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How you can pick Terry’s brain
In this column, I’ll respond to your most frequently asked questions regularly. Of course, you always can submit individual questions on my Sun-Times blog, reached on the home page at www.TerrySavage.com.
Updated: May 3, 2013 12:15PM
Q. I am going to Europe next month with a group. We were discussing the best and least expensive way to change our dollars into euros. Any advice would be appreciated?
A. That’s a very timely question! As you know, the relationship between the U.S. dollar and the euro changes on a daily basis and can have big swings even within one day. The latest headlines are about new problems with Greece, which weakens the euro — and means your dollar can buy slightly more of their currency.
But I assume you’re not trying to become a currency speculator, merely seeking the least expensive and safest way to handle your travel expenses. For that purpose, the easiest and safest way to convert currency is to use your debit card at any in-network bank ATM in Europe.
You’ll find plenty of bank ATMs in major cities. Although Europe is ahead of us in using microchips instead of magnetic strips on their debit cards, I had no trouble using my magnetic strip debit card on a recent trip. Your PIN works perfectly, and the money is withdrawn in euros (or the currency of any country you’re visiting).
But when you get your bank statement or view it online, you might be in for a surprise. First, you’ll note the exchange rate will vary. I was in Europe in early April when the dollar was falling. I tested the system, taking the same amount of cash out, several days apart, and had the sad experience of seeing the impact of the falling dollar. My statement reflected that it took more dollars to buy the same amount of Euros a few days later!
The second surprise is the fee that will be attached to your withdrawal. Whether you use a credit card or withdraw cash using your debit card, there will be a fee for the service — typically about 3 percent of the amount withdrawn. And most banks will also charge a fee for using an ATM that isn’t owned by the bank.
Those costs can add up, so plan to make fewer withdrawals and take more cash out each time. Then, of course, guard that cash in a wallet that you carry in a front pocket (not back pocket of jeans for men) or in a tightly guarded purse — or wear a money belt. Because most bank ATMs are on the street, pickpockets can easily target a cash-rich tourist.
Also, check with your credit-card issuer about their fees. In some cases, with gold or platinum cards, they may charge lower fees than bank ATMs. But you’re subject to their calculation of the currency exchange rate at the time the transaction is posted. In times of a falling dollar, that could add to your costs, and rarely does it work to your benefit.
Here are a few more tips:
† Beware of currency conversion machines in hotel lobbies or stores. Use only ATMs associated with a bank.
† Don’t bother with traveler’s checks, because bank ATMs are everywhere.
† Don’t expect to convert cash dollars to a foreign currency. Banks charge extra for converting paper money, since there is a huge cost to handle foreign cash.
† Avoid airport currency changing booths. Get some cash in Euros, or the currency of the country you’re visiting, by visiting a major bank in your town. In Chicago, Chase has foreign currencies at its Chase Tower main branch.
† Notify your bank or credit-card issuer that you’ll be traveling, so they don’t block your transactions because they suspect fraud. (To reach a person, keep saying “Operator.”)
Keep a separate record of your credit-card numbers and the toll-free international numbers to call in case your card is lost or stolen. And, while you’re at it, make a copy of the front page of your passport in case you lose that, too. Leave those stashed safely back in your hotel room, not in your purse.
Travel safely and enjoy your trip. Remember, the U.S. dollar may be falling in value, but it is still a tempting target in crowds of tourists. And that’s The Savage Truth.
Terry Savage is a registered investment adviser.