Money 101
Types of Cards
An ATM card is issued by your bank and draws money directly out of your bank account. It does not have a credit-card company logo (such as Visa or MasterCard), which makes it less widely accepted. Most ATM cards have a logo on the back for either Plus (affiliated with Visa) or Cirrus (affiliated with MasterCard). You'll have to look for an ATM with a corresponding logo to be sure it'll work.
A debit card (sometimes called a "check card") works the same way (it's issued by your bank, and draws cash from your bank account). However, it's more versatile because it has a credit-card logo (such as Visa or MasterCard), which means it can also be used for making purchases. This is the best option for getting cash in Europe. In a pinch, debit cards with a Visa or MasterCard logo can be used for over-the-counter cash advances (with a fee) at banks that accept those credit cards. Note that you can also buy prepaid debit cards — which you load with funds before your trip, then use like any other debit card — but these come with their own high fees, and aren't worth considering for most trips.
A credit card does not draw money from an account; rather, you are billed at the end of each month for any purchases or withdrawals you've made with it. Most credit cards work in ATMs (provided you know the PIN code) — but you're technically getting a cash advance, which is expensive. The second you pull your cash out of the ATM, you're immediately 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 can pre-pay the account.
Some European countries are beginning to introduce credit and debit cards with embedded "smart chips." You may see signs or keypads referring to this new technology. For example, British cardholders must enter a PIN in order to use new chip-embedded credit cards in retail stores. But non-chip cards, such as those used by most tourists, will still spit out a receipt for you to sign.
By Rick Steves
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.
Euros
Fifteen European countries — and more than 300 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, and Switzerland. Each of these countries has its reasons for choosing not to use euros. Other countries, which have only recently joined the European Union — such as the Czech Republic, Poland, and Hungary — will adopt the euro in the next few years.
But 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.
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 pay more.
Before you go, confirm with your bank that your card will work in Europe and alert them that you'll be making withdrawals while traveling — otherwise, the bank might freeze your card if it detects unusual spending patterns. Some banks automatically block US debit card use in certain countries — including the United Kingdom — to protect against fraud. (Credit-card companies do the same thing — inform them of your plans as well.) You don't have to tell them specific dates you'll be away. Just saying you'll be in France in July is sufficient.
ATM transactions using bank-issued debit cards come with various fees. Your bank may levy a flat $2–5 transaction fee 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 US 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.
Note that if you use a credit card for ATM transactions, it's technically a "cash advance" rather than a "withdrawal" — and subject to an additional cash-advance fee. If you plan to use a credit card rather than a debit card for ATM transactions, ask the issuing bank about all the associated charges.
Since European keypads have only numbers, you will 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.
Ask your bank how much you can withdraw per 24 hours. Note that foreign ATMs may not let you withdraw your daily limit. Many machines have a small maximum, forcing you to make several withdrawals and incur several fees to get the amount you want. When choosing how much to withdraw from a cash machine, 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, don't take it personally. Try again, requesting a smaller amount. Few ATM receipts list the exchange rate, and some machines don't dispense receipts at all.
In some less expensive 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 Kč instead of 3,000 Kč). If the machine gives you big bills anyway, go immediately to a bank to break them.
If you're looking for an ATM, ask for a distributeur automatique in France, a cashpoint in the UK, 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.
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 |
3% ($9) |
0% ($0) |
ATM non-customer fee |
$2 |
$2 |
Total fees |
$14 |
$7 |
| $600 credit-card purchase | ||
Bank A |
Bank B |
|
Visa/MC intl. trans. fee |
1% ($6) |
1% ($6) |
Bank currency-conversion fee |
2% ($12) |
0% ($0) |
Total fees |
$18 |
$6 |
Cash-to-Cash Machines
There are 24-hour money-munchers in big cities all over Europe. These machines look like ATMs, but you feed in cash instead of a card. At midnight in Florence, you can push in a $20 bill (or any major European currency) and, assuming the president (or royalty) is on the right side, the correct value of local currency will tumble out. They are handy, open all the time, and usually offer bad rates. These are a novelty, useful only if you want a new experience or if you're too tired to find a regular cash machine.
The Sleaze of Fees (And How to Avoid Them)
Recently, travelers returning from Europe have opened their mail to discover they paid more for their trip than they thought they had. Over the last couple years, 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.
There are different types of fees. For years, Visa and MasterCard have levied a 1 percent fee on international transactions. Recently, some banks that issue those cards are tacking on an additional 1–2 percent. These are often called "currency-conversion fees" or "foreign-transaction fees." For details on fees associated with using your card for ATM withdrawals, see "Cash Machines (ATMs)," above.
So, how can a smart traveler avoid (or at least reduce) these fees? Here are a few suggestions:
Ask about fees. As of 2006, banks are required to break out international transaction fees as line items on your statement, helping you to see exactly what you're paying. Even 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 what fees come with using their card overseas. Even if your card charged no fees the last time you went to Europe, there's a good chance it does now. Call and ask.
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. Capital One has a particularly good reputation for no-fee international transactions. If you're going on a long trip, do some research and consider taking out a card just for international purchases.
Avoid "dynamic currency conversion." Some merchants — capitalizing on the fact that many Americans are intimidated by unusual currencies — cheerfully charge you their prices in dollars. This seems 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 inter-bank rate). To make matters worse, even though you're paying in "dollars," your credit-card company may still levy its 1–3 percent "foreign transaction fee." Some merchants may disagree, but according to Visa, you have the right to decline this service at the store and have your transaction go through using local currency. Your transaction will then be converted by Visa or MasterCard at or near the more favorable inter-bank 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 US. You might be able to bypass the fee if the vendor has a US office (in which case, call the US 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, try to use a card with the lowest possible international fees, and insist that your transactions be charged in the local currency — not dollars. Then smile and enjoy your trip, feeling very clever for avoiding so much unnecessary expense.
Buying on Plastic
Credit cards work fine throughout Europe (at hotels, larger shops and restaurants, travel agencies, and so on), although more and more merchants are establishing a $30 minimum. 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 the right kind of card. But there are plenty of fees involved (typically about 1–3 percent per transaction). Also, realize that you're buying from businesses that have enough slack in their prices to absorb the fees the credit-card company charges the merchant (2–5 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. Fully aware of the percentage they lose, merchants and hoteliers — particularly in southern Europe — sometimes give you a better deal if you offer to pay with cash instead of a credit card (cash payments also allow them to avoid reporting — and being taxed on — all their income).
I use my credit card for booking hotel reservations by phone, making major purchases (such as car rentals and plane tickets), and paying for things near the end of my trip to avoid another visit to the ATM. But a dependence on plastic reshapes the Europe you experience. Pedro's Pension, the friendly guide at the cathedral, and most merchants in the market don't take credit cards. Going through the Back Door requires hard local cash.
Updated for 2008. For lots more tips, check out our best-selling Europe Through the Back Door travel skills guidebook.