Currency Conversion Woes

Listen Children and you shall hear, a story of the traveller, a bill and the various mean people who want a slice of that transaction. OK, OK. It's not a fairy tale. It's worse.

We'll soon be spending money: in Europe; Germany; an EU country; with Euro currency. For those of us starting out with accounts in USD (that's U.S. dollars,) we have a slight problem.

They won't take our checks, or our dollars, at the average restaurant, bar, or low-end (non-tourist) shop. Those that will - stay away from them, and do not offer to write a check, or pay in dollars.

The correct thing to do is to pay with cash or with your credit/debit card.

To get cash, you have multiple choices. Some are good, others less so. Getting cash (Euros) can be done before you go by going to your bank. Probably not by going to your bank branch, but to the main office of the bank. Call ahead to figure out what office you need to go to to get foreign currency. You can also get cash when you get there. You can go to an ATM, or you can go to a currency exchange. In Germany, Geldomat is ATM, Cambio is a currency exchange office. There are two parts of the transaction to which you need to pay attention. The first is the "fee" and the second is the "rate" of the conversion. Additionally, if you plan to use your ATM card in Germany, you may wish to verify that it is activated for international use. To do this you must call your issuer (bank) and authorize the card. It also must have a four digit PIN code, as the ATMs in Europe only accept 4-digit PINs for international transactions.

OK, assuming you have an internationally activated ATM card (Visa, whatever.) Which way is the better way (meaning cheapest) to get cash, or spend money? You intrepid financial reporter has done some (limited, anecdotal) research. Today's conversion rate is $1.226 for 1 Euro according to the Wall Street Journal currencies tables. This is as close to the 'real' conversion rate as you are going to find unless you are a currency trader and have access to governmental currency markets. First WARNING: this rate is the real rate, but not necessarily the rate that your bank, your credit card provider, the tourist store, or certainly the currency exhange CAMBIO is going to charge. I called my local bank (Fifth/Third,) got transferred to the main office, then transferred again to the international desk where I got some answers. My bank charges, today, $1.32 for one Euro. They say they charge no fees. Did anyone catch that? They say no fees, then quote a conversion rate that is almost 10% higher than the current rate of exchange. (The difference between the market rate of 1.22 to their rate of 1.32 = .10 or 9%) This is not a good deal! Your intrepid reporter then called his credit card issuer to find out about ATM transactions and purchases using the card. I have a Visa, but it is my 'bank' (Merrill Lynch) that I checked with. The deal: they charge 2% of all transactions (ATM and purchases) for the currency conversion. I asked about the rate - they said market rate. To verify, I asked what was their conversion rate for today. They said $1.226 to 1 Euro. That matches the published market rate for today. Verdict: Get a few Euro's, if you need them, before you go, but do most of your currency conversion over there, through ATMs and use your credit card for purchases. Remember, verify your card is authorized for international ATM and other transactions, and Oh, yeah: have an available balance on the card. Your financial reporter hoping that this advice does not leave you feeling like the Brothers Grimm.