thought. Even worse, not every place gives you the same exchange rate, and some will tack on extra fees.

If you aren’t careful, you’ll watch your vacation money dwindle before your eyes. That’s why planning ahead is crucial. Here are some tricks that will help you get the best exchange rate so you can use every cent of your hard-earned money enjoying your vacation.

Consider a credit card

This seems like odd advice, but bear with me. It turns out that Visa and MasterCard credit cards typically offer the best exchange rates of any currency converter. Not only that, you can find cards with no foreign-transaction fee.

For larger purchases like train or plane tickets and hotel rooms, credit is definitely the way to go. Of course, some places will charge their own transaction fee for using credit, so be sure to ask how much it is before you swipe.

Also, if a retailer offers to charge your card in U.S. dollars, tell them no. Their conversion will add extra fees that your card wouldn’t normally include if you are charged in the local currency.

You should notify your bank anyway that you’re traveling internationally. Otherwise it might put a hold on transactions until it can confirm you’re on the one making them. That’s stress you don’t need on your trip.
I should point out that if you’re going to Europe, many automated systems require “Chip and PIN” cards. These are cards with built-in encryption chips for extra security. If your card doesn’t have one, you might be out of luck at certain locations.

We don’t use Chip and PIN cards much yet in the U.S., although security experts keep trying to get credit card companies and retailers to adopt it. It would stop data breaches that rely on people to swipe their cards, like many of the recent retailer breaches – in theory anyway.

Still, these cards are available if you go looking. Just be careful because many have annual fees – you’ll need to shop around for ones that don’t.

Be smart about cash

There are still places where you’re going to want to use cash while traveling. It might be for a smaller purchase where the credit transaction fee isn’t worth it, for example. Maybe you need it for spur-of-the-moment transportation.

Before you exchange, there are a few rules for converting cash.
1. Be sure you know the official exchange rate between the currencies, and keep checking every few days. That way you won’t just take someone at their word that you’re getting a good rate. Click here for an app that will monitor exchange rates and help you budget your trip.
2. Convert your money in the country you’re visiting. You’ll usually get a better rate than you will in the U.S.
3. Avoid exchanges in tourist-heavy locations like airports and train stations. Regular ATMs in town or banks will have better rates.
4. Watch out for banking transfer fees. If the fees are a bit high, pull out more cash at once so you have to visit the ATM fewer times. Check with your local bank to see if it has any relationships with banks in the country you’re visiting that might reduce or avoid fees.
5. For in-person exchanges, try banks and hotels. Ask the exchanger what the net result of the transaction will be. Watch out for exchanges that post U.S. dollar sell rates rather than buy rates, or rates that only apply to large amounts of money.
6. Unless the country has a fixed transfer rate, don’t pay in U.S. dollars even if the option is available. Merchants will tack on extra fees to the transaction and you’ll end up paying more.
7. If you come across an exchange with rates that sounds too good to be true, or no fees at all, it might be a scam. You could end up with counterfeit money, so steer clear.

One of the drawbacks to cash is that you might not spend it all. You could arrive home with foreign currency that you can’t use. True, you can exchange it back into U.S. currency, but you’ll often lose some of the value in fees.

Instead, see if any of your friends will be vacationing in the same area soon. You can do a no-fees currency exchange with them and you’ll both come out on top.

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