Financial Matters

Money matters abroad

So, you’ve decided on your international vacation destination—your flights and hotel are all set, you have plans to see the latest and greatest sights of your destination, and even figured out how to say, “Donde esta el bano?” Smooth sailing ahead, right? Not so fast!

The small matter of money
Unless you’re writing a book on the joys of penniless European travel, or something of the sort, you’ll need some local currency. Of course, as with everything in life, there are a myriad of choices for currency exchange.
The two factors to look at when changing money are:

Transaction Fees: This is what is charged to actually execute the transaction—it may be a percentage of what you’re exchanging, a flat rate, or a combination. Some actually charge no fee, but hammer you on the next item–

The Exchange Rate: The actual amount of foreign currency you get for your dollars.

So, on to the choices, then…

Converting at the airport or other Bureau de Change

Although convenient, this is the most expensive option. Companies such as Travelex have booths set up at major airports and tourist locations. You hand them your cash, they give you the local currency, minus a chunk for their fees. On top of that, you are likely to also get ripped off on the exchange rate. It’s best to avoid this option. Banks are a better alternative, however, they are a bit less convenient to find.

Travellers Cheques

Although this used to be a popular option, it’s much less prevalent nowadays. Basically, you purchase travelers cheques before you leave, either in dollars or in your destination’s currency. The number one advantage to these are security—if they are lost or stolen, you can have them replaced within 24 hours. Of course, this option is useless if no merchant actually accepts travelers cheques, which is increasingly the case. You will be forced to convert at an expensive Bureau de Change or bank—same problem as above. Alternatively, some companies offer a travel cheque card that works similar to a credit card. Although more widely accepted, you will pay dearly for this option .

Welcome to the 21st Century
Yes, just as we use credit cards and ATMs at home, the rest of the world has also caught on. It is commonly recommended that travelers use these while going abroad. However, there are a few pitfalls to watch out for. While you’re enjoying your new, exploring its sights, and spending some serious cash, your credit card company may be laughing all the way to the bank! Although we will be looking specifically at credit cards, don’t miss our piece on foreign ATMs here.

Secret Fees
Remember those 10 page long contracts that required a magnifying glass and the patience of a monk to peruse? Buried in all the 2 point font were so called disclosures for foreign transaction fees. While credit cards tend to be a better deal overall versus exchanging cash or travelers cheques, some are better than others. Visa and MasterCard levy fees of 1% on all purchases abroad as a foreign currency conversion fee. Even worse, the issuing bank may charge even more surcharges on top of that, perhaps another 2-3%. What’s worse, all these fees are generally buried in the exchange rate printed on your statement, so you may not even notice that you’re being charged at all. But, most credit cards do charge.
“Big deal—what’s a couple of bucks”, you may say. Well, those dollars can add up to a huge chunk of change. Plus, why give the credit card company more money for doing…what, exactly? It’s a principle thing…
So, what’s the solution? Simple—there’s one card out there that not only charges no foreign transaction fees, they will eat the cost that Visa and MasterCard charge. On top of that, you get the interbank exchange rate, which is the same rate that banks are able to get for volume transactions.

So, save on nonsense fees, and spend your cash on the important stuff, like cheesy souvenirs for your cousin Vinnie…or “mas cerveza por favor!”

Salud!

Click here to apply for the Capital One card.

Related posts:
Using foreign ATMs