Currency exchange now offers more options

Geane Dvorak of Ventura frequently travels internationally on business, visits family in Brazil and has a daughter at the University of St. Andrews in Scotland, so she often has to change U.S. dollars into the local currency.

“You would think, with all the traveling I do, that I’d have it figured out,” Dvorak says. “But I don’t.”

Money matters bedevil even the most sophisticated traveler. The proliferation of automated teller machines and the introduction of the euro last year, now the uniform currency of 12 European nations, have simplified some aspects of the money equation, but travelers still must balance their needs with getting the best deal on exchange rates, security and convenience.

Among the questions they should ask:

Will there be an ATM where I’m going?

If I use an ATM, how do I know what exchange rate I’m getting?

Where will I get the best exchange rate?

Should I forget cash and just use credit cards?

Should I carry U.S. dollars and exchange money there or should I exchange money before I go?

Should I use traveler’s checks?

What can I do with leftover money at the end of my stay?

The answers depend on your destination and your comfort level and on how big a part convenience plays. The world market also may have a role.

In the last year, the dollar has lost value against some currencies in destinations popular with U.S. travelers, including 15% against the euro. Some money experts say the introduction of the euro led to increased prices as merchants converted prices from their local currency.

“The main consumer perception is that businesses rounded up,” Chris Matthews, spokesman for the European Commission, says of the price conversions. Inflation across Europe ran about 2% last year, so the euro may have been “a piece of the inflation puzzle,” he says, but its overall effect on prices was small and it was a one-time event.

The increased strength of foreign currencies against the dollar in the last year means that some places, once relative bargains, are growing more expensive. The South African rand is up 24% against the dollar, and the Australian dollar is up 11%, meaning that your dollar doesn’t go as far.

As you formulate a spending plan, keep in mind that your choices will affect how far you can stretch your travel dollar. And smart travelers use more than one method.

“I usually take some cash and exchange it at the airport before I go so I can take a taxi when I get there,” Dvorak says. “But most of my transactions once there are with a credit card.”

Here is a rundown of several ways you can deal with money, compiled with help from money experts and travelers. I also conducted a currency exchange experiment recently in Europe to try to understand the various commissions, fees and exchange rate options.

ATMs

If you think ATMs are available only in the superpower nations, think again. Karen Staples of Ventura spotted one in a most unlikely place during an 18-day vacation last summer.

“On the way to a game preserve [in South Africa] in a little gas station at a wide spot in the road, there was an ATM,” Staples says.

As ATMs have become more available, they have gained popularity with travelers as a money exchange tool. There are more than 835,000 ATMs in 120 countries -- including two in Antarctica -- that carry the MasterCard, Maestro or Cirrus brands alone.

Besides convenience, an ATM card generally gives you a fair exchange rate based on defined criteria (usually that day’s published interbank rate, which you can find in the financial pages of many larger newspapers). Of course you won’t know what the exact rate is until you see your bank statement, but at least you have recourse if there is a problem with the transaction.

Be aware that many foreign ATMs accept only four-digit personal identification numbers. If your PIN is longer, check with your financial institution about changing it before you leave home.

Exchange cost: The second best in my experiment -- about 2% over interbank rate, depending on fees charged by the banks (up to $3 per transaction).

Advantages: Convenience; you withdraw only the amount you feel safe carrying.

Disadvantages: There may not be an ATM available; networks and ATMs can break down; cards can be difficult to replace if lost or stolen.

Credit cards

Most experts suggest using a credit card for major purchases such as tickets, hotels and meals.

“We recommend customers use their cards for big items because they’ve got protection,” says Mike Sherman, spokesman for Visa International.

Credit cards can be canceled and, unlike cash, can be replaced if lost or stolen. If you dispute a charge, you can issue a stop payment until it’s resolved.

The exchange rate also makes card use attractive. As with ATM cards, the rates are based on daily published rates. But if you carry a balance on your cards, the interest charges can eat up the savings you may have realized.

Exchange cost: In my experiment, the best one sampled was about 1% over the interbank rate.

Advantages: Convenience; some cards earn points, miles or cash back; safe because they can be canceled and replaced if lost or stolen; widely accepted for major purchases; protection for disputed charges.

Disadvantages: Not usually accepted for small transactions like cab fare or a bottle of water, or for tips; interest charges on carried balances can approach 2% per month.

Cash

Cash is perhaps the riskiest option, but in some countries the U.S. dollar is preferred even to local currencies.

Maya Rich of New York travels frequently to Eastern Europe to visit family in Slovakia. She is hesitant to use ATMs abroad.

“Banks there are happy to exchange U.S. dollars,” says Rich, who shops for the best rate. “All you need is a passport.”

Looking back, Staples wishes she had taken more U.S. cash to Africa. “I would have been better off taking American dollars and being really careful,” says Staples, who found it difficult to cash traveler’s checks in some places.

With more cash, she also could have bargained with local money changers for a much better exchange rate. “They were ethical, just not American Express,” Staples says.

