While this pertains to exchanging dollars for euros (and was based on the exchange rate in late December 2014) the format can be adapted to any currency and exchange rate. Simply take a given sum (the example here uses $600, which is a typical amount of spending money a student might bring for a two-week trip that does not have meals included) and research how much foreign currency would be obtained through the various methods described. The following is a template that you can adapt for your trip to determine the best way to pay for services, meals, and lodging abroad.
What is the best way to get Euros?
For study abroad trips where the only meal included in the trip fee is breakfast, we typically tells the students that they will need spending money for "most lunches and dinners", additional museums or attractions they wish to visit that are not part of the course, and any sundries or souvenirs they purchase. If your trip fee covers meals then students will need less cash but you will need to pay for meals and the method used will make a difference in your overall cost that may be significant.
How to get cash in euros? There are several options. I spent a day comparing the currency exchange rates of various sources of euros based on an imaginary $600 in dollars to see how many euros you get from various service providers. (I chose $600 as many airports currency exchange booths advertise the amount of several foreign currencies one would receive in exchange for $600). Incidentally, to compare various sources for currency exchange or cash euros, it is best to ask 'how many euros (or other currency) will I get back for my _____ U. S. dollars?' rather than 'what are the fees?' as these are apparently two very different questions and the answer to the first question will provide the information that you need to make a sound decision. If you ask about “fees” they will generally say “there are no fees.”
- Currency exchange counters at the airport and other locations are usually NOT a good deal, in fact they are an expensive way to convert dollars into a foreign currency. Even though the sign says 'no fees' these money exchange counters are not a good deal as they give you an exchange rate that is favorable for them, not you. For example, December 27, 2014, the currency exchange counters at the airport would take your $600 and give you 431 euros back instead of the 491 euros you would receive if there was no charge for the conversion, using that day's bank exchange rate (use a currency conversion calculator like Oanda.com or XE.com to get the base bank rate). This 50 euro fee is equal to $60.89. This means the currency exchange counter is charging you 10%. They may advertise 'no fees' but it depends on how you define 'fee'. If they charge you a currency exchange rate that is 10% more than the bank rate, even though they don't call it a fee it certainly is more money in their pocket and less in yours! (Today Dec 29 the currency exchange rate is 1.217, it takes $1.21 to equal 1 euro. Or, one dollar = .82 euros). So multiply your $600 x .82 = 492 euros is what you'd receive with no currency exchange transaction fee/charge. Or just look it up on Oanda.com or XE, which are updated daily as the rate fluctuates.
- Traveler's checks are not very convenient, are NOT accepted everywhere in spite of the ads, and have higher fees than desirable. I don't recommend these. Also, prepaid traveler's debit cards generally have high currency conversion charges. If they say 'no fee' realize that it's not technically a 'fee' but rather a currency exchange rate that has a healthy profit built in for the company selling you the euros. It walks, talks, and sounds like a fee but technically it isn't a 'fee' so they will say 'no fee'. There are very few ways to get euros without some type of fee, charge, or cost, but you want to get the best deal possible and 10% is NOT a good deal.
- An ATM card/debit card is a good way to get cash in euros or another foreign currency while abroad. Unfortunately the fees have gotten higher in just the past couple of years. There are banks on the major ATM systems ("Plus" and "Cirrus") in most cities. Yes, there is generally a cash withdrawal fee of about $5, so limit this to a couple of larger transactions (as opposed to pulling out 30 euros every day). Your bank probably has an additional fee of approximately 3% (you may wish to check your bank's foreign transaction charge on ATM withdrawals). So, to withdraw that 491 euros you will have a 3% fee of 14.73 euros, about $18, plus the $5.00 cash withdrawal fee, so you have spent $23 in 'fees'. Better than the $60.89 at the currency exchange counter! Be sure you memorize the numbers (not letters!) of your 4-digit pin. (Longer pins and pins that begin with 'zero' may not work. Get a 4-digit pin for your ATM card if you have a longer one. Memorize the actual numbers, the letters are not always on the buttons).
Many American banks have a limit on the amount of cash they will let you withdraw in one day. You should contact the bank that issued your ATM-debit card and ask to have the cash withdrawal amount raised for the duration of your trip if it is not adequate. While banks overseas may limit the amount of cash withdrawal permitted in one day, particularly from other banks, you won’t have control over that. However you can at least ensure that your bank isn’t the reason you are limited to $250 per day. When a restaurant manager tells you the credit card machine is broken and you need to pay for a thousand-euro dinner at 10 pm in a foreign city you will be thankful to be able to obtain cash from a nearby ATM (or two).
- Credit cards – For purchases where a credit card is accepted, this is the best way to buy things if you have one of the credit cards that don't charge for currency exchange (called a "foreign transaction") fee. Examples are the "no foreign transaction fee" cards from Capital One, Marriott Rewards, Bank Americard, and various airline-logo credit cards. You pay the base bank rate, with no transaction fees. This is an excellent way to pay at hotels, restaurants, museums, etc. While you may not have one of these cards, you may have time to apply for one if interested. If you are paying a large payment in foreign currency, for example a lodging bill, this is ideal. While smaller hotels and inns may offer a discount (typically around 3%) for cash, this is still comparable to ATM fees of 3%, is more convenient, and avoids ATM withdrawal fees and the need to handle large amounts of cash.
