April 9, 2010 in Personal Finance

Are there smart ways to stretch your dollar during international travel?

Although the value of the dollar fluctuates, it generally has been down in recent years against the euro, pound and yen.

Well-traveled bloggers, expats, authors and other experts suggested eight dollar-boosting tips for spring or summer vacations abroad.

1. Fight currency conversion fees. Many international travelers shop and withdraw cash with credit cards and debit cards. But upon returning home, many users are shocked by the fees tacked onto each card transaction.

Before traveling, call your card issuer and ask how much it is tacking on any foreign conversion fees.

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Typical fees range from 1 percent to 3 percent of the withdrawal or purchase. While it may not sound like much, 2 percent of a $4,000 vacation amounts to $80, which goes a long way toward an extra night’s stay.

Some card issuers offer transaction-fee-free plastic, such as Capital One. Compare credit card rates and switch to a low-fee or no-fee card before you go.

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2. Avoid ATM fees. ATM users may pay two fees for the ease of use — a currency conversion fee and a machine fee. Credit card users withdrawing from ATM machines will also pay cash-advance fees on top.

But some banks partner with banks in Europe. Partnerships allow you to skip paying surcharges for out-of-network ATMs.

For example, Bank of America and Citibank debit cards work at partner-bank ATMs, says Anne Banas, executive editor at the travel-news site SmarterTravel.com.

“With a Bank of America debit card, you can make unlimited withdrawals without being charged a single fee at ATMs in the U.K., Germany, France, Canada, and in Australia and New Zealand,” she says.

Matthew Kepnes, blogger at NomadicMatt.com — a site discussing budget travel and world travel — keeps fees down by using an HSBC bank account.

“They have ATMs all over the world, so I can avoid getting dinged with an ATM fee,” he says.

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Of course, always make sure your card will work before traveling and ensure that your PIN is functional. Tell your bank you’re going abroad; some banks cut off cards when charges start rolling in, fearing a stolen card or number.

3. Ask about cash discounts. Many hotels may require a credit card deposit to reserve a room, but you may be able to cut your check-out bill with cash.

“Often you can get a 3 percent or greater discount by paying with cash,” when staying in Europe, says Chantal Panozzo, an expat working in Zurich.

Susanna Zaraysky, author of “Travel Happy, Budget Low,” says cash discounts extend to stores in some countries.

“In Brazil, it’s common to give a 10 percent discount for cash purchases,” Zaraysky says.

4. Keep up on rates. Although exchange rates probably won’t swing widely during your travels, it’s wise to keep an eye on financial news. Even a small change benefiting the dollar may mean that it’s cheaper to pay off your hotel bill on one day instead of another.

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Check the day’s rates at Web sites like Bankrate, XE.com or Yahoo’s Currency Converter. If you have an iPhone or iPod Touch, Banas suggests the free Currency app, which provides real-time information for more than 50 currencies in 70 countries.

5. Buy traveler’s checks in local currency. While ATMs and credit cards often offer the best rates, traveler’s checks are a solid backup option if your card doesn’t work or gets stolen. U.S. dollars aren’t a good idea — they’re easily stolen and expensive to exchange.

However, it may be wise to purchase checks in a local currency, says Joseph Sobin, the owner and travel executive of Denver-based Colorado Concierge Services.

Sobin suggests Sterling- or euro-denominated traveler checks, which hold value in a swinging currency exchange market.

“I may have clients buy traveler checks in the local currency before they leave the U.S.,” Sobin says. “It keeps them on a budget and they don’t have to worry about exchange rates and fees once at their destination.”

Shop around for checks; ask banks about exchange rates, commissions and fees charged.

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6. Prepay your way. Best Western hotels — a quality option in Europe, according to Sobin — offer a prepaid hotel card for jet-setters.

Pay in your home currency, and the currency is converted to units that can be spent in U.S. dollars, euros or Canadian dollars. When it’s time to pay for your night’s stay, the card’s amount is converted to local currency at a rate closely matching the actual exchange rate — and you won’t pay currency conversion fees.

Likewise, you may be able to use your frequent-flier miles or hotel rewards cards to score free overseas nights.

7. Ready your rapid-math skills. Get quick at converting the foreign currency into dollars — whether via calculator, handmade chart or mental-math acuity.

“It’s easy to waste money when you forget that a one euro coffee is not actually a cheap $1 cup of java,” Zaraysky says.

“Remember the dollar equivalents of typical prices — 1 euro, 5 euros, 10 euros — to keep yourself from buying little trinkets or snacks that you most likely don’t need and will cost you more than you think,” she says.

8. Beware buck changers. Hotels, stores and other establishments may offer to exchange cash or travelers checks, or allow you to pay for your credit-card purchases in dollars. But watch out for hidden fees or poor exchange rates.

But because you know the current rate — tip No. 4 — you’ll spot whether the hotel’s exchange rate is fair. Ask if there’s an extra fee for transactions or whether you’ll find any surprises on your card bill.

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