Nearly every foreign traveller, at one stage or another, wants to exchange currency during a trip to Europe. If you are not an experienced traveller, you might not know about all the pitfalls – and the whole exercise could turn out to be a very expensive learning curve.
Exchanging foreign currency at the first currency kiosk you encounter at the airport or when you arrive at your hotel or a nearby currency exchange shop will virtually ensure that you get a terrible exchange rate. This will leave you with fewer Euros in your wallet and unnecessarily hike the cost of your journey.
Keep on reading to find out what your best (and worst) options are when it comes to converting your US dollars or other currency to Euros.
Where can one exchange your local currency for Euros?
Credit unions, banks, and online currency exchange converters offer a convenient and, generally speaking, also a fairly inexpensive option. Alternatively, your own bank might have ATMs in some of the bigger European cities. Another option is to use a foreign bank to withdraw local currency with your ATM card or credit card after you have arrived in Europe.
Other options include converting your local currency to Euros at your hotel or at a currency dealer or kiosk as you travel through Europe. This can be a very costly mistake because you are unlikely to get a good exchange rate, and the fees will typically vary from high to exorbitant.
Using a Travelex Money Card
If you still remember the good old days of traveller’s checks, you are probably older than you would like to admit. The Travelex card is something quite similar to what traveller’s checks used to be. Except it it is stolen or it gets lost, it is easy to replace. Apart from that, since it is not linked to your bank account, thieves will not be able to get their hands on the rest of your money.
The Travelex Money Card also removes a lot of the stress from the whole process because you can purchase it at Travelex stores as well as online.
This is a contactless card that allows travellers to upload as many as six foreign currencies onto the same card and also to exchange one currency for another while they are traveling from country to country.
This convenience does come at a price, though. The cost to buy the card depends on where it is purchased and includes a card fee of a few USD. When you exchange one currency for another one, the cost involved will be the current exchange rate plus an additional 5.5%. If you want your full balance refunded, it will, at the time of writing, involve a fee of $20. Also, if you do not use the Travelex card for 6 months or longer, the firm will charge you $3 in inactivity fees every month.
Verdict: This is neither the best nor the worst option for exchanging money.
Using credit instead of cash to pay for things when you are in Europe
The banking scene has become nearly fully digital. That means the majority of travellers no longer need to carry money belts or traveller’s checks when they visit Europe.
That is why we recommend that you take both a credit card and a debit card with zero foreign fees with you on your European travels. Examples of companies that offer cards with no fees for foreign transactions include Bank of America, Chase, Capital One, and similar firms.
Your best option is to use a credit card with no transaction fees instead of cash on a trip to Europe because it will most likely provide you with fraud protection. Use cash only as a last resort. Remember that you can never replace lost cash, while a stolen or lost card can be replaced.
Do not, however, use a credit card to get a cash advance in Euros. Doing this will mean that you have to pay a hefty cash advance fee plus interest that starts to accrue straight away.
Verdict: A solid option. The massive technological advancements and widespread use of technology have contributed to making the use of credit and debit cards very easy and affordable in most parts of the world, including Europe.
Exchanging money at your own bank before the trip to Europe
Nearly all credit unions and banks provide foreign currency exchange services for their clients. You will, however, normally have to order the currency (e.g., Euros) before your trip starts. In many cases, the bank will be prepared to waive any fees associated with such a transaction.
Bank of America, for example, allows its clients to order a maximum of 10,000 US Dollars in one or more foreign currencies over a 30-day period. It will charge you a relatively small delivery fee for orders below 1,000 USD but no fees for amounts larger than this.
If you are considering to use this particular option you should contact your bank at least one month before you depart for Europe.
Verdict: Although cumbersome, this is a fairly good option. If you are a high net-worth client, the bank might not even charge you any fees.
Using your debit card at local banks and ATMs in Europe
Using a local ATM or bank when you get to Europe is another good option. Many foreign financial institutions are prepared to exchange your dollars into Euros at a better rate than what you will find at most other places.
If you are from the United States, you will be happy to hear that quite a few American banks charge zero fees for using ATMs in Europe, or they will refund foreign ATM fees. They typically also offer a competitive exchange rate.
Depending on which bank you are using, you might be able to use your debit card at ATMs in Europe to withdraw Euros for either zero fees or a small charge. If you are a Bank of America customer, for example, you might only have to fork out a 3% transaction fee, which is a lot less than many other options.