Note that these credit cards typically do have an annual fee and of course if you don't pay the full amount before the due date you'll pay finance charges that will make this NOT a good deal! Also, note that in Europe, American Express cards are not usually accepted; typically only Visa and Master Card. Also, always look or ask if credit cards are accepted. They are not as widely used in many countries compared to the U.S., and you may be surprised to find the restaurant you just dined in won't take your credit card. You will still need to have cash.
Most regular credit cards charge a currency exchange fee of 3% or 4% (call your provider or read the fine print) but at least you don't have the additional ATM fees. Also, don't be surprised that they don't take credit cards at many restaurants and stores, especially in Germany. One important caution: you do NOT (repeat NOT) EVER want to use a credit card to get cash. This gets you finance charges from moment of transaction as it is considered a 'cash advance.' The interest charges will make the currency exchange counter look like a good deal!
- Friends or family that have cash euros left over from a previous trip? An idea for getting euros in advance to have some 'seed money' for that first day until you find a convenient ATM is friends or relatives who have returned from Europe with euros they didn't spend. Usually they don't have a lot of leftover euros but this can cover you for minor purchases the first couple of hours in Europe (coins for the bathroom, a croissant, taxi or bus fare to the hotel). People are often are happy to exchange their euros for dollars at the current exchange rate and don't charge a fee! Or, just promise them you will return with the same amount of cash in Euros and make them whole. Yes, there is an ATM in the airport when you arrive, but it may be hard to find. If you can wait until you out of the airport there are a couple of ATMs close to your hotel. Of course if you trip involves staying in a rural setting, the outback, or the rainforest, you’d best get your foreign currency at the ATM before leaving the airport. Or from the bank at home.
- Banks, credit union, AAA, travel agents – You can also get euros in exchange for dollars before leaving the US, from most U.S. banks, credit unions, and travel agents. They will SAY they don't charge a fee, or they only charge a $10 fee, and it often takes up to a week or more to process and deliver your cash. Again, there is the definition of a 'fee' that may lead to this person providing unintentionally misleading answers, in good faith (of course). What the customer service person often doesn't understand or clearly communicate is that they give you a currency exchange rate that has their organization's 'charge' built in. For example, I am an AAA member, called their affiliated travel agency, and asked about getting euros. They say proudly there is 'no fee for members' if you get over $200 worth of euros. However, your $600 will net you 465 euros, instead of the 492.70 which is today's (Dec 29) bank rate, a 27 euro difference, which equals $32.88, a charge of about 5.5%. I called my bank and asked how many euros my $600 would get. The answer was $462.99, as they use the conversion rate of 1.295. There is also a $10 fee. So, pretty much the same as the AAA travel agent. You'd still do better at the ATM, as your fees came to $23 instead of $32.88. Of course, if you visit the ATM every 2 days, those $5 transaction fees would quickly eat up the benefit. So, food for thought, you can determine your preferred option.
- Paypal – While Paypal isn’t useful for obtaining foreign currency, it may be accepted for deposits and/or payment at some lodging establishments and by tour guides and other small businesses. Paypal charges for currency exchange a rate of 2.5% “above the wholesale exchange rate Paypal pays for foreign currency.” Merchants also pay a fee depending on their Paypal volume, so this may be passed along to you.
As trip leader you have a couple of additional options for paying in advance for lodging, transportation, or tours abroad. If a deposit is required, these are options but may not be as good as a no-foreign-transaction charge credit card. However if you can’t pay by credit card these Paypal or wiring the money overseas may be good alternatives.
- Wiring money overseas for a hotel deposit or other payment is another strategy. Larger banks are more likely to wire money, and Western Union does this as well. Some large banks, like Bank of America, may allow you to do this online if you are do this frequently, but generally you would go to the bank or Western Union and provide them the recipient’s Bank Identifier Code (BIC) and International Bank Account Number (IBAN). Wiring money overseas from the U.S. generally costs between $20 and $50, and you may not get a favorable exchange rate from commercial banks or Western Union. Your university business office may wire money overseas for you and may not charge a fee.
- A no-foreign-transaction-fee credit card is the best way to pay for lodging, meals, museum admissions, and other expenses as long as you pay the bill on time and avoid finance charges.
- ATMS are a good way to get cash, just try to limit the number of visits due to those fees with each withdrawal.
- Currency exchange counters at U.S. airports generally have an exchange rate that will cost 10%. These may have an even worse rate if you are overseas or at locations other than an airport. These are not as good a value as other methods of obtaining foreign currency.
- If possible get 'seed euros' from someone and promise to return to them the same amount.
A week or two before your trip, call the banks that issued your ATM and credit cards to tell them the dates you will be abroad and where. Or you may be able to do this online (it is called a 'travel alert'). Otherwise they typically put a freeze on the account once you try to use it in another country, to protect you from fraud. And don't forget about having a 4 digit pin, with the numbers memorized (not letters). Also, do find out the daily withdrawal limit your bank permits from ATMS at other banks; you may wish to ask the bank allow larger withdrawals during your trip.