Managing Your Money on the Road

 If you’ve never seen a travelers’ check and maybe don’t even know what it is, you’re like most overseas travelers these days. Going abroad no longer means planning to carry wads of cash, or trekking off to American Express to buy travelers’ checks and worrying what to do if you didn’t take enough. But there are enough new wrinkles that it pays to pay attention to what’s up.

This report comes partly from my own experiences, and partly from following these issues online for the past few years…I’d be glad to learn more from you!

WHERE TO GET YOUR FOREIGN FUNDS

Overwhelmingly, the answer is “at a bank ATM when you get there.”

Getting your money from a local bank means that you will be getting an exchange rate closely based on the “interbank” rate that banks use in their transactions with each other. That will usually be at least 5% better than you’ll get from a currency exchange.

Getting it there rather than at home is both a matter of convenience and safety. You won’t need to carry your whole vacation’s worth and worry about loss, and you won’t have to make special arrangements at your local bank to have the Euros or yen available—and you won’t pay a special fee, either.

Saver Tips: If you’re offered a choice at the ATM, be sure your account is debited in local currency, not US dollars. See note on DCC below for why. And second: use your ATM card, not a credit card, to get your money. When you use the credit card, you’re actually taking a loan and can run up a lot of interest charges; with the ATM card, you’re taking your money out of the bank. Check with your bank, by the way: they may have a relationship with a bank where you’re going that saves you ATM fees.

USING YOUR CREDIT CARDS

Using your credit cards on your trip—what most people do—has a few questions of its own. Including which ones to take. MasterCard and Visa are almost universally OK, American Express less so, and frankly, Discover has not been discovered “out there.” And in some countries cash is expected in more places than here; Portugal is a good example.

• A foreign transaction fee is charged by most cards on purchases made abroad, usually about 3%. That’s a little “up” above the 1% that MasterCard and Visa charge the banks. Some don’t add that, and lately a number have followed Capital One’s path of no foreign transaction fee at all.  http://bankrate.com can help you find one that’s best for you.
• Chip-and-PIN is coming to U.S. and is already in most other places. The U.S. standard card with a magnetic stripe backed up with a signature is on the way out; more and more places expect chip-and-PIN, where the card is inserted in the machine, you enter your PIN, which is matched to the one encoded on the chip, and that’s it. Far more secure than easily-copied magstripes and sloppy signatures. You can still use your U.S. card…but there are more and more places, especially machines, where it won’t work. See notes below on options.
• Don’t count on using only an ATM or other debit card on the road; not all stores and systems are set up to accept them, and in a few places (Denmark is one) only local debit cards will work. Have at least a couple of credit cards with you.
• Security Tip: Split your cards. Keep a couple with you, leave a couple in your apartment or hotel. If you lose your wallet, you can cancel those cards and use the others.
• DO let your card issuers know you are traveling, so they don’t decline your purchases because they don’t know you’re having a great time in Rome or Bangkok or…

WATCH OUT FOR DCC!

DCC is a perfectly legal dirty trick that is being used by legitimate merchants and, as of summer 2013, even by banks. It stands for Dynamic Currency Conversion, and what it starts like is this: “For your convenience, sir, shall I charge your card in dollars instead of Euros?” But if you listen closely, what it really sounds like is “Shall I charge your card in dollars at a very unfavorable exchange rate so that I can make an extra buck off your confusion?” Always say “NO,” whether it’s in a store or at an ATM.

When you charge something in Euros or yen or bhat, or take some out at an ATM, the transaction is completed in the middle of the night between two banks, using the most favorable rate of the moment, and you get a rate only slightly above that. But when a merchant, or an ATM operator (even a bank!) or a currency exchange uses DCC, they are not tied to that rate. Last summer, I tracked the rate offered on ATMs in four cities in Portugal and Spain as I traveled; the best of the rates offered was 5% higher than the day’s interbank rate. In stores, you won’t even see the rate.

WHERE CAN YOU GET A CHIP-AND-PIN CARD IN THE U.S.?

Hardly anywhere. There are more and more cards with chips (called an EMV chip) from mainline issuers, but so far, they are going with chip-and-signature, not PIN. The exceptions: USAA (http://usaa.com) has a true chip-and-PIN MasterCard on offer, and a few credit unions (Andrews Federal Credit Union and State Department Federal Credit Union) offer cards that come with a PIN, but default to signature. In theory, they will work as PIN cards in a terminal that is not set up for signature, but results so far (personal experience) are erratic. With chip-and-signature in an attended place, by the way, when you’re asked for your PIN, you just hit enter and a signature receipt is printed.

But the chip-and-PIN situation will change. MasterCard and Visa are forcing card issuers to switch to the chip over the next couple of years, or take the losses for fraudulent transactions. Most will still be signature, but some banks have indicated they will at least make PIN cards available on request.

OH, YES: HERE’S A TRAVELERS’ CHECK:

They used to be issued by Bank of America, Citibank, and especially by American Express, and were accepted all over the world. You signed it once when you bought it, and then signed it again when you used it, so the merchant could see the signatures matched.

Credit cards pretty much killed them, although Amex still offers them. Almost no one accepts them, which makes it almost pointless to buy them. Although, to tell the truth, I still have a $100 travelers’ check tucked behind my drivers license. Just in case. It’s been there since 1997. Maybe it’s still good…maybe not.