Foreign Currency: when to exchange

If asked to recall my least fond memories I think going over foreign transactions in my accounting classes would rank pretty far up there. When you're used to dealing in one currency it is confusing to compare it to others. What is even more confusing is when you start throwing in questions like "If this happens does it mean the value of the dollar is getting stronger or weaker?" I would have tried to write a scenario but I haven't had my coffee yet and it would confuse you anyways.

The reason why this is confusing is because there are two different rates you are really dealing with when you exchange money. You need to understand how much 1 unit of money is worth in another currency. You also need to understand how much 1 unit of that other currency is worth in your currency. That's two different exchange rates and for many it can get confusing, especially if you're trying to determine other things like transaction fees.

To lessen the brain pain I decided to stick with one figure. How much do I have to pay in USD to have one Euro? The exchange rate is forecasted to rise to around 1.40 or so when I'm in Europe. (US dollar getting weaker) This means $1.40 US = 1 Euro. Currently the exchange rate is at $1.33. Most of this trip is going to be covered in cash so I need to get a pretty firm grasp on what the best options are for me and how to save the most money. Pennies don't sound like they matter but when you have about a few thousand dollars they really do add up!

My options:

US Bank
I called up my bank to see how much of a fee they might charge as many can charge percentages of what you are withdrawing and they actually said "we own all the ATMS in Europe so there is no fee, only the ATM fee". I am not 100% sure I believe this claim but I'd like to at least trust that my bank won't charge me a fee.

The plus is that banks usually have some of the best foreign exchange rates so I know that I'll be getting as close to my money's worth as I can on the day I withdraw.

The problem with using the money in my bank is that it will be intermingled with the other money I have in there that I need to use to cover automatic withdrawals for student loans, car payments, and other bills during the month. The least amount of thinking I have to do with money on this trip the better. I'm already going to be managing my work's two bank accounts.

Credit Cards
I have a plethora of credit cards but all of them but one charge foreign transactions fees. They charge anywhere from 1 - 3% and if I did a cash advance they also charge a 3% fee for that plus a ridiculous APR tacked on for the balance. There's no need for me to take a cash advance on a credit card, thankfully.

I've never used it until now but I have a Capital One credit card that does not charge any foreign transaction fees at all so I will be using them for one or two of my bigger transactions. I don't anticipate charging any more than two hundred euros on this account, but it is nice to know that they do not have any fees. I will not need any other credit cards.

Travelex

Travelex offers to exchange money before you leave. I will need some Euros in my hand when I get there so I will need to use their services. However, if you exchange under $500 there is a fee and the rate is awful. They are, of course, making money this way but they are taking about 13%. Currently 1.53 USD = 1 Euro. This means you are paying .20 more for each dollar. Ouch! If you exchange over $500 they give you a much better rate but I can't remember what it was as they offered me the option to purchase something called a cash passport card.

The Cash Passport Card is just like a prepaid debit card. It has a Mastercard or Visa logo on it and you can use it at any bank to withdraw up to 700 euros a day. The transaction fees are 1.75 euros for each ATM withdrawal. There are no foreign exchange fees since the money on your account is loaded in the foreign currency.
You can use it at any place that accepts credit cards as well. The money is loaded in the currency of your choice (currently I think they only accept euros, pounds and us dollars) so it is locked in at the rate given on the date of purchase. As long as you spend over $500 they are currently offering 1.40 USD = 1 Euro.

After giving it some consideration I've decided to load my money onto one of these cards. I am not getting the best exchange rate but if I wait until I visit in May to pull money from the banks over there the exchange rate is forecasted to be on par with what they are currently offering. Travelex also offers online access so I can see how much I've spent and they also have 100% fraud protection. If it is stolen they Fed-Ex a new card to you overnight for free to wherever you're staying. I would like to keep my money separate and this is a good way. All ATM fees are fixed so everything is predictable. I'd like to keep the least amount of money on me as possible but ensure that the money I do have is safe. The main reason why I chose this card though was so I wouldn't have to worry as much about the exchange rate fluctuations.

For the math geeks:

Overall I am losing about $86.
2860 x .741 = 2119.26 - this is what I'd receive in Euros at the real 1.33 exchange rate

2860 x .711 = 2033.46 - this is what I will receive in Euros at their exchange rate

Hopefully my calculations are correct.

So, today I took the day off work to run a few errands and this will be one of them! I've also got to dispute a parking ticket ($80!!) and try to get it reduced. Wish me luck!

Everything is ready to go!

This morning I finalized everything for my trip and it feels awesome! I leave 7 weeks to the day and it's pretty exciting to know it's coming up so soon. All train tickets, bus rides, hostels, B&B's, apartments and plane tickets are booked.

The total cost for 5 weeks of lodging Europe came to 860 euros, which is about $1175 USD currently ($33.57/US a night). I know I could have saved more money if I hadn't booked 2 apartments but it's a vacation! I've also had a few friends tell me they know friends in some of the cities I'm staying but I haven't heard any more details besides "I know someone who lives there!". I bought deposit insurance for $1 for each hostel in case something comes up last minute and I find cheaper or better lodging. It would be really nice to spend some time with locals and friends of friends so I'm keeping my fingers crossed.

The exchange rate has dropped about 10 cents to the dollar since December (1 euro = 1.36 USD. In December it was 1.46) so I'm considering calling up my bank to see what rate they are using and exchanging some money once I'm able to cash a check my awesome dad gave me for Christmas. Exchanging money also makes it a lot harder to spend here. Linette loaned me a really comfy money belt so I feel a little better knowing that I may be carrying a little bit of cash. Because I'm clumsy though, most of it will be left at home in my bank account to withdraw over there.

For this trip I decided to cash in my 401K that has been sitting at another company since I left in 2007. There has been talk of charging me a few hundred a year to manage this account and since it's under $2,000 it really seems pointless to keep it there and lose money. I could have rolled it over to my own account but I'm still an irresponsible kid at heart who needs any and all the monetary resources available to me for this trip. My birthday is in June but I think some family members might be giving me an early b-day gift to help with costs, which is really sweet.

So, now it's a waiting game! I can focus more on the sights I want to see and wait patiently for my passport to be delivered. I am a member of REI and have a nice dividend coming to me at the end of this month which I can use to purchase some travel gadgets/gear. I know I want one of those lightweight super absorbent towels, 3oz bottles for soaps, a compass and some of that awesome space Neapolitan ice cream just cause they sell it there. Also, a padlock or two for the lockers. And personalized business cards with my name, picture, email and Facebook info to give to new friends. Oh, there are so many things but it's really exciting to be in the home stretch and gathering my final items. REI also has some amazing lightweight pants that are flattering that I may splurge on if my budget allows (they are $55). I've got plug adapters coming and may need to get a voltage converter for my hair straighter. It's the only girly thing that I really am going to give in and bring besides a small amount of make-up. For some reason I feel slightly less grody when I straighten my hair if I haven't had a chance to shower for a day or two.

For fellow travelers reading this blog, what are some essential things I should put on my list to bring?