27 February 2008

How to make the most out of the weak dollar when you travel

We are already planning our family’s annual trip in July either to Europe or back home. I am bent to go to Europe since we will be spending Christmas in the Philippines anyway. We know that the dollar is getting weak compared to the euro and how do we best make use of the weak currency when we travel? Let’s find that out.

Tips from Ed Hewitt of Independent Traveller.com (as taken from MSNBC):

1. Get cash from ATMs — at a bank
ATM is your best option for a combination of a fair exchange rate and low surcharges and fees. At an ATM, you will likely pay a transaction fee, but in many cases you won't be paying a percentage on every dollar exchanged. However, we should note that many banks are now applying fees to foreign transactions, usually in the 1-2 percent range. Over the course of your trip, you'll take a hit from these fees — but it will be nothing like the up to four to eight cents on the dollar that you can lose by choosing the wrong exchange desk. In most cases you'll get the best rate available; the pennies can really add up the more you spend (and you'll be spending plenty in Europe this year).
When using an ATM, you may want to take out more cash than you need immediately, as with each trip to the ATM you pay the fees and surcharges yet again. You'll want to balance this tactic against the risk of carrying too much cash, which can make you vulnerable to the criminal element that sometimes preys on travellers. A hotel safe might be a good hedge against this problem. You'll do well to avoid stand-alone, off-brand ATMs of the kind you can find stateside in the back of convenience stores and the like. These typically have the highest transaction fees; use an ATM from a reputable bank instead.
Finally, even when using a bank ATM, you will sometimes pay fees both to the bank that owns the ATM as well as your own bank. Whenever possible, use your own bank to get cash. Virtually all major banks have ATM and branch location services on their Web sites.

2. If you absolutely must use a currency exchange counter ...The following tips can help minimize the damage:
· Exchange money at your destination; doing so in advance stateside is a money loser.
· Similarly, when dumping your
leftover currency, do so before departure.
· Exchange only enough money to get the job of the moment done (whether it be a cab ride, emergency rations or the purchase of a piñata), and then get thee to an ATM when you can.
· Skip the airport or train station kiosk, where you are almost guaranteed to get the worst rate available.
· The best place to exchange money is at a bank; avoid the tourist traps.

3. Use your credit card
Many of the benefits of using an ATM card also apply to your
credit card, with the additional upside that transaction fees, surcharges, poor exchange rates and the like are a lesser evil in most credit card transactions.
However, this is one area in which all credit cards are not created equal. Many credit card companies have adopted fees for purchases made in foreign currencies, usually 1-2 percent. Choose the right card and you can avoid these fees; Capital One, for example, is one major credit card company that will not charge you these fees (at present, anyway). Check with your credit card company for their fee schedule on foreign purchases to figure out which card has the lowest surcharges, and then use that one for your overseas purchases.
Out on the road, also check the fine print to make sure that your hotel, restaurant or other outfit does not tack on a percentage fee on all credit card transactions to cover their authorization fees.

Okay, given the above tips, start loading your bank accounts since you will need your ATM and credit cards when you travel. As for me, I personally use Euro when I travel since it is the stronger currency. I am neither an investment mathematician nor an economist but I do know that I have more buying power with the Euro. However, the US dollar is quite affordable when you are saving money to buy a different currency. I won’t suggest that though when you are still in your home country. Buy at least a hundred dollars or euros but leave the rest when you get to your destination.

Well, I hope to be able to finalize my trip plan so if we go to Europe or not, I’ll still keep my ATM and credit cards handy, just in case.

(Source: MSNBC.com, Travel categories, author Ed Hewitt)

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