How to Handle Your Money While Traveling to Europe

High fees and unavailability of euros can be problematic

I cashed my last traveler's check years ago. And I haven't stepped into a European bank in ages. Now, I get my cash from ATM machines.


Nineteen European countries — and more than 330 million people — use the same currency. Using euros, tourists and locals can easily compare prices of goods between countries. And we no longer lose money or time changing money at borders.

Not all European countries have switched to euros. As of now, major holdouts include the United Kingdom, Denmark, Norway, Sweden, Switzerland and Croatia. Each of these countries has its reasons for choosing not to use euros (for example, the Swiss are protecting their lucrative secret-banking tradition, which would disappear with the transparency that adopting the euro would require). Meanwhile, several Eastern European countries that have joined the European Union — including the Czech Republic, Poland, Hungary and the Baltic States — are working hard to satisfy requirements that will allow them to adopt the euro in the future.

Even in some non-Euroland countries, the euro is commonly used. For example, some Swiss ATMs give euros, most prices are listed in both Swiss francs and euros, and travelers can get by in that country with euro cash. But if you pay in euros, you'll get a rotten exchange rate. Ideally, if you're in the country for more than a few hours, stow your euros and get some local cash instead.

Cash Machines (ATMs)

Throughout Europe, cash machines (ATMs) are the standard way for travelers to get local currency. European ATMs work like your hometown machine and always have English-language instructions. Using your debit card with an ATM takes dollars directly from your bank account at home and gives you that country's cash. You'll pay fees, but you'll still get a better rate than you would for exchanging traveler's checks.

Ideally, use your debit card to take money out of ATMs. You can use a credit card, but you'll typically pay more in fees.

Before you go, confirm with your bank or credit-card company that your card will work in Europe and alert it that you'll be making withdrawals while traveling — otherwise, it might freeze your card if it detects unusual spending patterns. Some banks automatically block U.S. debit card use in certain countries (including the United Kingdom) to protect against fraud.

ATM transactions using bank-issued debit cards come with various fees. Your bank may levy a flat transaction fee of $2 to $5 each time you use an ATM, and/or may charge a percentage for the currency conversion (1–3 percent); the ATM you use might charge its own fee, too. If your bank charges a flat fee, make fewer visits to the ATM and withdraw larger amounts. (Some major U.S. banks partner with "corresponding" European bank chains, meaning that you can use those ATMs with no fees at all — ask your bank.) Other fees may apply; for all the details, see The Sleaze of Fees, below. These additional expenses can pile up. Quiz your bank to figure out exactly what you'll pay for each withdrawal.

If you use a credit card (rather than a debit card) for ATM transactions, it's technically a "cash advance" rather than a "withdrawal" — and subject to an additional cash-advance fee. The moment you pull cash out of the ATM with a credit card, you're immediately bumped into the high-interest category with your new credit-card debt. If you want to use your credit card for ATM transactions without incurring this interest expense, you may be able to prepay the account — check with your bank.

Since some European keypads have only numbers, you'll need to know your personal identification number (PIN) by number rather than by letter — derive the numbers from your hometown bank's keypad. A PIN with more than four digits may not be accepted. Plan on being able to withdraw money only from your checking account. You might be able to dip into your savings account or transfer funds between accounts, but don't count on it.

Bringing two different cards provides a backup if one is demagnetized or eaten by a machine. Make sure the validity period of your card won't expire before your trip ends.

It can be helpful to set up online access to your bank accounts. Most banks have secure websites that allow you to check balances, make payments and transfer funds; if you check your account periodically while in Europe, you can also see the exact exchange rate you're getting, and whether the bank is levying any extra unexpected fees.

Ask your bank how much you can withdraw per 24 hours, but be aware that many foreign ATMs have their own limits. If the ATM won't let you withdraw your daily maximum, you'll have to make several smaller withdrawals (and incur extra fees) to get the amount you want. Request a big amount on the small chance you'll get it. If you're lucky and the machine complies, you'll save on fees. If you're denied, try again, requesting a smaller amount. Few ATM receipts list the exchange rate, and some machines don't dispense receipts at all.

In some countries (especially in Eastern Europe), an ATM may give you high-denomination bills, which can be difficult to break. My strategy: Request an odd amount of money from the ATM (such as 2,800 Czech koruna instead of 3,000). If the machine insists on giving you big bills, go immediately to a bank to break them.

