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The best way to exchange currency

Traveling to Europe this summer? Don't overpay for converting your dollars into euros when you arrive or before you depart.

By Karen Datko Jun 18, 2012 6:23PM
Image: Couple reading guidebook in Rome © SIMON WATSON/Lifesize/Getty ImagesIn case you haven't heard, the euro compared with the dollar is a relative bargain right now. But no matter when you go abroad, you're wasting money if you're trading dollars for euros at the airport kiosk upon your arrival or at your bank before you leave home.

 

A new study by Card Hub illustrates how much you'll pay to convert dollars to euros at a variety of locations. "Exchanging currency tends to be an important pre-trip task for international travelers, but as this study illustrates, doing so is not only unnecessary, but it will also cost you quite a bit of money," Card Hub's Odysseas Papadimitriou said in a press release.

 

Among the findings:

  • Make purchases with your credit card. On June 11, the exchange rates were 1.2557 for MasterCard and 1.2579 for Visa. That means a euro was worth about $1.25, much lower than last year's $1.42. Avoid paying up to 3% on each purchase by taking a card that doesn't have a foreign transaction fee. (Post continues below.)

  • Avoid the banks before you go. Among the 15 largest U.S. banks, the exchange rates ranged from 1.3000 at Citibank to 1.4400 at U.S. Bank. The transaction fee ranged from zero to $12 for bank customers. (For noncustomers, a higher fee might apply.) Card Hub adds:
The banks that offer the best deals are Northern Trust and Harris Bank, which charge 1.3153 and 1.3207, respectively, and do not apply fees to the transaction The banks offering the worst rates are U.S. Bank, which has a 1.440 conversion rate and a $9.95 fee, and Cincinnati, Ohio-based Fifth Third Bank, which has a 1.3600 conversion rate and a $10 fee.
  • Beware the airport kiosks. Card Hub says the largest airport-based money exchange service, Travelex, had a June 11 rate of 1.4493 and a $9.95 fee.

"On average, credit cards save consumers 8.1% relative to bank conversion services and 16.2% relative to companies found in airports," Card Hub said.

What should a smart traveler do? Card Hub offers these tips:

  • Use your debit card to withdraw cash at ATMs after you reach your destination. Hopefully your card has a low foreign transaction fee. "You'd rather get the low Visa/MasterCard exchange rate and withdraw cash as needed than have to trade in dollars at an unfavorable rate and risk getting pickpocketed while carrying more cash than you need," Papadimitriou said.
  • Let the issuers of your credit and debit cards know about your travel plans before you leave home. You don't want your card suspended for suspicious activity.
  • Write down the phone number on the back of each card that you can call collect if your card disappears during your travels. Keep them separate from your cards. 
  • Avoid "dynamic currency conversion," when a foreign merchant offers to convert the purchase from his currency into yours. It's a ripoff.

More on MSN Money:

4Comments
Jun 21, 2012 9:27AM
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"But no matter when you go abroad, you're wasting money if you're trading dollars for euros at the airport kiosk upon your arrival or at your bank before you leave home." - It is highly not recommended to travel abroad with a roll of cash, even if its foreign currency. The only option you have is to pay with a credit card, but you will be charged a foreign transaction fee, usually 3%, unless you are using an American Express, that charges lowest fee of 2.7%, or find a card that has no fees at all. Here’s a list of the foreign exchange fees currently charged by some of the major banks (noted as percent of purchase amount, and subject to change, so you should always double check):

·         American Express Platinum and Centurion: 0 percent

·         Capital One: 0 percent 

·         Discover: 0 percent 

·         HSBC Premier: 0 percent

·         JP Morgan Chase: 0 percent to 3 percent, depending on a card 

·         American Express: 2.7 percent

·         Bank of America: 3 percent 

·         Citibank/Diners: 3 percent 

·         Diners Club: 3 percent 

·         HSBC: 3 percent

·         US Bank: 3 percent 

Wells Fargo: 3 percent  
By the way, if you look at the above table, you'll see that almost all banks aside of AMEX charge 3% fee. So I was surprised to see CARDHUB giving an average for MasterCard and Visa less than 3%. Alas, a short investigation pointed me into the flaw in their reporting - they've actually included AMEX 2.7% fee, but rolled that lowered number into MasterCard and Visa results. So if you are going to start looking for a MasterCard or Visa with less than 3% fee, let me know if you find one.  

So, what if you choose to pay in local currency? Than you can request the merchant to do a dynamic conversion which occurs at the point of sale. This feature is built in to swiping machine of the merchant, and you'll just have to select that option on the screen. You can find out more about dynamic conversion rates and latest credit cards without foreign transaction fees in our upcoming study of Foreign Transaction Fees, soon to be published at Credit-Land.com

Aug 18, 2013 3:35AM
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There are Credit Cards in the US that offer no charge for money exchange on purchases overseas.  However, not everyone accepts an American credit card in Europe anymore.  Small establishments, in Germany for instance do not accept Visa and Master Card.  They do accept some European cards.  If you like shopping at small, local businesses overseas you have to bring their currency to the establishment.

 

May 4, 2013 12:38PM
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Great article highlighting fees and costs of currency exchange. Checkout http://www.knightsbridgefx.com. Get better rates than the banks for Canadian and US dollars and compare Canadian bank exchange rates to ensure you are getting the best deal.
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