Holly Johnson* breaks down the pros and cons of using cash, credit cards or making ATM withdrawals while holidaying in Europe.
Planning your first vacation to Europe can be exciting and overwhelming.
There are huge details to pore over, accommodation to book, and long, pricey flights to prepare yourself for — unless you’re using airline miles, of course.
While there’s plenty you can book and pay for ahead of time, you’ll also need to have a strategy in place to pay for items once you arrive.
How will you pay for that homemade truffle pasta you’ve been craving? Gelato? Trains?
Will you exchange currency before you arrive, get cash out of an ATM, or pack a credit card for the trip?
There’s really no right or wrong choice — just know that there are notable pros and cons with each payment method, and plenty to mull over as you decide.
Exchanging currency before you arrive
One way to financially prepare for your trip is exchanging currency at your local bank before you go.
Most banks let you exchange for almost any currency in Europe, although you typically need to provide some notice (one to two weeks should be fine).
While having currency in-hand when you arrive in your destination may sound ideal, note that this is not the most affordable way to pay for your vacation.
Banks and credit unions charge a fee to exchange hard currency, although these fees can vary.
Pro tip: Don’t rush into your bank the day before you leave and expect your bank to have hundreds of dollars in euros or Norwegian krone on hand.
Chances are, they won’t have what you need.
Pros of exchanging currency ahead of time:
- Having local currency in-hand when you arrive in your destination provides a sense of security.
- You won’t be stuck without any cash if your ATM card isn’t working.
Cons of exchanging currency ahead of time:
- It’s easy to get stuck with extra currency if you don’t spend it all.
- It can be difficult to get the right amount of money if you’re travelling to multiple European destinations that don’t use the same type of currency.
Using a credit card abroad
Another way to pay your way is with a credit card, and this strategy is one of the best — and most affordable — available.
Using a credit card for purchases abroad means you’ll get access to the most realistic and accurate exchange rates, meaning you won’t pay more for something than you have to.
Not only that, but credit cards offer consumer protections you don’t get with other forms of payment.
If you have a wad of cash that’s stolen during your trip, you’re out of luck.
If someone uses your credit card fraudulently, on the other hand, your liability is limited.
Most credit cards even have zero-liability policies for fraudulent charges.
Credit cards are the most affordable for purchases abroad when you choose a card with no foreign transaction fees.
Pro tip: Beware of dynamic currency conversion — a pricey situation where an overseas vendor chooses to charge your card in your currency and not theirs.
This will virtually always cost you more money, so make sure to avoid it at all costs.
Whenever you buy something abroad with a credit card, tell the merchant to charge in the local currency — never assume they will do it automatically.
Pros of using a credit card:
- Zero fraud liability if someone steals your credit card or your credit card numbers.
- You don’t have to deal with physical currency.
Cons of using a credit card:
- Small vendors and shops may not take credit cards, especially in small towns and villages.
- You’ll need to tell merchants to charge in the local currency to avoid dynamic currency conversion.
Getting cash out of an ATM
Another way to access cash overseas involves waiting until you arrive and getting money out of an ATM.
This option is typically more affordable than exchanging currency at home, but it’s more expensive than using a credit card.
That’s because you will likely have to pay a fee to access money from a foreign ATM outside your network.
You may also be required to pay an exchange rate, along with a transaction fee.
You can minimise transaction fees and ATM fees charged by your bank by taking out large sums of money at once instead of several small withdrawals during your trip.
You can also avoid them completely by choosing a bank that offers a broad network of ATMs in your destination, or one that waives ATM fees outside your network.
Pro tip: Call your bank to let them know about your travel plans before you depart.
If you don’t, there’s a good chance your card will be flagged for fraud when you try to use it the first time.
Pros of getting cash out of an ATM:
- Can be affordable if you have an ATM card that waives foreign ATM fees.
- Only get the cash you need and you don’t have to go to the bank before your trip.
Cons of getting cash out of an ATM:
- Fees can be high with some banks and in some destinations.
- Hackers and thieves abroad can use skimming devices to steal your banking information.
The bottom line
At this point, you’re probably wondering why you shouldn’t just use your debit card abroad.
While you can absolutely do so and there may not be many fees or charges involved, I don’t normally suggest it due to the lack of consumer protections you get when you use debit.
As you can see, there are pros and cons with any way you pay.
Educate yourself on the basics and make sure you have a plan before you hop on a plane.
Europe is an amazing destination to visit, but you’ll need money to see and do everything on your list.
* Holly Johnson is a freelance writer. She tweets at @ClubThrifty. Her website is clubthrifty.com.
This article first appeared at www.businessinsider.com.au.
