Money doesn't actually talk. We do.

Trading Dollars for Euros Before a Trip

It figures. Just as I’m packing for Rome, the dollar hits a new all-time low against the euro.

I’ve put off traveling overseas for several years in hopes that the dollar would eventually firm up. But when you start reading stories about how some New York shopkeepers are beginning to favor the European currency, you lose hope. And you just go anyway.

Since we’re already starting at a disadvantage, I want to avoid as many of the fees banks and credit-card companies tack on every time you make a transaction in a foreign currency. So I did some research to find out the best credit-cards to use, as well as what’s the most economic way to convert my weakling dollars into euros (I need a small pile of euros to qualify for a 10% discount on my hotel).

Best Credit-Cards

Credit cards do a great job when it comes to securing one of the best exchange rates (though some folks have questioned this). However, most credit cards slap up on a charge up to 3% for “currency conversion” every time you make a transaction. Two percent of that typically comes from the bank issuing the card, while Visa and MasterCard levy the other 1%.

There are a few notable exceptions. Capital One doesn’t charge any fees of its own, and it eats the one imposed by MasterCard/Visa. Discover does the same, but it’s not widely accepted outside of the U.S., says Justin McHenry, research director of IndexCreditCards.com, a site that tracks card features. Washington Mutual only charges the 1% fee imposed by MasterCard or Visa, while American Express will cost you 2%. Bank of America, Chase, Citibank and Wells Fargo all charge 3%. I haven’t yet opened a Capital One card account, so I’ll be relying on my Amex.

Another tip: foreign merchants may offer to process your transactions in U.S. dollars. Sounds nice, no? Don’t do it. The merchants will give you a poor exchange rate, and you’ll never know it, because you’re only seeing the total amount in U.S. dollars. “Have the merchant charge you in local currency and have your card issuer do the conversion, which will definitely be at a lower rate,” McHenry advises. “You’ll come out better overall.”

Debit Cards, Getting Cash and ATMs

Like many credit cards, debit cards often charge currency conversion fees on every transaction, including withdrawals at an ATM machine. Even so, using an ATM overseas is typically the best way to retrieve cash. Like credit cards, ATMs provide excellent exchange rates, but you’ll want to call your bank to see what fees it imposes. For instance, if I use my Citibank ATM/debit card at a Citi ATM in Rome, the bank will still ding me 2% every time I make a withdrawal (Citigold customers are charged 1%). So if I withdraw 662 euros, the equivalent of about $1,000, it’ll cost me $20.

Your bank might also provide other options. Citi offers a service for customers called World Wallet. Before you leave, you put in an order for foreign currency. The money is debited from your account, and the currency can be delivered to a Citi branch for free, or, for $5, they’ll bring the pile right to your doorstep or office. The charge is waived for orders over $1,000. But convenience comes at a cost: on Wednesday, Citi was charging $1.59 per euro, or about 5.2% more than the actual exchange rate of $1.51. The ATM will get me a better rate, though I’ll probably have to go back twice to withdraw enough cash to pay for my hotel.

You’ll also want to find out how much you can withdraw from your bank’s ATM daily. (if you’re using another bank’s ATM, it’s possible it will set its own limits). My bank says I can withdraw the equivalent of $1,000 each day, but I’m bringing all its customer service numbers in case I run into any trouble.

Whatever methods or products you decide to use, be sure to call your financial institutions before you leave to get the lowdown on what fees apply (and to let them know you’re traveling, especially if you don’t leave the States that often. You don’t want them to freeze your accounts.) Keeping these costs down won’t make a huge difference, but it might buy you the equivalent of a nice lunch in, say, Trastevere.

–Tara Siegel Bernard