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Tips for getting the best exchange abroad

Planning a European vacation this year? “Today” financial editor Jean Chatzky offers advice on how to stretch your dollar.
/ Source: TODAY

More Americans look to be traveling abroad this summer, according to an AAA study that shows international air bookings this summer, with more than 25 percent increases to both Europe and Asia. Unfortunately for those otherwise lucky tourists, it's going to cost them. The dollar's decline means that in many places, such as Europe, our buying power has decreased.

How do you make every dollar count? Start by making sure you exchange currency in the best way possible. You likely shopped around for the best priced airfare, hotel deals and tourist packages. Why throw away money on exorbitant fees and lousy exchange rates?

Here's what to do to get the most value from your greenback:

  • Know the exchange rate. This is the most important thing you can do, says Amy Ziff, editor-at-large for Travelocity.
    It gives you the power to determine when you are getting a good deal or ripped off. You should generally avoid currency exchange booths in popular tourist destinations, such as airports and train stations, because they do not offer the best exchange rates. Instead, favor local banks and sometimes hotels. There are always exceptions (some hotels offer bad rates), so, again, the best tool you can have is the ability to calculate for yourself if the deal you are being offered is sweet or sour.
    Also keep in mind: The more you exchange the better a deal you can swing. So change enough money for at least a few days per shot. This also prevents you from paying the flat fee multiple times that some companies charge each transaction.
  • Use ATM cards for cash. Just as you get a better exchange rate if you change more money, by using an ATM you're basically cashing in on the fact that your bank is trading currencies in larger amounts. “That makes ATM exchanges some of the best rates you can get,” says Ziff. 
    Note: Be aware when using foreign ATMs ... some machines include numbers only on their key pads and no alphabet letters (or the alphabet is different). So make sure you know the actual numbers for your pin. Some international ATMs also do not recognize pins larger than four digits. If your pin is longer than four numbers, ask your bank if you can switch to a four-digit pin.
    Finally, you also must alert your bank (and credit card companies) that you are traveling abroad. When they notice what is deemed suspicious activity — transactions in international places — they sometimes freeze your money. That would quickly put a damper on your vacation.
  • Charge larger purchases. For reasons similar to ATMs, credit cards usually provide good exchange rates. Just beware of fees.
    “Recently travelers are opening their mail to discover they paid more for their trip than they thought they had,” says Rick Steves, author of more than 25 European travel books and host of the public television series “Rick Steves' Europe.” “Over the last couple of years, banks have dramatically increased the fees they charge for oversea transactions using credit cards. So even if your card charged no fees last time you traveled abroad, there is a good chance that it does now.” Steves notes that there are different types of fees. Visa and Mastercard have charged a 1 percent fee on international transactions for years. But now banks are adding another 1 to 2 percent, usually called “currency-conversion fees” or “foreign transaction fees.” So before you go, find out what your credit card charges. You will likely have one card that is more favorable than the rest. Also, use your credit card in ATM machines for cash advances only for emergencies. Cash advances are generally charged much higher interest rates than purchases. 
  • Pay with U.S. dollars. Finally, be aware that in many countries you can actually pay with dollars. They are so highly coveted that locals may actually prefer them. But if you're going to take this route it is again, imperative to know what currency is worth. When locals translate their prices into dollars, they may give themselves (not you) the advantage in each transaction. Have fun — and happy shopping.

Jean Chatzky is an editor-at-large at Money magazine and serves as AOL's official Money Coach. She is the personal finance editor for NBC's "Today Show" and is also a columnist for Life magazine. She is the author of four books, including "Pay It Down! From Debt to Wealth on $10 a Day" (Portfolio, 2004). To find out more, visit her Web site, .