There is a currency black market in many countries, especially for U.S. dollars. The street rates may be tempting, but beware: Selling dollars on the black market in some countries could land you in a foreign jail.

Even at legitimate currency exchange windows, exchanging cash for local currency can be dicey. With commissions, fees and markups on the exchange rate, it can cost you 12.5% or more just to exchange a few dollars. On a $200 transaction, that means you can be charged up to $25, but it is difficult to comprehend that loss because you are seeing it in a strange currency. You should shop around to try to get the best deal, but figuring out all the costs associated with a transaction is befuddling at best.

When you’re ready to go home, think twice about changing your foreign currency back to U.S. dollars. Double-exchanging currency can be expensive. You have already paid once to have the money converted into local currency. When you go to exchange it back, the rates and fees are even steeper -- 9.5% just in commission at one exchange I checked. If you do end up with foreign currency at the end of your stay, you can always save it for another trip to the same country (or in the case of the euro, any of 11 other countries).

I use leftover cash to pay off all or part of my hotel bill, or for duty-free shopping at the airport. And I usually bring home change and small bills for gifts to my nieces and nephew. It’s an inexpensive, tangible geography lesson for them.

Exchange cost: From 7% to 12.5%, depending on where you exchange; higher if you double exchange. It pays to shop around.

Advantages: Possibly better exchange rates through secondary sources; deals on merchandise from vendors who want U.S. dollars.

Disadvantages: No recourse if cash is lost or stolen; carrying large amounts of cash can make you a target for criminals.

Traveler’s checks

With the growing number of ATMs, one might assume the death knell is sounding for traditional traveler’s checks. Not so, says Peter Vaughn, vice president of traveler’s checks at American Express.

“Sure, there is significant pressure from competing products like ATMs,” Vaughn says. “But traveler’s checks is still seen by us as a growth business.”

American Express is moving aggressively to counter the competition, offering value-added benefits for purchasers of its traveler’s checks. They include lost or stolen passport and credit card services, and discount offers previously reserved exclusively for American Express card members.

Traveler’s checks are available at many banks and can also be ordered online. They can be purchased in other currencies, including the euro, pound, yen and Australian dollar.

Exchange cost: Generally equal to cash, though some currency exchanges add a fee for cashing traveler’s checks. Some banks charge a fee when purchasing traveler’s checks -- for foreign-denominated checks, about 6% in fees, commissions and markup on the exchange rate in my experiment.

Advantages: Safety -- must be countersigned, so they are less attractive to criminals; can be replaced if lost or stolen; may confer value-added benefits.

Disadvantages: Not accepted in all places; dollar-denominated checks can carry additional exchange costs.

Other options

A prepaid ATM card is a good choice for those who want to keep a tight rein on their travel budget. Visa offers one called Travel Money, available through Travelex, (877) 394-2247, www.travelex.com. You preload it with a minimum of $300, then use it just like an ATM card, withdrawing cash as needed. Two drawbacks: Unlike credit cards, Travel Money cards cannot be replaced if lost or stolen, and they can be used only at ATMs, not at retailers such as restaurants or souvenir shops.

Debit cards are another option. They usually provide the same good exchange rate as credit cards but without the protections or added benefits.

You can also change money before you leave, ordering through some banks or on the Internet. Both American Express and Travelex allow you to purchase currency and traveler’s checks on the World Wide Web.

There is no predicting whether this year will see a continued deterioration in the value of the dollar. So pack your ATM and credit cards, traveler’s checks and cash and check the currency exchange tables at the back of this section. Now may just be the best time to take that foreign trip you’ve been dreaming about.

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A guide to tipping

How much to leave and for whom can cause embarrassment and confusion. Here is a guide to tipping in the United States.

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Restaurants

Server: 15% to 20% of the bill

Bartender: 10% to 15% of the bill or, for small bill, at least $1 per drink

Wine steward: 10% to 20% of the cost of the wine

Maitre d’: at least $5; more for exceptional service

Restroom attendant: $1

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Hotel

Doorman: $1 for cab; more if it’s raining

Bellhop: $1 minimum per bag

Maid: $1 to $3 per day, depending on hotel

Concierge: $2 to $10, depending on the service, more for difficult reservations or theater tickets

Parking valet: $1 to $2

Room service: 15% (but check to see if it’s an automatic gratuity)

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Cruises (per passenger, per day)

Cabin attendant: $3 to $4

Waiter/server: $3 to $4

Assistant waiter/busboy: $1.50 to $2.50

Headwaiter/head server: 50 cents to $1

Spa or salon: 15% to 20% of the cost of the service

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Tours

Tour guide: $2 for a full day, $5 to $10 for a week

Bus driver: Same as tour guide if driver provides commentary

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In Transit

Cabdriver: 15% to 20% of the fare, $1 to $2 for bag help

Shuttle bus driver: $1 to $2

Private limo: 15% to 20% of the total charge

Shared limo: $1 to $2 per person

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Sources: Fodor’s “How to Tip”; American Society of Travel Agents; Consumer Reports

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James Gilden, who travels 70,000 miles a year, is a writer living in Ventura.