If you're looking for an ATM, ask for a retrait or distributeur (de billets) in France, a cashpoint in the United Kingdom, and a Bankomat just about everywhere else. Many European banks have their ATMs in a small entry lobby, which protects users from snoopers and bad weather. When the bank is closed, the door to this lobby may be locked. In this case, look for a credit-card-size slot next to the door. Simply insert or swipe your debit or credit card in this slot, and the door should automatically open.

Stay away from commercial ATMs that aren't run by banks. These companies, such as Travelex Money Machine, like to stack their machines next to bank ATMs in the hope that travelers will be too confused to notice the difference. The commercial ATMs charge outrageous extra fees — often double the cost of a bank ATM.

Transaction Fees Add Up

It pays to shop around for the best rates, both for debit-card ATM withdrawals and credit-card transactions. Consider these examples and you'll see how these fees can really add up over the length of your trip.

$300 ATM withdrawal with debit card Bank A Bank B
Flat fee $3 $5
Currency conversion fee 2% ($6) 0
ATM non-customer fee $2 $2
Total fees $11 $7
$600 Credit card purchase Bank A Bank B
Visa/MasterCard initial transaction fee 1% ($6) 1% (6)
Bank currency conversion fee 2% ($12) 0
Total fees $18 $6
The Sleaze of Fees (and How to Avoid Them)

Travelers returning from Europe often open their mail to discover they paid more for their trip than they thought they had. Over the last decade, banks have dramatically increased the fees they charge for overseas transactions using credit and debit cards. While these fees are legal, they're basically a slimy way for credit-card companies to wring a few more dollars out of their customers. A few years ago, a class-action settlement forced many banks to refund some of these fees, and most have (slightly) reduced the fees they charge for international transactions.

Visa and MasterCard levy a 1 percent fee on international transactions, and some banks that issue those cards also tack on a currency conversion fee (additional 1–2 percent). As mentioned earlier, there are also fees associated with using your card for ATM withdrawals — such as a flat transaction fee of $2 to $5, a percentage-based currency conversion fee, or a charge for using the ATM.

So, how can a smart traveler avoid (or at least reduce) these fees? Here are a few suggestions:

Ask about fees. Banks are required to break out international transaction fees as line items on your statement, helping you to see exactly what you're paying. But by the time you get your statement, it's too late — so it's smart to make a call before your trip to get the whole story. Carefully quiz your bank or credit-card company about the specific fees that come with using their card overseas. Even if your card didn't ring up fees the last time you went to Europe, there's a good chance it will now. Call and ask, and be persistent.

If you're getting a bad deal, get a new credit card. Some companies offer far lower international fees than others — and a handful don't charge any fees at all. If you’re going on a long trip, do some research and consider taking out a card just for international purchases. Capital One has a particularly good reputation for no-fee international transactions. Most credit unions have low-to-no international transaction fees. Bankrate has a good comparison chart of major credit cards and their currency-conversion fees.

Avoid dynamic currency conversion (DCC). Some European merchants — capitalizing on the fact that many Americans are intimidated by unusual currencies — cheerfully charge you for converting their prices to dollars. This may seem like a nice service, but you'll actually end up paying more by adding yet another middle-man to your transaction. Usually the dollar price is based on a lousy exchange rate (which can be set wherever the merchant likes — generally about 3 percent worse than the prevailing interbank rate). To make matters worse, even though you're paying in "dollars," your credit-card company may still levy its 1 to 3 percent "foreign transaction fee." The result: You could pay up to a 6 percent premium for the "convenience" of immediately seeing your charges in dollars.

Some merchants may disagree, but according to DCC provider Planet Payment, you have the right to decline this service at the store and have your transaction go through using local currency. If you're handed a receipt with two totals — one in the local currency and the other in U.S. dollars — circle the amount listed in the local currency before you sign. If your receipt shows the total in dollars only, ask that it to be rung up again in the local currency. Your transaction will then be converted by Visa or MasterCard at or near the more favorable interbank rate.

Online purchases can be subject to fees. If you're buying from an international website, you can still get hit with currency conversion fees — even if you make the transaction while in the United States. You might be able to bypass the fee if the vendor has a U.S. office (in which case, call the U.S. phone number rather than buying online).

The bottom line. Here's the best formula for saving money as you travel: Pay for as much as possible with cash (use a bank that charges low rates for international ATM transactions, and withdraw large amounts at each transaction — keeping the cash safe in your money belt). When using a credit card, use a card with the lowest possible international fees, and make sure your transactions are charged in the local currency — not dollars. Then smile and enjoy your trip, feeling very clever for avoiding so much unnecessary expense.

