So, you are going on that long sought after European vacation. How should you fianance it?

I sit at a bank currency window five days a week and watch last minute customers who did not plan ahead lose large sums of money. Yes, we are providing a service and no one is holding a gun to these peoples heads, but if these people had maybe read this write up or did some research they could have save tens, hundreds, and even sometimes $1,000's of Dollars. Some of the easiest customers to pull the wool over their eyes are my fellow countrymen (Americans). They rarely ask any questions, are generally laid back, and do not understand that they are forfeiting a lot of their hard-earned money by changing for conveinence.

So what should I do?
In Europe you should try to pay with your card as much as possible. In Switzerland, the UK (England, Northern Ireland, Wales, and Scotland), Germany, France, Iceland, for that matter most of Western Europe it is going to be possible to pay with card most everywhere. If you are travelling to Eastern Europe (Czech Republic, Slovenia, Hungary, Poland, then it might be a little more limited especially outside of built up areas, but I would guess you still could pay at most places with a card). Check with your bank or credit card issuer but most companies charge only a small fee above the daily rate and very few cards charge a transaction fee per transaction. Before you get burned call your bank and ask how it works with your card.

The second best option is to take money out at an ATM. Make sure you warned your bank in advance before you set off on your trip and tell them where you are going to be. If you don't do this your bank might cancel your card. I would also recommending having at least two cards in your wallet. It can always happen that the ATM eats your card and doesn't give it back to you. Then you better have enough cash with you before you get a new one or have some nice family who can send you money with Western Union or Moneygram or some other similar remittance service.

When you use your card check with your bank beforehand to ask what they charge on fees. With my Austrian bank card I spend €6,90 (approximately $8.30) per withdrawal. I also love around 0.5% to the exchange rate. I always plan ahead and try to use my card the least amount of times possible, but with $'s I know I will be back in the US so it doesn't matter if a few are left over. My point here is that if you think you are going to spend a €1,000 on your trip, try to take it out 1 or 2 times so that you don't keep getting hit with fees. Since we are on the topic €'s you should start thinking only in Euros! ATMs are smart and try to ascertain if you are a dumb tourist using the following trick (DCC...Direct Currency Conversion). Each ATM tries to trick a person by wording it differently, but mainly it works the following way. The machine will ask you do you want to take out Euros and have your home bank decide the rate (sounds scary since the rate is not known) or do you want this promised rate of so many Dollars for Euros and the machine will show you how many Dollars they are going to charge you. If you select the latter (2nd option) the machine gives you generally a much worse rate because they provided you with a conveinence (promised rate) and allowed you to pay in your home currency.

If this scares you with the options above at the ATM, then you could go to a currency window and take out money with your card (third best option), this is especially good if you only have 1 card and are afraid the machine might swallow it. The option at the counter is generally considered a cash advance and since you are with a person it generally costs more. Ask your bank in advance if the rate is the same at a bank counter in comparison to an ATM and if any fees apply because of the advance. The reason it can be expensive is that your card is probably issued in $'s and you need €'s. The money exchange place or bank will also charge you a fee because they are providing a service. The bank I work for charges a flat fee of €5-€10 depending on the amount.

The worst option is changing cash. If you change cash you should only change a small amount at your bank unless you get a great deal. A great deal in my opinion is 4-5% losses with no additional fees. Check with your bank beforehand. The bank I work at has an online ordering system open to the public and losses for customers needing foreign currency (like USD, GBP, and CHF) is only 3.4%. Pre-ordering can save you money, but most banks in the US are going to give you large bills and probably charge you more than 4-5%. Where should you change your cash? In the country your visiting, but not at the Airport. At the Airport our rent costs are insane, and everything costs more (food, drinks) and of course cash also costs more. You also have to think about where you are travelling to. In Asia for example (Vietnam, Thailand, Cambodia) the cost of living is significantly lower and the people earn less so changing there is cheaper. In Vietnam and Cambodia Dollars are great to have for tips and small purchases. But back to where to change your cash, the Airport is the last option I would use and if I used it I would only change $100-$120. My company does a tiered approach and it costs € to change up to about $130. This will be enough for a taxi in and out of the City and one meal. The rest pay with card. I would only do this if I came to the country with no money, because I know the taxis take car
and I can take out money at an ATM for cheaper, but if I wanted some cash quick then I would change at the counter. Be careful. How expensive it is to change money consists of two factors: The commission (sometimes referred to as fee can be a flat fee or can be a percentage), and the second factor is what the rate is. Generally the smaller amounts you change are the most expensive to change because the base fee eats up a lot of the value. How can I explain this? If you change $20 at my bank you get €11.50 roughly (because minimum commission is €3 and the rate is roughly $1.38 for 1,-€). If you change $100 you get €70 (€12,50 more) because the minimum fee is only € and the same rate. So they encourage you to change more by giving you a little more for your money, but in the end you might lose less then if you changed 5 $20 Dollar bills five separate times, but you still are losing a lot because you changed at an Airport. Something we use that is really tricky, especially to foreigners who aren't native English speakers (and most English speakers fall for it) is that we promise the person it is commission free and without any fees if they change $500. Most people don't understand what this means and think they are getting something for free. Normally people pay €15 to change this amount and yes they save this, but we are earning handsomely on the rate of exchange. We take $1.38 for each Euro when the real rate is around $1.19.

Where do I change cash then? In the City at a main street currency exchange or bank or railroad station and maybe shop around.

So to wrap this up. Use your card as much as possible. Use your card to withdrawal money as a second option, and if you insist on using cash then only change in the City and avoid the Airport. You should also avoid the ATMs from currency exchange businesses (generally horrible rates) and try to find an ATM from a bank. If you have a phone with you look up the name of who owns the ATM and make sure it is a legitmate bank. If you have any questions I can answer them probably.