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Currency Exchange: What You Use Matters
CardHub's 2013 Currency Exchange Study compared the cost of the currency exchange services offered by 15 of the largest banks in the U.S. as well as Visa, MasterCard and Travelex. The study proved that using a no foreign fee credit card is the way to go on spending internationally. Banks charge an average of exchange rate of 7.1% and Travelex charges 15.5%.
Worried about using a credit card outside of the U.S.? Don't be. Credit cards also provide fraud protection for just that reason.
"Even if a consumer uses a credit card with foreign fees – the average foreign transaction fee is 2.24%, according to CardHub's latest Credit Card Landscape Report – he'll still save 4.86% on currency conversion relative to the services offered by banks and 13.26% compared to airport currency exchange providers," said CardHub CEO Odysseas Papadimitriou in a HeraldOnline report.
The best banks for currency conversion? The CardHub study indicates Northern Trust and Harris Bank lead the pack as they did in the 2012 and 2011 editions of the study while U.S. Bank and SunTrust hold the bottom two spots. On average though, banks are better than Travelex, saving an average 8.4%.
"It's just one of those things that have been traditionally recommended," says Papadimitriou. "But with the banking system becoming increasingly digital, it makes sense that the easiest way to buy things in a foreign currency is with plastic."
Credit cards are good. No foreign fee cards are better. Still, some cash will probably be necessary along the way tipping or making purchases in places that do not take cards. With that in mind, Papadimitriou recommends a debit card with low international ATM withdrawal fees but warns travelers to avoid dynamic currency conversion, when a merchant offers to convert your purchase total from the native currency to U.S. dollars.
It might seem as though that merchant in Venice is trying to be help make sense of how much a purchase really costs, in our own currency, but "they could be looking for an excuse to apply a high exchange rate and squeeze a bit more money out of you. It's best not to find out, especially when you can use your phone or a small pocket calculator to make quick conversions and better understand how much things cost," says Papadimitriou.
As long as we're talking about financial security when traveling, what about pickpockets? Well, the days of those villains are ending. In this video we see that all it takes now is a smartphone to steal your credit card information.