Paying With Plastic

American credit cards work throughout Europe (at hotels, larger shops and restaurants, travel agencies and so on), although some countries are switching to new technology that may cause your U.S. card to be rejected in certain automated machines (see "Chip and PIN," below). Also, more and more merchants are establishing a $30 minimum for credit-card purchases. Visa and MasterCard are the most widely accepted. American Express is less common (because it costs merchants more) but is popular with some travelers for its extra services. The Discover card is completely unknown in Europe.

Plastic fans gloat that you get a better exchange rate by using your card. This may be true, if you have a card with particularly low fees (most credit cards charge about 1 to 3 percent per transaction — see The Sleaze of Fees, above). But regardless of fees, realize that when you use your credit card, you're buying from businesses that have enough slack in their prices to absorb the fees the credit-card company charges the merchant (2 to 5 percent). In other words, those who travel on their plastic may be getting a better rate, but on a worse price. As more consumers believe they are getting "free use of the bank's money," we all absorb the percentage the credit-card companies are making in higher purchase prices.

Chip and PIN Cards

What is chip-and-PIN? Some parts of Europe — especially Britain, Ireland, Scandinavia, France, Switzerland, Belgium, and the Netherlands — are adopting a chip-and-PIN system for their credit and debit cards. These "smartcards" come with an embedded microchip. When making a purchase, cardholders must enter a PIN (similar to using a debit card for a point-of-sale purchase in the United States). The chip inside the card then authorizes the transaction.

While handy for Europeans, chip-and-PIN cards are causing a few headaches for American visitors: Some machines that are designed to accept chip-and-PIN cards simply don't accept U.S. credit cards. This is especially common with automated machines, like those at train and subway stations, toll roads, parking garages, luggage lockers, bike-rental kiosks and self-serve pumps at gas stations.

For example, after a long flight into Charles de Gaulle Airport in France, you find you can't use your credit card in the ticket machine for the train into Paris. Or, while driving in rural Switzerland on a Sunday afternoon, you discover that the few gas stations that are open accept only chip-and-PIN cards.

In most of these situations, a cashier is nearby who can process your card manually by swiping it, and having you sign the receipt the old-fashioned way. Automated machines might take your U.S. credit card if you also know the card's PIN. Every card has one — ask your bank for the number before you leave; since they're unlikely to tell you over the phone, allow time for the bank to mail you the PIN.

For now, most hotels, restaurants and shops that serve Americans will gladly accept your U.S. credit card. However, at smaller shops, the merchant may prefer that you don't use your credit card (since they pay a much higher commission on "regular" credit-card transactions than on chip-and-PIN ones). They might accept your credit card, but then ask you to type in the PIN. If this happens, politely ask them to print out a receipt for you to sign instead (in live transactions, it's slightly safer to sign than enter your PIN). If they refuse, either use your PIN or pay with cash.

Most of Western Europe should be totally converted to chip and PIN in 2012, and Canada will complete its conversion in 2015. Eventually some of these countries could stop accepting magnetic-strip cards, although most banking authorities think this won't happen in the short term — the American tourist market is too lucrative.

American travelers can avoid potential hassle by getting their own chip-and-PIN card just for their trip, but I don't recommend it. Travelex offers U.S. travelers a chip-and-PIN card, called "Cash Passport," that is preloaded with euros or British pounds. While handy, this service comes with exorbitant exchange rates; it’s probably not worth it unless you are staying for several weeks in a country that’s converted to chip-and-PIN cards, and you’re willing to pay for the convenience.

The bottom line: Don't be surprised if your credit card occasionally isn't accepted. Be aware that if your card is rejected, there's usually an alternative — either paying with cash, typing in your credit card's PIN or paying with your credit card at a staffed ticket window. But in a few cases, you might simply be out of luck; drivers in particular need to be aware of potential problems when filling up at an automated gas station, entering an unattended parking garage, or exiting a toll road … you might just have to move on to the next gas station, or use the "cash only" lane at the toll plaza.

Rick Steves writes European travel guidebooks and hosts travel shows on public television and public radio. Email him at [email protected]

Rick Steves
By Rick Steves
Rick Steves writes European travel guidebooks and hosts travel shows on public television and public radio. Email him at [email protected] and follow his blog on Facebook.

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