Verdict: If you are able to find a partner ATM, this is a relatively good alternative.
Other Europe travel tips
One thing you should not neglect before embarking on your European trip is to inform your credit card company and bank of your travel plans. That way, you can help make sure that if you suddenly start using your debit or credit card while you are in Europe, they will not freeze your account because of fraud concerns.
Wherever possible, you should also try not to pay in your local currency (e.g., USD) while you are traveling in Europe, regardless of whether the merchant is prepared to accept that. The latter will most likely charge a fee for this and use a conversion rate that is, to say the least, not in your best interest.
The same applies to paying in cash using USD (or whatever currency you use at home).
What should I do if I have Euros left at the end of my trip?
When you arrive back home, you can visit your credit union or bank to convert any leftover Euros into your local currency again. Just don’t forget that while they might accept Euros, they might not accept less well known currencies, e.g., the Bulgarian lev or the Danish krone.
Your last resort, if you have some foreign money left at the end of your trip, is to exchange it at the airport before flying back home.
The worst places possible if you want to exchange currency
When you are traveling in Europe, you will seldom be able to use the dollar (or whatever your local currency is). It’s very easy to get your hands on foreign currency, but you have to be very cautious about where you get it – otherwise, you could end up with a terrible exchange rate and other costs. Once you’ve read the above section about the best places to exchange your local currency for Euros, this is less likely to happen, but not impossible.
How foreign currency exchanges operate
The currency exchange system is all about swapping one currency for another one by executing sell and buy transactions, in this case selling your own currency and buying Euros. The value of the first currency relative to the second one is determined by what is known as the international spot rate. In essence, this is the daily value as determined by a number of large banks that trade in foreign exchange.
These foreign exchange (forex) rates are fluctuating all the time because the world economy doesn’t stop functioning for a single second. As some economies weaken while others strengthen, currencies undergo price increases and decreases. The result is that the relative value of one currency against others is seldom stable for a long time.
Speculators, investors, and other financial institutions like banks are purchasing and selling large amounts of currencies all the time. This is what in the end determines the market exchange rate between your country’s currency and, e.g., the Euro.
When you travel to Europe (for example) and you want to purchase something in their currency, you would normally exchange a fairly small amount of your own currency in return for Euros. Since there is such a small profit involved for the currency exchange, you are going to pay more for Euros than you otherwise would have.
The places where you will most likely get the worst exchange rates
The Airport
The airport terminal is where the vast majority of travellers will arrive in Europe. It is also the first place where they will get the opportunity to exchange their home currency for Euros. This is not where you will find the best exchange rates, though. The reason is that currency exchange shops at the airport know very well that you are going to need Euros to catch a train, bus, or taxi and that you can only get Euros from them. So they will typically offer you the worst exchange rate they can get away with!
If at all possible, avoid this option by getting some Euros from your local bank before your trip, or otherwise try an ATM or bank at the airport.
Stores that offer currency exchange
Once you have left the airport, you could find yourself in a popular tourist area, maybe a bazaar or a market. Once again, the shops here that offer to exchange your local currency for Euros will be perfectly aware that you can’t buy anything without the latter – and they will often take advantage of your ignorance.
You will most likely be able to get a better exchange rate at a dedicated forex exchange outlet, but even so, it’s very unlikely that you will get the best possible deal.
Schengen visas and ETIAS
At the present time, citizens from more or less 63 foreign nations do not have to apply for a visa if they want to visit Europe. The majority of the others have to apply for what is known as a Schengen Visa before they are allowed to visit the European region.
From next year (2024), things are going to change. Visitors from all the countries that at the moment do not need a Schengen Visa will then have to apply for what will be known as ETIAS. This term stands for the European Travel Information and Authorization System. The list includes citizens of the United States, Canada, Australia, New Zealand and nearly 60 other countries.
Sources
- https://www.investopedia.com/articles/personal-finance/082114/best-places-exchange-currency.asp
- https://www.investopedia.com/articles/personal-finance/032015/best-ways-exchange-currency-europe.asp
- https://www.investopedia.com/articles/personal-finance/022415/worst-place-exchange-currency.asp
- https://www.euronews.com/travel/2022/12/08/as-croatia-joins-the-euro-which-7-eu-countries-still-use-their-own-currency
