Currency Exchange

Currency conversion fees, whether they are obvious or hidden in a disadvantageous rate, can cost you 2 to 10 percent of your spending power. Many of us, for expediency's sake, exchange money at airports and hotels. Even if you're just exchanging small amounts, the cost of these transactions can add up to a small fortune. Fortunately, the electronic flow of currency has greatly expanded your options for obtaining foreign money. Not only is the process more convenient, it's now less expensive.

Use Your Bank ATM Card Cirrus and Plus networks have machines worldwide; call before your departure to see if they are available at your destination, and make sure you have a 4-digit PIN code, since longer codes don't work in all countries. Funds are withdrawn from your account at the bank rate plus 1 percent. You can't do better, except on the black market. The machines in some countries don't accept bank ATM cards but will issue cash advances on a Visa or MasterCard. If your Visa or MasterCard issuer does not have high cash advance fees, and you are able to pay them back quickly, this can still be cost effective. Make sure you have PIN codes for all your cards before you depart; it can't hurt. American Express cardmembers can sign-up to use the company's cash machines, which are cost-effective for large withdrawals that are drafted from a pre-registered checking account. Even better, but not quite as convenient, cardmembers can cash personal checks at American Express offices as cost-effectively as using an ATM, plus these checks sometimes take weeks to clear.

Be Careful Changing Currency in the United States It may be cheaper to send the funds by registered mail to a broker in a big city than to rely on your local bank. We use N.Y. Foreign Exchange (800/346-3924 or 212/248-4700). Many large travel agencies such as American Express and Thomas Cook offer currency conversion as well. While you can purchase foreign currency traveler's checks in the United States, you may be better off buying U.S. dollar checks and exchanging them for foreign currency checks upon arrival. Exchange rates abroad tend to be more competitive.

Don't Use Your Bank for Foreign Drafts If you need a check drawn in foreign currency for a hotel deposit or similar transaction, you'll find it much cheaper to use a company like Ruesch International (800/424-2923), which charges just a few dollars, than your local bank, which may charge as much as $25. The same is true for cashing checks drawn in foreign funds. While it may take a few weeks to get your funds, you won't pay the steep collection fees of most banks.