It had to happen eventually! A GRS staff writer has finally submitted an article on a topic I was planning to cover. This post from April Dykman is stronger than the one I’d put together, though, so I’ve just tacked an addendum to the end.
Europe’s financial crisis is leading to a weaker euro and more travel deals designed to attract American tourists. According to media reports, the state of the euro might make a trip to Europe more affordable in 2010.
In the summer of 2008, the euro traded for about 1.58 U.S. dollars. This week, one euro traded for $1.22. With both the euro and the British pound falling to new lows, experts are saying it might be the best time in recent years to travel to Europe.
Financial troubles in Europe are expected to continue through 2010, leading to favorable predictions for American travelers, and a slew of reports that Europe is becoming more affordable. But not every travel cost is predicted to be lower this summer. Here’s where you might save, and where you’ll probably pay more:
Lodging and shopping
CNN Money reports that travelers can expect to find heavily discounted hotel rates meant to attract tourists:
If you traveled to Europe six months ago, a 5-night stay in a hotel room at a rate of 100 euros per night would cost 500 euros or about $750. But if you travel there now, that same stay would cost you only $620.
With the uncertain euro-zone economy, would-be travelers are likely to cut discretionary spending, forcing hotels to reduce prices to attract tourists. This, combined with the strengthening dollar, should make hotel stays more affordable for U.S. travelers.
Similarly, European store owners have started to discount prices to stay competitive. In 2007, Europeans shopped in major U.S. cities for the “laughably” low exchange rate, but now deals are looking better for Americans shopping in Europe.
Flights
One area travelers aren’t likely to save is on airfare. Airlines are increasing surcharges to offset higher oil prices, bumping the cost of a round-trip ticket by $80+ over fares from 2009. Most airlines have also added surcharges for peak domestic flights.
In addition to surcharges, airlines have scaled back on the number of tickets sold per flight to offset reductions in travel, according to USA Today Travel:
Delta and American, for instance, cut the number of seats this April by 21% and 14.2%, respectively, from April 2008. On the flip side, U.S. airlines say the number of leisure travelers has nearly returned to 2008 levels. Business travelers also are returning, though not back to pre-recession levels.
Fewer seats means more expensive tickets. Though the airlines are charging more, many in the travel industry predict that with a stronger dollar, the total cost of the trip will still be a bargain compared to 2009.
Don’t bank on a weak euro
Despite the positive predictions from the travel industry, it’s still wise to be cautious. The euro has been unstable, and Dr. Chris Hughen, professor of finance at the University of Denver’s Daniels College of Business, advises travelers not to count on a stronger dollar:
I think anybody who tells you to have a lot of confidence in what’s going to happen over the short run is probably lying to you. What has changed, though, is that people are starting to question the viability of this European monetary union. What that means is, over the short run, we could have enormous fluctuations.
Basically, there’s a lot of speculation. Nothing is certain. If you’re thinking about going to Europe this year, it’s not a bad idea to see what deals are out there.
When you travel overseas, does the state of the dollar affect your plans? Have you ever delayed a vacation or chosen another destination based on the exchange rate?
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While it’s difficult to time the stock market or the currency market, you have to look at historical data. We are near 5-6 year lows. There is a lot more room for the euro to go up than it is to go down. Which would indicate a pretty safe time to buy.
You can always do some dollar cost averaging and buy some euro’s now only to buy more later.
*Note: I am making a trip to Europe in Italy and have planned to buy some Euro’s just havn’t been to the bank
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JD: are you planning to take all your cash with you? There are advantages and risks to this. The obvious risk is theft – money is easily stolen and there may be a limit on what your insurance covers. However, you have a known exchange rate, and can budget in advance (and don’t lose time changing money).
Another option is traveller’s cheques (more security, but only accepted in some places, and may need changing into cash). Usually these will be replaced if reported stolen.
Beware of using cards (including ATM cards) – the rate your provider uses is unlikely to be favourable, and you will almost certainly get dinged with a percentage fee (1-5% is usual) as well. Beware of merchants who offer to bill you in your home currency – these is almost always an even worse bet as they will use very unfavourable exchange rates. However, an emergency card to get you out of trouble should the worst happen is not a bad plan.
