Tips for cutting your foreign exchange losses
Ablang
If you spend, say, $2,000 at your foreign destination, the worst
exchange rate will cost you something around $100 more than the best
rate. Given all of the other opportunities to overspend, that isn't a
huge deal. Still, travelers hate even a small gouge when it's
unnecessary. Although I've done several previous columns on this
subject, I still get more reader inquiries about foreign exchange than
any other topic. So here, for what I hope is the last time this year,
are my best suggestions about exchanging dollars for foreign money.
1. The best overall way to exchange is a no-fee ATM currency
withdrawal with a debit-ATM card. I know of three no-fee systems:
* If you have an account at Bank of America, you can make
unlimited withdrawals, with no fees, from ATMs operated by Barclay's
(UK), Deutsche Bank (Germany), Paribas (France), Scotiabank (Canada),
and Westpac (Australia).
* If you have an account at Citibank, you can make unlimited
withdrawals from Citibank ATMs in various foreign countries. Check the
Citibank website for locations. Unfortunately, Citibank has very few
ATMs in such popular destinations as France, Italy, Thailand, and the
U.K.
* Some small banks absorb the usual fees for foreign withdrawals,
usually with a limit on the number of no-fee uses. Ask your bank about
its policies.
2. If you don't have a no-fee ATM card, you do almost as well billing
local purchases to a credit card that doesn't assess a large foreign
surcharge. You lose no more than about one percent in exchange costs
with a Visa card from Capital One or USAA bank, or a MasterCard or
Visa from one of the smaller banks and credit unions that issue such
cards. Check around for a smaller bank in your area. You lose about
two percent with an American Express card.
Most other banks that issue MasterCard or Visa cards, as well as
Diners Club, add a surcharge of three percent to foreign billings.
Although two-thirds of that is pure gouge, the total three percent is
still less than you'd lose exchanging currency or travelers checks.
Since my earlier report, MBNA, which used to add only one percent, has
gone over to the dark side and now adds the three-percent gouge.
3. For the cash you need, your best bet is a debit-ATM card. Since you
pay a fee of up to $5 for each withdrawal regardless of the amount of
money, you can minimize your exchange losses by withdrawing at least
$200 worth of foreign currency each time.
4. Exchanging U.S. currency or travelers checks at banks or
independent "bureaus de change" generally costs anywhere from four to
10 percent in exchange rates and fees. But you can't use foreign
currency travelers checks to avoid that fee, since you pay an
equivalent fee when you buy the checks.
5. Finally, here are a few exchange methods to avoid:
* Don't let a foreign merchant bill your credit card in U.S.
dollars rather than foreign currency. That way, you'll get gouged
twice: once when the merchant gives you a poor exchange rate, and
again when your bank adds a surcharge.
* Don't exchange at U.S. airports before you depart. Over the
years, those have been among the worst rates I've seen.
* Don't use a credit card to withdraw cash—you'll pay fees on the
exchange plus a withdrawal fee plus interest on a cash advance.
* Don't exchange at a hotel desk—I've seen hotel desks give as
much as 20 percent less foreign currency than you'd get at the
wholesale rate.
* Forget travelers checks unless you're paranoid about security
issues with plastic.
It's easy to keep your exchange losses to no more than three percent.
And with the right combination of ATM and credit cards, you can cut
losses close to zero.
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"To buy an island is the same as courting a woman. You can never explain exactly why you love her. It's chemistry--something you cannot define--a feeling that you can stay forever."
-- Farhad Vladi, Islands (mag) Jul/Aug 2005