Managing Your Cash and Credit in Europe

One of the Wealth Daily correspondents just returned from a trip to Europe.

Given the attractive exchange rates for the U.S. dollar/euro, we asked him to share some insights about his trip. So Brian O’Connell is writing today, and I’ll be back on Monday, March 23.

Until then,

Briton L. Ryle

My daughter is studying abroad in London this semester, a trip that’s already taken her to points all over the continent including Dublin, Prague, Paris, and Croatia. (I didn’t expect that last one, but the college student says she loved it.)

My girlfriend Leslie and I paid her a visit recently, and we all wound up having a wonderful time in London and Paris, with side trips to the country.

Dover, Canterbury, and Tour all come highly recommended, by the way.

I’m an ex-Wall Street bond trader and a current personal finance writer, so you’d think I’d have a good handle on using cash, credit, and debit cards overseas.

I did all right — but there’s always room for improvement in managing money on an overseas trip (especially when you freely indulge in local spirits and cuisine and you’re not exactly “focused”). I learned a lot from my first trip to Europe in years.

If you’re going over to Europe for the first time this year, learn from our experience — take some of the anxiety of handling money off the board so you are free to enjoy your entire time there.

These tips should help you do just that.

1. Contact your bank and credit card company before you go: Leslie and I both visited our banks before embarking for London, which, it turns out, is not a luxury but a necessity. Your bank will shut down your debit card (your credit card carrier will do the same) if you don’t let them know you’re heading out of the country.

The reason is security — banks suspect card usage outside of the U.S. to be fraud if you don’t give them a heads up. Your bank can also give you a good deal on exchanging U.S. dollars for pounds or euros.

2. Go ahead and use your debit card: We were also encouraged to use our debit cards to get cash as much as possible, as ATM debit fees aren’t as onerous as you might think overseas. Ours were about $3 per transaction, although I’ve heard from others that ATM fees can go as high as $5 per transaction.

Still, that beats using a credit card or traveler’s check, where fees can be much higher.

Also use a debit card at exchange rate locations (like ATMs, they are all over London and Paris). They offer low fees of about 1% to 3% — a good deal if you want to exchange dollars for euros or British pounds.

3. Credit card usage: Visa and MasterCard are your best bets. Don’t expect to use American Express too much — many euro retailers don’t take it.

4. Know the exchange rates: The U.S. dollar is staging a comeback against overseas currencies, but on our trip, we still took it on the chin as U.S. financial consumers relying on a different currency (especially the pound) in Europe.

At first glance, a steak at a good London eatery at £20 looks like a great deal. But once you factor in the currency spread, you’re actually paying about $30 in U.S. dollars (the current exchange rate between the dollar and pound is about 1 to 0.678).

Don’t even get me started on the £250.00 we took out of an ATM at a London casino. A glance at my bank account the next day revealed a debit of over $325.00 from my U.S. bank account. Losing at the gaming tables only sharpened the pain.

5. Everyday expenses: By and large, we found France was more expensive than the UK, although the exchange rate spread was sharper with the pound against the dollar. Once you’re dealing in British pounds, prices are highly amenable in London and the UK.

For example, a pint of Pickwick or Fosters in my favorite London pubs ran about $2.50 apiece. The same ales in a Paris brasserie ran about $3.50 each.

It could be local economic conditions or the fact that prices are notoriously jacked up in Paris relative to London, currency rates notwithstanding. As for the stronger U.S. dollar, we didn’t see much of that reflected in either London or Paris or in outlying areas.

6. Go through a tour operator: Using a travel agency here in the States may seem quaint in the age of Trip Adviser and Orbitz, but trust me, they come in handy.

Aside from making all your travel arrangements, your agency will have you prepay for airfare, hotel, and auto rentals — taking away the potentially big headache of dealing with payment as you move about from country to country. (Plus, the best agencies can you get you tickets to London plays and French winery tours, among other perks — another payment you don’t need to worry about overseas.)

Make sure to use your rewards credit or debit card to prepay for the trip to get the best points and miles deals.

7. Know the currencies: Get to know the paper currency you’ll undoubtedly be using in Europe (particularly at smaller merchants). The ECB website can help get you up to speed on both banknotes and coins.

One last tip: Watch out for pickpockets. They are a huge threat overseas, especially at big urban tourist hot spots. We ran into U.S. tourists who had recently lost wallets and purses on the London Underground and at the Eiffel Tower, and their trips, they said, were basically ruined.

I kept my wallet in my front pocket the entire trip, and Leslie carried nothing but a debit card in her front pocket, and we had no problem.

Traveling to Europe was a magical experience, and the opportunity to share it with my loved ones was beyond belief. But the trip was even better knowing our finances and spending money were in good shape — which led to the memories of a lifetime.

Until next time,

Brian O’Connell for Wealth Daily