A final option is cash-loaded cards like the CaxtonFX card (there are other providers too). You load them in the same way as you might change your home currency for cash or cheques, but can then use it as an ATM card in the country you’re visiting. I think they’re probably a good balance between security and fees, and I know a number of people who’ve had good experiences with them.
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In reply to J.D.’s note:
I’m not sure I’d necessarily call it “trying to time the currency market” to go ahead and exchange some dollars for euros now.
If the exchange rate right now is such that you’d be happy to go ahead and fund your trip, I vote go ahead and do it.
As an analogy, imagine somebody had a 529 plan that was entirely in stocks and her child was going to start college in the fall. If her stock holdings were doing reasonably well recently, would you necessarily suggest that she keep it all in stocks right up until school starts?
One more random thought: Part of the reason “buy & hold” is generally recommend over “trying to time the market” with stocks is that the stock market has a positive expected return over time. So in theory at least, the more time in the market, the better.
In contrast, currency exchange rates have an expected return equal to zero over time.
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JD, It might make sense to buy some, not all, your euros now as a hedge. That way you won’t miss these possible bargain rates, nor will you have overbought should they continue to fall. It’s impossible to predict what will happen. Bon voyage!
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If you plan on taking all cash with you, then I would consider converting a portion of the amount you will want between now and the time you leave, e.g. converting 100 euros each month. That way, you’ll average out the exchange rate to avoid the highs and the lows.
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I think another factor for travelers this year is the volcano in Iceland. Rational or not, I know a couple of people who changed their plans for fear of getting stuck in Europe because of it.
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I have been trading currencies for almost two years now and likely follow the markets closer than most readers. Currently, the Euro is at a level not seen since 2006, and if you are planning a trip to Europe in the near future, I would consider it prudent to go ahead and exchange at least some of the money you are planning on spending. This is simply doing what is referred to as hedging. As a trader, I have to be more precise in my buying/selling, but as a traveler one does not need to be as exact.
I don’t attempt to predict what the market will do and claim no knowledge of what the rate will be in 1, 3, or 12 months. If you exchange now and the rate goes down to parity (1.0), then yes, you would be missing out on some money. However, as a follower of the currency markets, I know how volatile they can be and it can take only one news story or chart pattern to drive the rate back up 1000 pips or so.
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Having done plenty of international travel, I would suggest that you DO NOT carry large amounts of cash. If you want to have a few Euros (say €50), then go ahead. For normal transactions, I would say to use a Credit Card – check with your bank but I found that Capital One offered the best deal. They charge your purchase at the current exchange rate and nothing else.
I hope that you enjoy your trip … here are few things that we enjoyed from our last trip to Europe.
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If you’re already planning a trip, like JD, it’s nice things may be cheaper. But going on a trip to Europe just because of this would be like buying a house for the tax credit. You still have to spend a lot of money to be able to take advantage of the savings.
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JD. Why don’t you do the same thing with Euros as many people do with stocks. Dollar cost averaging. Buy a little every other week. You get some at low points and some at high points.
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JD – Buying euros now would be a hedge against a stronger euro later, which is insurance you appear to be willing to pay given the current good rate.
Instead of the trouble of actually buying and carrying actual euros with you, you can just use a brokerage account to buy the number of euros you plan to use on your trip, then sell it when you leave for your trip. This method of hedging (which I do on a more consistent and longer term basis because of ties and many foreseeable future trips to europe) will make sure whatever change in the euro occurs is perfectly balanced with your investment return, and only takes a minute of your time. I’d say it isn’t worth the trouble for just a single trip, but with online brokerage accounts trading currencies now its really no trouble at all.
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I hate to rain on anyone’s parade but personally I find the whole “weak euro, wohoo, great deals to be had on travel”-argument kind of silly.
Generally over here in Europe we pay a lot more for pretty much everything. So even if the exchange rate is more favourable than it was a couple of months or a year back, odds are people coming over from across the pond will still feel that it’s expensive. Sure you may save a hundred or two but taking into account the total cost of the visit (probably a couple of grand) that is not really a significant amount. Sure it’s something but not really worth celebrating over. If you can afford a trip to Europe (or in my case the US) a couple of hundred saved is merely a drop in your financial ocean.
