Foreign Currency Exchange Rates

The value of the US dollar in relation to currencies of other countries fluctuates throughout time depending on domestic and foreign economic cycles, as well constant daily fluctuations. Therefore when traveling to foreign countries it is very important to have a good understanding of the foreign currency exchange at that specific time. The same is applicable when having a family member living overseas, or considering the cost of attending college in a foreign country.

Where to Start

A good place to start is visiting the US State Department site (travel.state.gov) which contains valuable and useful information on many aspects of traveling and living in a foreign country. Another site packed with information is flyerguide.com, containing many specifics on methods of payment, expenses, etc.

Currency Conversion

When planning a trip or stay to foreign country, the determination of the value of the US dollar in comparison to the currency of that foreign country is a very significant cost factor. Some internet sites, such as www.x-rates.com displays exchange rates, and provides good conversion calculators. Conversion rates, however, do not reflect financial transaction charges, and sometimes proportionally significant charges, depending on the issuer of the credit card, the country, etc.

Purchases in a Foreign Country

When you make a purchase in a foreign country with a US issued credit card, your bank will reflect the charge in US dollars plus a “conversion” or service fees for converting your purchase to US dollars, even if the currency was already converted before reflected by your bank. The actual conversions are actually made by Visa or MasterCard associations. Those fees can vary between 1 and 3 percent of the total amount of purchase. In some instances other transaction fees also may be applicable. In many occasions travelers pay 1% for the currency exchange fee to Visa and MasterCard at the time of the transactions.

In addition to fees charged by your bank or credit card issuer, some countries or transactions may reflect a Value Added Tax (VAT), which will increase the cost of your transaction.

International Airports feature exchange desks where one can exchange currency just before departure or upon arrival to the country of your destination.

ATM’s  and Credit Cards

Do not rely on just one ATM card when traveling to a foreign destination. Take more than one ATM card from multiple issuers in the event there is a problem with one, since some ATM cards may not work at all banks. It is not a good practice to rely on just one card to obtain cash when traveling away from the US.

As to your Visa or MasterCard charge chards, make sure that your Visa or MasterCard has a Cirrus, or Plus logo on it.

Cash Withdrawals

It is more expensive to withdraw cash from an ATM using a credit card than a debit card. If you withdraw cash from an ATM using a credit card (a card not linked to a bank account), you will probably be charged a cash advance fee of about 3% in addition to foreign exchange fees

Traveler’s Checks

Traveler’s checks are a viable option or alternative to the use of credit cards. Depending upon the fees charged for purchasing traveler’s checks from your bank or credit card company, traveler’s checks may be a viable alternative. In many occasions banks offer free traveler’s checks to customers who meet certain depository requirements. It would be a good idea to make that determination with your bank.

Tips

Always notify your credit card company or bank of your travel plans, as sometimes a credit card issuer may suspect theft or unauthorized used when the transactions are outside of the charge patterns of the cardholder.

If possible, do not carry all the cards with you. It is best to leave some at a safe location. Make copies of front and back of your credit cards, and have with you telephone numbers of the card issuers or bank in case of theft, loss, or other problems.

If an extended trip is in your horizon, perhaps in the military or school, you should seek the advise of a financial planner or accountant as to how to make wise use of your money.

Getting Expert Financial Help

If you are planning a trip to a foreign country you would benefit from the expert advice of an accountant or financial planner, which could result in substantial savings.