Going Abroad? Prepare your money plans in advance. | Moneta

Blog

Traveler’s checks are somewhat ‘old school’ these days. They can be difficult to use and may not be accepted in some places. However, there are number of options available to ensure you have cash or credit when traveling. A little personal research is recommended because everyone’s spending habits and cash needs are different, and the options you already have — credit or debit cards — may be sufficient.

When traveling overseas, it is handy to have some local currency upon arrival — for taxis, snacks, tips, etc. — but converting more than a few dollars before you go may not be the best option. A wiser policy is to use an ATM card while traveling, taking out local currency in smaller increments as needed. The use of credit cards in most cities is simple, but many businesses use the chip-PIN system. You may need to get a card that contains a chip — common in Europe, although not in wide use in the U.S. This is especially important for toll fees, purchasing tickets in train station kiosks and the like. From a recent article by Michelle Higgins in the New York Times:

Like many Americans who have tried to use their credit cards in Europe, Elliot E. Porter, a historian from San Francisco, has encountered his share of payment headaches. Perhaps the most aggravating occurred a few months ago at Amsterdam Centraal Station, where he learned only after waiting in line to purchase train tickets that none of his credit cards, which include a MasterCard, Visa and American Express, would be accepted. The problem? They rely on magnetic-strip technology rather than embedded microprocessor chips, which are becoming increasingly common outside the United States.

For ready cash, relying on ATMs is simple, and they have instructions in English. Yes, you’ll pay fees, but traveling with large amounts of cash can be hazardous: Pickpockets are a common woe in some European cities, and lost cash is lost. You risk little chance of getting stuck without cash: ATMs are plentiful. The article here, by travel expert Rick Steves, is a comprehensive summary of Money Travel Tips.   http://www.ricksteves.com/plan/tips/money-travel-tips.htm

If you want to convert dollars to euros or other foreign currency prior to your departure, check first with your bank. Locally, Commerce Bank, Bank of America and US Bank — and perhaps your bank — can supply foreign currency. BOA and Barclay’s (in the UK) have an agreement that will allow you to withdraw cash at Barclay’s ATMs without paying additional fees (although there will be fees based on exchange rates). US Bank has Travelex, and although its exchange rate is higher, it does not charge fees on cash withdrawals (which may be a better deal if you plan to take a large amount of cash with you). Some currency exchanges charge a percentage on the total amount of cash exchanged, which may be considerable, and taking a large amount of cash is usually unnecessary. Before making a decision, be sure to ask about exchange rates and any additional fees.

Educate yourself regarding the most current exchange rate: 500 American dollars equaled 412.065 euros on July 25. Calculators are available online. The credit card foreign transaction fee is generally the combination of a fee that your network (e.g. MasterCard, VISA, etc.) charges to handle the transaction between the overseas merchant and your credit card issuer, and a fee that your credit card issuer (e.g. Bank of America, Citi, etc.) charges on top of that. And some credit card companies charge high exchange rates — as much as 7 percent. Inquire to make certain you know what the costs will be for using your credit card abroad — exchange rate plus fees.

Always notify your credit card provider when you will be using your card overseas. Unusual purchases or unexpected locations will send up red flags, and your card may be declined — a real inconvenience and a hassle to reverse — especially if your cell phone doesn’t work in Europe. (Actually, notifying the credit card company of any travel dates is often wise, as your card may even be declined in the U.S.)  

Consider an international debit card or prepaid credit card. These are available from many banks and credit card companies. They may include the ‘chips’ being used instead of ‘strips’ in European (and other foreign) countries. Securing one of these cards prior to travel can prevent headaches during your trip.  Servers, merchants, etc., bring the PIN machine to you, rather than taking your card to the machine, so you always have possession of your card. With prepaid cards, the chip and PIN are not tied to your personal information, so if lost or stolen they cannot be used by anyone who does not have the PIN. If traveling with a companion, consider a separate, prepaid card for each of you; if one is lost, you will still be able to use the remaining card, as each has a unique PIN. 

There are some downsides: You don’t get to select the PIN because they are embedded in each card and can’t be changed; and as they are ‘prepaid,’ you can’t spend more than the amount on the card, so think carefully about how much you need. If you return with money left on your card, you may be able to convert it back to dollars, likely at the same exchange rate, but check with your provider to be sure.

If you use a credit card for money exchanges, your credit card provider will likely consider it a ‘cash advance,’ so make sure your card allows a high enough limit on the amount you can advance, which is usually very different from your credit limit. Searching the Internet for ‘best credit cards to use in Europe’ revealed interesting details and, hands down, the most recommended (and cheapest) card — by those having no stake in the company — is Capital One. Why? Capital One doesn’t charge ANY foreign transaction fees for any of their credit cards. There are a number of other options — such as American Express Platinum — but if you’re thinking of getting a new card simply for foreign travel, look at the options offered by Capital One.

More from Michelle Higgins in the New York Times:

For backup, also consider carrying a preloaded debit MasterCard from Travelex called Chip and PIN Cash Passport, available in pounds or euros, which is equipped with the embedded chip. But use it only when you can’t use other cards. While it does not cost anything to use the card, the exchange rates you’ll get when loading it with cash aren’t great. For example, in late May, the exchange rate when putting funds into a Travelex Chip and PIN card online was about $1.50 to the euro. (It can be higher in actual Travelex stores.) By contrast, the spot exchange rate, charged by most banks, was roughly $1.42, according to Bankrate.com, a financial research site. Even after adding the 3 percent foreign exchange fee typically charged by major American card issuers, it was still more expensive to use a Travelex Chip and PIN card.

That said, there are some transactions — like buying train tickets at kiosks — for which you will need a Travelex card; remaining funds can be converted back to dollars after your trip.

Travel is exciting, but it can be challenging when things go awry, especially with finances. I was once robbed in the south of France — credit cards all gone — and getting the mess straightened out was a daunting process, although I had use of a French cell phone, which really saved my sale de fume! If you are not an experienced international traveler, your holiday will be enhanced by making money plans well in advance. The research is all part of the fun!