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I just checked it out and HSBC offers a savings account in euro to business owners (don’t know how you’ve set things up for GetRichSlowly). With that account, you could transfer a little at a time, keep it somewhere safe, withdraw it and buy travelers cheques before you leave.
I had absolutely no problem cashing travelers cheques while I was abroad, especially in big cities (all post offices, most grocery stores and some restaurants will accept them for payment). Although I don’t know if you are backpacking, this is a great website full of really good information and knowledgeable people in the discussion board area:http://www.backpackeurope.com/
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I wouldn’t buy Euros, instead I would by options on FXE. FXE is a Euro-to-Dollar ETF, and buying options on FXE is pretty much the only way consumers have to hedge Euro-$ currency fluctuations.
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I’m in the “use a credit card mostly, and just hit the ATM for pocket money” camp for traveling anywhere.
If your lodging and flight are already booked, you likely have most of your big expenses covered. What you have left is food and maybe a rental car? The rental car will likely be on a credit card and probably most of the food, too. Whatever else you might use cash for isn’t going to amount to saving much money, or making much money.
Where you can save money is getting a refund on the VAT if that exists in France or Italy. I know we have received refund checks from England and Canada when we submitted the proper receipts.
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You could buy some now, or time your purchases of euros over the next few months to try to hedge your bets. Honestly, though, I don’t think it matters. I spent four months in Barcelona at the “worst” time; I think the euro peaked at $1.58 right before I left. I’d budgeted $5000 for the four months, and I think at the end there was one weekend trip I opted not to take due to financial constraints and general exhaustion. Even with the poor exchange rate, I still managed to travel to seven countries from my base in Barcelona, and while I wasn’t eating at the starred restaurants, I never felt deprived. If you’ve already set the money aside for the trip, don’t worry too much about making it go further. That just leads to not enjoying what you are able to do, or trying to stuff too much into the time and risking a burnout on the whole trip.
Have a great time!
ETA: Another option is to try to find a multi-exchange rate credit card. I had one that charged your purchases with the best exchange rate of the month, and that helped take the sting off the high prices.
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I think that it is good because they will be able to spend more money overseas
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How many euros are you planning to buy? If you’re only planning to carry a couple hundred to have some cash on hand (which is typically advised) then the exchange rate has a marginal effect on that small amount of cash and it’s an academic decision more than a practical one. It’s like trying to time the stock market when you only plan to buy three ~$30 shares. Yeah it’s real money, but probably not enough to spend that much time thinking about.
If you’re looking at larger amounts then it’s more like you are asking “should I invest in the euro?” because the effect isn’t different than if you bought them to trade them back into dollars later.
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Having travelled to Europe a 4 times in the past 6 years (education, leading College students), a low Euro is a godsend. However, I agree with the others about not carrying a lot of cash. You might go ahead and get a small amount, like $200-300 into Euros, since it is so low, but still be cautious. Keep watching. While the market could jump in huge amounts between now and the end of the year, it typically does not. So, if you travel and its 1.35, its not that great of a loss and you stay more secure. Plus, it could go down–not a great feeling having exchanged at 1.22 only to see it at 1.12.
And, as others have said well, you ALWAYS get the best rate through your credit cards and bank card (or at least a very, very competitive rate). What I tell (and force) my students to do is to take limited US cash (like $50 max, just for the airports) AND take their ATM card. ATMs are everywhere in most major European cities.
As soon as we land, I have everyone use an ATM to get about $40 in Euros because you will want some cash. Street merchants, many eating places and snack areas will not take credit cards. When we went to Prague and Vienna last year, my wife and I probably made 75% of our purchases with the credit card/Bank card, and the rest in cash.
So, if you did get some cash now due to the low rates, you’d want to dole that out over the time to avoid using the ATM (you will pay bank fees unless you can find a partner with your US bank). And, make sure you split your carried cash (especially that much) into 4 different locations (you, your wife, different bags, maybe a secret wallet).
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Earn more; don’t sweat the small stuff!
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I would hold off on buying euros. There’s no reason to think that the current trend will shift, and in fact there are many reason to think the euro will continue to weaken against the dollar. Some very credible analysts think we’ll see euro/dollar parity in the near future.
http://finance.yahoo.com/tech-ticker/europe‘s-mounting-crisis-%22we’re-on-life-support%22-chris-whalen-says-490996.html?tickers=euo,UUP,tbt,%5Edji,%5Egspc,xlf,FXE
http://www.marketwatch.com/story/analyst-eurodollar-parity-by-first-quarter-2011-2010-05-07
Plus, the exchange rates you’d get buying euros in the U.S. are generally worse than what you’d get if you simply withdrew money from a European ATM using your normal debit card.
