Take steps to make money go further while abroad
By Brad Foss
Associated Press
Q. How do I get the best currency exchange rate when traveling overseas?
A. Pay with a credit card whenever possible. Making purchases with plastic guarantees tourists the wholesale exchange rate used by banks and other financial institutions. The exchange rates merchants quote customers using travelers checks or cash are less predictable and typically are more expensive, experts said.
That said, the advantage of using credit cards has been diminished somewhat in recent years by the proliferation of fees known as foreign currency surcharges.
"They have sparked some controversy," said Bankrate.com senior analyst Greg McBride. "The question is whether people realize this is something that they're paying."
It's unlikely most consumers have any idea about the surcharges — which generally range from 1 percent to 5 percent per purchase — because they do not appear as a separate item on credit card statements. Instead, the total cost of each transaction in dollars is listed.
"We feel it's very clear," said Desiree Fish, a spokeswoman for American Express, which tacks on 2 percent to all purchases made overseas.
MasterCard Inc. and Visa International customers pay anywhere between 1 percent and 5 percent in currency conversion charges, depending on the policy of the bank that issued the credit card. MasterCard and Visa add 1 percent to every purchase and the banks account for the rest.
Of course, there are other advantages to using a credit card — aside from the fact that it's easier to carry around than a bundle of cash and there's less to worry about in the event of a lost wallet.
For example, the cost of items bought with an American Express card that break or are stolen within 90 days of the purchase date are covered by the company, Fish said.
But because not all merchants accept credit cards, it is obviously important to have a backup plan. This is where travelers checks and an ATM card come in handy.
American Express and Visa charge 1 percent on top of the value of traveler's checks purchased, although AAA members can get them at no extra cost.
But that's not the only added expense. Hotels and independently-owned currency exchange outlets often charge a commission in excess of 5 percent to redeem traveler's checks, and they rarely convert currencies based on the wholesale rates used by banks.
Travelers might do a little bit better on the conversion by buying traveler's checks that already are denominated in a foreign currency or by buying foreign currency inside the United States, experts said.
As for using ATMs overseas, McBride recommends making as few withdrawals as possible to avoid multiple surcharges from the owners of the cash machines and the bank from which the debit card was issued.
