NEW YORK (MainStreet) — A stronger U.S. dollar against foreign currencies is making it easier and less expensive for Americans traveling abroad of late (especially in Europe), with economists expecting that trend to continue this summer.
Take the dollar versus the euro, where Americans wandering around Europe are getting 22.39% more euros per dollar this year relative to 2014, thanks to the dollar's recent strength, according to CardHub's most recent Currency Exchange Study.
That currency gap can make a big difference on your summer trip to Paris or Brussels. CardHub notes that saving 15% on a weeklong European vacation, which runs the average family of four around $4,000, will equate to an extra $600 in your pocket. "That's the equivalent of staying an extra night, or perhaps even opting to fly first class," the report says.
Even with the favorable rates, where you convert currencies can make or break savings overseas. For example, CardHub reports that while the overall cost of converting currency at a national bank has decreased 13% on average from last year, and currency services provider Travelex has also seen an 11% price drop, credit unions are now charging 10% more than in 2014.
While currency exchange options (and rates) are all over the map, there are savings out there once you look.
One of the best ways to save on currency exchanges is via a no-foreign-transaction-fee credit (Visa and MasterCard offer them to U.S. consumers). As the average bank fee for converting the dollar to foreign currencies stands at 5.88% (and 9.05% at Travelex locations), paying for goods and services on a no-fee credit card is a good deal for overseas travelers.
Of course, financial experts and regular foreign travelers have their own ideas on how to best curb currency transaction costs in overseas bourses.
"I travel abroad regularly, and I don't ever exchange money," says Susan Shain, a San Diego freelance writer and travel blogger. "I've learned from traveling abroad, banks and currency services charge way too many fees." Instead, Shain uses a Charles Schwab debit card, which not only does not charge ATM fees overseas — it refunds them directly to her bank account.
"I also use my Chase Sapphire Preferred card, which doesn't charge a foreign transaction fee and offers great travel rewards," Shain says.
Steven Knight, a foreign currency analyst at Blackwell Global Investments in Auckland, New Zealand, who travels around 70,000 miles annually, says your destination can make the most impact on your wallet. "Getting the best foreign currency rates typically depends on where you are traveling to in the world," Knight says. "Through my travels, I've found that the rates I get in Asia typically far exceeds what banks in New Zealand or Australia, for example, are offering."
Knight's best advice to cut currency costs is to think about it early — before hitting the highways and skyways. "Typically when I travel, I do a quick appraisal of the currency charts and see which way the trend is heading and whether I'm likely to be securing currency now or closer to my travel date," he says. "I normally never buy currency from a bank due to the aforementioned spreads. I'll either arrange to lock in a currency price through one of the foreign currency exchange services that provide it for travelers, or I'll get it on the ground from an exchange booth."
When you get back home and have all those extra euros or British pounds in your pocket, don't toss them into your desk drawer. Instead, get a good return on the dollar through services such as Leftovercash, which turns leftover foreign currency (including foreign coins) into retail gift cards and donations to worthy causes via ATM-like kiosks. "Our kiosk can handle up to five foreign currencies together in one transaction for just $3.99," says Ferdinand Poon, founder of Leftovercash. "When a traveler returns from a European vacation, for example, she can recycle her leftover euros, British Pounds and Swiss Francs all in one transaction."
— Written by Brian O'Connell for MainStreet