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I would buy some (but not all) the euros you need now.
If the euro falls in relation to the dollar, you will take advantage with the remainder of euros you need.
If the euro rises, you will have already purchased some at a lower rate, “locking in” some savings.
There is also the chance that the price relation will not change dramatically.
You may also consider this a “price/value” purchase decision: If you think that the current low euro is a good value now, then go ahead and buy… You should not have any “buyer’s remorse” if you believe current rates are a good exchange.
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This is the sort of the thing that I’ll gladly take advantage of if it happens to work in my favor, but not something that I’d go out of my way to try and capitalize on. If I want to go to Europe, I’m just going to plan my trip. If I’d expected to spend $5000 and I end up spending $4,500 because of exchange rates, great. If it works out the other way and I end up spending $5,500, oh well. The trip is valuable enough to me that a possible fluctuation one way or the other by 10% isn’t going to cause me to change my behavior, so no need to worry about it.
Yeah, I know my methodology isn’t the best for absolutely maximizing the value I get for my dollar on vacation, but it’s a lot better for not turning my vacation planning into a stressful nightmare. I can just imagine deciding to wait on booking a hotel because I think the price or exchange rate will drop, only to find that either it goes up, and I’ve wasted money, or that the dates I wanted get sold out, and then I have to find somewhere else to stay. I’d rather just pay a little more.
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We had a huge problem with traveler’s checks in Germany and Luxembourg this year. The exchange rate on the traveler’s check was much higher than for cash in the places that would exchange them (like the airport). Banks were not open on the day we needed them most (probably a Sunday). Most hotels didn’t cash them like they had when I was in Spain years ago.
A lot of places didn’t accept credit card. Most people paid for things with cash even if they did accept credit.
We remembered to call and tell the credit card companies we were going overseas, but forgot to call our bank. Turns out we needed to change the pin number to be able to use European ATMs, so when banks were closed and a place didn’t take credit we were SOL.
DH took some cash and his debit card with the right number of digits in the PIN to England a few months ago. He paid with credit card when he could and used the ATM to get cash when he couldn’t. That worked really well and had the best exchange rate/fees.
btw, if you have multiple credit cards, call them up and find what their foreign currency fee is. I wish I hadn’t let my Capital One card lapse– a 0% fee is much better than a 3% fee.
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Hold for now and keep on saving. Could go either way, but check the exchange rates with your cards & their use could work in your favor at that time..
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I just spent two weeks in Italy at the beginning of May. My original plan was just to use cash but just before I left, someone who travels to Italy frequently suggested that I try to use my credit card whenever possible.
The threat of theft is real (use a money belt, it is worth the awkwardness at the beginning if you aren’t used to it) and at least it is possible to replace/trace/cancel a credit card. I met so many people on my trip who told me about getting their money/camera/bags stolen. Generally, if you are being very aware and you’ve taken all precautions: money belt, wearing your day pack on the front, padlocking your luggage, avoiding tourist trap/crowded buses that are notorious for pickpockets (aka Bus #64 to the Vatican in Rome), and being organized with your stuff (train stations are a great place to steal b/c people are fumbling with their luggage), you shouldn’t have a problem, at least I didn’t. The trick is to make it difficult to steal from you so that the thieves would rather find someone who is easier. Only carry around as much cash as you could handle losing. There are some places that only accept cash but most will take credit these days.
I did buy some Euros before I left on my trip for 1.39 (CDN). During my trip, the exchange rate went down considerably. My credit card shows that the rate started around 1.38 and eventually dropped to 1.31 by the end of my trip. In this case, it was well worth it to use my credit card. I just kept a close eye on my account to make sure all the transactions were legit. With most lodging having internet now, online banking was pretty easy.
JD, enjoy your trip to Italy! It’s an experience of a lifetime. If you decide to go the Rick Steves way, make sure to pick up another travel book as well, otherwise you’ll just be spending your trip meeting other Americans (this is advice from some Americans I met along the way). Get off the beaten path and you will catch a glimpse of what Italy is all about. Oh and enjoy every second of the food. It is incredible!
