6/20/2013 1:45 PM ET|
How to use credit cards abroad
Credit cards are virtually indispensable when you travel overseas, but using them in foreign countries can be tricky. Here are a few Euro-tips.
Several years after I graduated from college, I looked into the new year with incredible joy because I had planned my first trip overseas. My best friend wanted to visit her Italian roots for her 25th birthday and I could think of no better way to help her celebrate than to accompany her.
We decided to take Rome and Florence by storm. I always wanted to visit the Vatican, Coliseum, the Statue of David, and just walk the streets and eat gelato. As an American Studies major in college, I was infatuated with understanding how other cultures influenced the world.
However, there were a few issues -- how would we pay for the trip? Would I go broke charging everything on a credit card? The strategies that we used to go to Italy are ones that I still use today.
Set your mind on a financial target
I first asked myself how much money I would need to travel for a 10-day trip and not owe anyone money when I returned. Whatever the price was in U.S. dollars, I would need 1.5 times the amount to buy things in euros given the exchange rate at the time.
My friend and I decided that we needed about $2,500 each to have the vacation we wanted. Fortunately, we knew the benefits of planning ahead, and we each saved $500 per month since the summer. I had to give up other things like extravagant outings to hit my goal. I booked my flight on my credit card to rack up miles, and then I paid off my bill by the due date with the money I saved up.
Because the credit card bill would be much higher than my normal monthly credit card payment, I was extra conscious of other charges that I put on my credit card for the next 30 days.
Split the expenses
My best friend booked the hotel room in Rome on her credit card and I put the room in Florence on my credit card. We did not have to pay each other back for our respective shares because the rooms were roughly the same price. We were able to book our train tickets from Rome to Italy on our respective cards at the same time.
With lodging and air transportation out of the way, I wanted to have a strategy in place before I arrived in Rome. I called my credit card and debit card companies before I went to let them know that I was going to travel overseas. Otherwise, the companies would have placed a hold on my account because of the "outside" activity.
By calling, I also found out that if I used my debit card overseas, I would be charged an additional fee with every transaction for the currency conversion. However, I would not be charged additional transaction fees when I used my credit card. Most financial institutions outline their policies and it's important to read the fine print.
I wanted to exchange some dollars for euros before I arrived. I also wanted to carry U.S. currency with me in case the value of the dollar rose after I got to Italy; I could buy more stuff in euros with my dollars. I could also buy euros on my credit card in case I got desperate, but that would mean more money to pay back upon my return.
I have one golden rule: If I'm going on vacation, I want to have fun. For me, fun means having enough money to treat myself to things or experiences that I want to have. I told myself that I wanted two quality pieces of Italian leather. I made this a priority -- I could sacrifice some wine outings for a chance to get my hands on some fine leather pieces. I was specifically looking for a bag and a pair of Italian leather boots. I got both! Because I used euros instead of my credit card, I even negotiated a great price for the purchase.
My best friend and I always talk about that Italy trip -- we felt grown, independent, and on top of the world. If you want to go away on vacation, set your mind to the task and follow these simple strategies. Life is short -- live it up with a strategy in 2013.
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Get a new bank. Exchanging Dollars for Euro's before you leave has one of the worst exchange rates. And only if you are extremely, extremely desperate use an airport exchange office. Even if you get hit with a fee for doing it taking cash out with your debit card, you'll get a better rate through your bank then the exchange in the airport. (there's probably a ATM about 5 feet away from the exchange office) I travel to Europe for 3 months every year and I use my debit card to get my cash, my bank gives me the exchange rate, the actual exchange rate at the time of the transaction, with no fee. Check XE.com for current exchange rates.
Hedging your bets by taking US dollars was a waste especially for a 10 day trip, the exchange rate isn't going to fluctuate that much in 10 days and whatever it changes to, any advantage you have, you'd lose and then some when you went to exchange those dollars for Euros. Any exchange office, even the most reputable one, charges a fee for that exchange that will be far and above any increase in the value of the US dollar vs the Euro. You have some great advice about staying on budget but your advice on exchange, credit/debit card use is counter-productive.
Two tricks to travel in Europe.
1. Capital One Credit Cards - have no intl. transaction fees. This alone can save you a fair amount vs. a std. CC. Make sure you get a chip/pin version of the card before you leave the States.
2. Bank of America - Good ol' BofA is part of the Global ATM Alliance. You can use ATM machines with DeutscheBank, Barclays and BNP Paribas (Germany, UK, France) with no fees. Exchange rate is extremely competitive and you don't need to carry tons of Euros.
I only had a Mastercard with me in Greece in 1996 and almost lost the chance to buy the last two tickets for a side-tour of the Peloponnese (there was a line of people behind me) when I realized my debit card was a Visa and they were happy to take it.
Which cards are best to take now?
Is it still true that our backward-technology credit cards do not work in many automated cash dispensers in Europe?
Do I need my credit card pin (which most people don't even know they have) if I travel overseas?
Call the issuer of the credit card before you travel and let them know where you are traveling because businesses overseas can't/won't take wheelbarrows full of Obama dollars as payment for your vacation.
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