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 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 moment you pull your cash out of the ATM, 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 can sometimes pre-pay the account — check with your bank.
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
Eighteen 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). 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.
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 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 some 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.
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).
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 extra 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 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 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 |
2% ($6) |
0% ($0) |
ATM non-customer fee |
$2 |
$2 |
Total fees |
$11 |
$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 |
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 few years, banks 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.
There are different types of fees. Visa and MasterCard levy a 1 percent fee on international transactions and some banks that issue those cards also tack 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. 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. Bankrate has a good comparison chart of major credit cards and their fees.
Avoid dynamic currency conversion (DCC). Some 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 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." 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 US 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 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, 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.
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 (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.
Chip and PIN
As a fraud-protection measure, some parts of Europe (especially the British Isles, Scandinavia, France, and the Netherlands) are adopting a "chip and PIN" system for their credit and debit cards. These "smartcards" come with an embedded microchip, and cardholders must enter a personal identification number (PIN) instead of signing a receipt.
In areas where this technology is becoming standard, some merchants might request that you key in a PIN with your credit card. US credit-card companies insist that their cards should be accepted without entering a PIN, and are working on conveying this message to overseas vendors. The merchant has the ability to override the PIN request — try asking if they can press a "no PIN" or "signature" button to print out a receipt to sign. (They might ask to scan the barcode on a picture ID, such as your driver's license or passport.) However, a few merchants might insist on the PIN. For this reason, it's smart to know the PIN for your credit card (ask your credit-card company); in a pinch, use your debit card and PIN instead.
Some newer, chip-oriented pay points — especially automated ones (such as pay-at-the-pump gas stations or ticket machines) — can no longer read the magnetic strip on American credit cards at all. If this is the case, try to find a clerk to process the transaction the old-fashioned way. If the machine is completely unstaffed, you might simply find yourself out of luck. So far, no American bank has announced plans to issue chip and PIN cards (although they are being introduced in Canada).
Updated for 2009. For lots more tips, check out our best-selling Europe Through the Back Door travel skills guidebook.