PS. I used the GRS spreadsheet for planning my expenses. It worked great and I only went over my quite conservative budget by ~$280 CDN, which is pretty awesome.
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JD, having done this three times in the last year and a half (London/Paris in March 2009, Italy in May 2009, and most recently London/Amsterdam/Bruges/Paris just last month)…
You aren’t going to be spending enough money to make sense for you to try hedging the currency. Just save for the worst and hope for the best.
I got out of my most recent trip, 14 days on the ground, 16 including travel, for just around $3000. I’d planned on spending closer to $4200 because at the time we started planning this trip, the Euro was about $1.50 and the Pound about $1.66. I got lucky with a $1.24 Euro and a $1.42 Pound, and was more frugal than I anticipated.
Don’t worry about it. Bring a small (like $200 per person) amount of US currency to exchange in an emergency, and bring your ATM card and a backup to withdraw money as you need it. Like I said, plan for the worst case and hope for the best.
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I recently traveled to Ireland and Northern Ireland for two weeks because the pound and euro exchange from CAD is about as low as it`s probably going to get. When my family visited Canada 7 years ago it was like 2 or 2.50 GBP to 1 CAD. When I went over, it was 1.63 CAD to 1 GBP and 1.3 something CAD to Euro. Pretty good rates!
Cash and credit cards are the way to go. Travelers cheques are useless.
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A couple of comments:
Even with a falling Euro it is unlikely one will find better shopping deals (overall) in Europe versus the USA. I live in Europe and I still do most my shopping in the USA.
I also believe it is unlikely one will find many hotels, etc dropping their prices any more/less than the last few years. However, a weak Euro will make it significantly cheaper for Americans to travel now, irregardless.
As far as converting to Euro now I certainly have my own opinion on the long term and short term valuation of the Euro, but it is really immaterial. JD, what you might look at doing is converting half of your planned expenses into Euro right now. That way you’re hedged evenly either way against an increase or decrease in value. There are a couple of ways to do it, but the simplest maybe to buy FXE now and sell it when you leave (but you will have to pay income tax rates on any gains).
I’d also consider getting a Capital One credit card (no fees) for credit card purchases and also a Schwab ATM card (no fees either) for cash withdrawals. The Schwab card requires you open a brokerage account but you don’t have to use it.
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You would be a lot better off switching to a credit card that offers no exchange penalty + cash back and using that for the trip, rather than buying Euros and attempting to handle cash.
I travel frequently and carry very little cash. Cash must be spent or converted at a loss at the end of the trip. That means you’re more likely to spend it. Credit cards are accepted nearly everywhere.
The Schwab Invest First Visa offers no exchange fee + 2% cash back on every purchase. It’s really time to switch to this (Fidelity has an equivalent, I believe) before your trip.
-Erica
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Mike Piper hit it in the head in comment #3. Buying Euros now allows you to lock in the current price – it is a defensive hedge. It is much more akin to a business buying a futures contract on a key commodity that it knows it will need to purchase down the road than it is to an investor timing the stock market.
Trying to time the stock market adds an element of risk, while buying the Euros now reduces the risk that your vacation will end up costing you more than you had budgeted.
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Rather than monkey around with cash I think what I would be inclined to do, in the same situation, which I hope and trust I will be in someday relatively soon!!, is pre-pay some upgrades at the lodgings.
DH and I have found that travel experiences are infinitely more enjoyable when we allow just a little luxury here and there. So for example if we have a timeshare condo booked for a week but we’re going to be in an area an extra night, we will spend that extra night at a rather nice hotel with amenities the condo doesn’t have.
If you are staying in standard hotels, you might consider an upgrade for the first and last nights of your trip, to a suite, or a room with a jet tub, or to a hotel nearer a great view, or whatever would be most luxurious for you.
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Whenever I travel, I use ATM’s and my debit card. I pay a 1% fee on both, but I am willing to live with that; I don’t quite spend enough abroad to make it worth having a zero fee card. I generally spend cash except for large purchases.
