Getting the Best Exchange Rate When You Travel Abroad

Travel writer and consumer advocate Ed Perkins offers travelers some advice on how to lower their costs while exchanging currency. He recommends using a credit card and an ATM card to avoid the high exchange rates that are usually attached to travelers checks and the fees charged by currency exchanges.
Getting the Best Exchange Rate When You Travel Abroad
By Ed Perkins
Finding the best ways to exchange currency has always been one of the most nettlesome questions for foreign travelers. However, these days the widespread use of plastic money—credit cards and debit ATM cards—makes the question much simpler.
The best strategy for exchanging currency today may be summed up in two basic rules: Put as much of your foreign expenses on a credit card as you can, and use your ATM card whenever you need to get cash. With a little bit of background and research, you can spend more of your money on travel and less on fees.
Getting the Best Exchange Rate When You Travel Abroad
As a visitor to a foreign country you will always lose at least a little in the process of exchanging currency. Your objective is to keep that loss as low as possible. Here are some facts about currency exchange that may surprise you:
* On a retail transaction—exchanging United States currency or travelers checks for foreign currency at a bank or exchange office—you usually lose from 4 to 8 percent on the transaction. You will lose even more if you exchange currency at a hotel.
* You won’t lose less money by exchanging currency in the United States before you leave. In fact, U.S. bank rates are usually worse than bank rates overseas. Buying travelers checks in a foreign currency before you leave home doesn’t help matters: You will simply take the loss here when you buy them instead of taking it overseas when you cash the checks.
* When you use a credit card or a debit ATM card in a foreign country the least you can lose is the (approximately) 1 percent fee that the international MasterCard and Visa networks charge to make the actual exchange. With American Express and Diners Club the fee is about 2 percent.
* When you charge a foreign purchase to a bank credit card, such as MasterCard or Visa, all you lose with some cards is the 1 percent the issuer charges for the actual exchange. Other banks, however, add a surcharge of 2 to 3 percent on transactions in foreign currencies. The decision whether or not to surcharge is up to the bank that issues the card, not MasterCard or Visa. Some of the big banks that don’t surcharge are Capitol One, HFC, and US Bank. Among those that do surcharge are Chase, Citibank, First USA, and Providian. Even with a surcharge, however, you generally lose less with a credit card than with currency or travelers checks. American Express and Diners Club don’t surcharge beyond the 2 percent fee.
* When you use a debit card, such as Cirrus or Plus, to withdraw foreign cash, the conversion fee is 1 percent, the same as with a credit card. In addition, you pay a fee, established by your bank, for each withdrawal. The typical fee for an overseas withdrawal is 2 to 3 dollars, although a few banks charge more; you pay the same fee, no matter how much or how little you withdraw. A few small banks offer “no-fee” ATM cards to attract business.
* When you use a credit card to get foreign cash, the withdrawal is treated as a cash advance, and you are immediately subject to interest charges in addition to the 1 percent conversion loss and a fee of 3 dollars or more.
A basic strategy for exchanging currency
Take maximum advantage of your credit card and debit ATM card by following this basic strategy:
* Use a credit card to lose the least on your foreign purchases. By researching the different cards before you leave on a trip, you can keep your losses to around 1 to 2 percent.
* For the cash you need, keep your losses to a minimum by withdrawing foreign currency with an ATM debit card. If you withdraw in amounts of $200 or more, the percentage loss is small. If you use a credit card to withdraw cash, you’ll lose a lot more. Don’t use a debit card for small withdrawals.
* Don’t use travelers checks as your primary means of foreign payment. But do take along a few $20 checks or bills to exchange at retail for those last minute or unexpected needs.
Microsoft ® Encarta ® 2007. © 1993-2006 Microsoft Corporation. All rights reserved.

Visa International

I INTRODUCTION
Visa International, credit card and payment system company based in Foster City, near San Francisco, California. Visa is the world’s largest consumer payment company, with more than one billion cards issued, more than $1.8 trillion in transactions annually, and more than half of the world’s market in transactions. Visa is collectively owned by more than 21,000 member financial institutions around the world. These institutions issue Visa cards, and each establishes the terms that it will offer to consumers, such as rates and fees.

II ORIGINS
Visa traces its roots to 1958, when Bank of America, based in San Francisco, issued the BankAmericard (see BankAmerica Corporation). At the time, many banks in the United States offered charge cards, or cards that enabled consumers to charge goods and services to an account. Banks required cardholders to then pay their account balances in full each month. Unlike charge cards, the BankAmericard offered cardholders credit privileges, so they could pay their balance over a longer period of time in increments, plus interest. Bank of America licensed the card throughout California and eventually in other states as well.
The BankAmericard suffered from transactions problems and fraud during the early 1960s because of unreliable interchange systems between Bank of America and other banks licensed to issue the card. In 1968 Dee Ward Hock, an executive of the National Bank of Commerce in Seattle, Washington, headed a committee of BankAmericard licensees that was formed to resolve the problems among credit-card issuers. Two years later Hock was instrumental in creating National BankAmericard Inc. (NBI), a consortium of BankAmericard licensees designed to conduct more reliable transactions between the banks. NBI bought the domestic bankcard system from Bank of America, and Hock became the head of NBI. By 1970 the BankAmericard and its biggest competitor, Master Charge (later MasterCard), were offered nationwide, and most banks had eliminated their own bankcard programs to join one or both of the national systems.

III VISA CARD INTRODUCED
In 1974 Hock formed IBANCO, which took over administration of BankAmericard’s foreign operations. In 1977 Hock changed the name of the BankAmericard to the Visa card. NBI became Visa U.S.A. and IBANCO became Visa International. Visa International Incorporated became the umbrella organization for Visa’s business units. Visa International and Visa U.S.A. share corporate headquarters in Foster City.

IV GROWTH
In 1977 MasterCard held 60 percent of the bankcard business, compared with 40 percent for Visa. By 1983 those percentages were reversed, making Visa the leading U.S. credit card. Credit-card use expanded dramatically in the 1980s, and Visa continued to dominate the market. Visa had 56 million cardholders worldwide in 1979, but that figure rose to 220 million ten years later.
Credit-card use continued to grow in the 1990s as businesses ranging from supermarkets to health care providers began accepting payment with cards. Visa also offered premiums, such as airline discounts, for using its card. The number of Visa cards worldwide increased from 255 million in 1990 to more than one billion in 2000. The company’s revenues grew from $720 million in 1990 to $1.8 billion in 2000.
Of the more than $1.6 trillion in credit-card transactions worldwide in 1996, 55.8 percent used a Visa card, making it the worldwide leader in the credit-card industry.
Microsoft ® Encarta ® 2007. © 1993-2006 Microsoft Corporation. All rights reserved.