I agree with those that say it’s not worth the risk of carrying a bunch of cash, just to maybe save on the exchange rate (and maybe lose money). The Euro is still a large, presumably stable, globale level currency; it might go up or down a bit but it’s not going to swing wildly. You could hedge your bets a bit by prepaying for hotels and whatnot at today’s exchange rate.
Also, as others have said, the better USD-to-EUR exchange rate does help a bit, but not enough to make or break a vacation. It takes a much bigger change to really make a dent. For instance the huge drop in Icelandic Krona a year and a half ago. (And even then, the effect was somewhat short lived. In a few months prices had more or less risen back to their pre-crash levels)
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Last year I went on a trip to Europe (Italy, Switzerland, France, Belgium and the Netherlands) and before we went we watched the currencey closely and when it dipped last spring (momentarily) we bought Euros to cover some of our “set” expenses (hotels we had booked, tickets for museums, things like that). The rate then went back up so while we were there we paid a higher exchange rate on food and other items.
I would suggest buying some Euros now. The rates are great and you can’t really go wrong. I would advise against purchasing ALL of the Euros you think you need now but buying some now as a hedge against the rate going higher later.
Also, as someone mentioned above, I wouldn’t buy cash. There are prepaid foreign currency cards you can purchase that act like a debit card and can be used at ATMs.
Have fun!
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Thanks for this informative post April. And to JD buying those Euros early could be pretty risky; are you considering credit as an option?
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I’ll have to consider bumping up the future european vacation I wanted to take 2 years from now. I wonder how much further (if any) the Euro will fall against the US Dollar?
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I’d exchange a few hundred now and the rest later. Balance is always a good way to go.
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if you are in the US, Bank of America will sell you currency, delivered to the local branch. just look on their web site for current rates
debit card is probably the easiest conversion tho. but some places don’t take debit (cabs, etc)
unfortuantly our trip was when the dollar was LOW compared to the euro…
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I found, when traveling, that the minor swings in currency pricing aren’t a huge deal. I spent 4 months studying abroad in Europe, and it was more trouble than it’s worth to try and figure out if the Euro will shift around. If you think it might upswing significantly, that’d be a case for buying currency now. But I honestly wouldn’t worry about it — like you said, it’s really not possible to time the market.
In terms of pulling cash out, use ATM cards. I only read the first few comments, so apologies if I repeat others. But do use the cards. Call up your bank, and see if they do reciprocity with any banks in Europe. Some banks like Bank of America will. If you can find one that will, then be sure to only use those ATMs — you’ll save a lot on fees. I have Schwab, which just charges for the currency conversion last I checked. When you do pull out money, do the maximum withdrawal. That way, you’re not adding up fees for every 20 euros you pull out.
For a more authoritative voice saying that, here’s Rick Steves: http://www.ricksteves.com/plan/tips/moneytip.htm
He travels so much and general has the best ideas for how to do things.
Also, one last thing: bring a coin purse if you have one. Or several ziploc bags. You’ll definitely want something so that you don’t have a huge bunch of euros clanging around in your pocket.
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If you’re going to buy euros, I’d go with the people suggesting you buy some now, some later, as a hedge.
That said, you get the best exchange rate when you pull money out of a bank abroad with an ATM card, so you’ll have to compare the cost of possible currency fluctuations with the fees incurred when you exchange currency, which may be hidden in the relatively poor exchange rate you’ll get on this side of the pond.
My money-saving tips, having lived abroad in the UK the last two years – use a Capital One credit card (no fees for international use), pull cash out of ATMs with your debit card, and check with your bank here to see if they have preferred partners overseas. For instance, Bank of America has an agreement with Barclays, Deutsche Bank, and BNP Paribas where they won’t charge you the usual fees for using out-of-network ATMs.
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JD, you are correct in thinking that you should not try to time the currency market. So, you should buy Euros as you save the money, maybe on a monthly basis. If you just saved up and bought your Euros right before your trip, then you would effectively still be timing the market.
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We went on a two week cruise of the mediterranean a couple of years back, and while we buy some euros to carry in cash, most of the time we just used our credit card because the rate we paid to exchange was pretty minimal – especially for the amounts we ended up spending. I’m with the camp that says buy a little bit of Euro currency now, and spend the rest via credit card as the risk of being pick pocketed or something robbed is pretty real. We heard plenty of horror stories while in Rome.
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As oil and aircraft are priced in US dollars rather than euro there would be less impact on air travel costs from the change in the exchange rate.
If you are looking to travel within the EU look at some of the low cost carriers such as Ryanair, however take care as Ryanair charge for everything except a cheap, safe, normally on time flight. (they also just announced a 500 million euro dividend)
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I’m from Australia so don’t know much about the $US but our currency seems to fluctuate a lot with international exchange.
The first time I went to Japan, I’d book a hotel (but not paid for it because many Japanese businesses still don’t take credit cards) and then *bam* global financial crisis! The Australian dollar went from around 100 yen to 55 – that was half my holiday money gone.
I didn’t cancel my hotel but changed from our reservations from the nice hotel we’d booked to backpackers hotels and was extra careful with my money. I ended up coming home with over $1000 left and had a great time – never felt like I was missing out on anything.
I’d definitely get money cashed now though when the exchange rate is good. It can be gamble but am scared of losing money now. I never used to use traveller’s cheques because I thought they were old fashioned but the banks here seem to give a better exchange rate for them.
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I’ve lived in the UK for the last four years and have spent considerable time traveling around the continent.
I second those voices who note that travellers cheques are worthless. DO NOT, under any circumstances, be talked into buying them. I was at my local UK HSBC yesterday and my banker was ranting about how much he hates them and how expensive they are. I personally have been stuck with them in the past (10 years ago) with nowhere to spend them even then. Nowadays they are akin to a dinosaur.
Also, big bills (over 20 euros) are hard to get rid of on the continent as many small places won’t take them (they are frequently used for money laundering, so there is the fear of getting fake notes).
Banks are closed on all kinds of “random” (to Americans) days, so you cannot rely on exchanging money after 4pm, on the weekends, or on many Mondays (as they are frequently holidays). However, ATMs are always available.
As has also been noted, Europe uses the Chip & Pin system where you need to enter a PIN to use a debit or credit card for most transactions. So make sure you know your number. In the UK you frequently cannot use a card without a “chip” (i.e. any American card) to make a purchase greater than 50GBP at an unmanned point (i.e. an automated ticket machine at a train station). So if your card is declined try purchasing your tickets at a manned window instead.
Just a final note – in Italy the locals have their coffee standing up at a bar. If you want to sit to have yours you will pay out the nose for the priviledge. Be aware that a cover charge will be added to your bill (especially in tourist areas) for sitting down at any restaurant as well.
Hope you have a great time – soak up all the history you can!
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I was considering going to Europe this year because the Euro is really low. I did notice that the prices for flights were insane!
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I believe that it is better, more people will travel and get to experience Europe for better costs and have a once in a life experience.
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I live in Poland and while we don’t use the Euro, we have needed them from time to time. We are planning on a camping trip to Germany/Italy later this year.
If I were you, I’d NOT take traveler’s checks. At least here in Poland, they are worthless…it is difficult to find a person to take them and when you can, their rate is bad. Dollars are the best for exchanging if you are coming to Poland. But you aren’t.
So, I’d buy some Euros now and probably charge the rest on my c/c. At least that is what we do. Not all stores in Germany take a regular Visa/MC. It was a bit ironic to us that the main media type store (like Best buy) took only cash. It seemed like an oxymoron to have the leading tech store not take c/c. they did have an atm outside the store, so we had to go get our own cash first. However, we’ve not seen any gas stations or hotels (in Germany) that don’t take them.
Enjoy your trip! I’d be glad to see the day when the Euro/Dollar are back to 1 to 1. I remember when it was .86 Euros to the dollar.
For those of you who think that carrying around 200 Euros is a lot of money….it does go fast in Europe.
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I live and work in Germany, but I am paid in US dollars. I’ve been here two years and this is the best I’ve ever seen the rate. When it goes high like this, I buy Euros and hold them for when it will inevitably go back down. Needless to say, I’ve bought a lot of Euros recently.
My advice is to buy your Euros now – I don’t expect the rate to maintain at this high level.
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I travel to Mongolia and SE Asia often and the dollar doesn’t interfere much… their holidays and festivals drive up air fares more than the dollar fluctuations so I plan travel to miss those busy times. I’ve traveled to Scotland many times and I would look harder at that than I have before.
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