Settling your debts abroad

(Second of two parts)

In the last issue I analyzed the ins and outs of bill paying abroad. In this issue, I offer additional suggestions on this topic.

Debit card checklist

Once you have acquired your debit card, it is helpful to do the following.

1. Ascertain the expiration date of your plastic money (the same holds for credit cards).

2. Be sure that you have a PIN — which is furnished by your bank — that consists of four digits and no letters. If you don’t have the correct one, have it changed. This often is done anonymously by phone so that nobody will know what your PIN is.

3. Make sure your PIN works properly by using it in a store, obtaining money from an ATM in the U.S. or having it checked at its issuer.

4. If possible, take two debit cards, each with a different number, since the maximum you can obtain from a machine on one card usually is limited. (This also is helpful in case one gets misplaced.) Decide beforehand how much currency you want to withdraw.

5. For ATM locations, check with your financial institution or consult the Web. For Visa, go to www.visa.com and for MasterCard®, Maestro/Cirrus®, type www.mastercard.com.

6. Before picking up money at the airport (usually a good idea), pinpoint the placement of its cash machines on the Internet airport diagram. Otherwise, ask somebody for help upon arrival.

7. Memorize the translation of the word “ATM” in the foreign language. You can obtain this information from a phrase book. A suggestion — before buying a phrase book, make sure that the word “ATM” or “Automatic Teller Machine” is listed in either its money section or in its dictionary. (Every good phrase book will have a dictionary in the back of the book.)

ATM user tips

To find an ATM once you have settled in, ask your hotel for help or look for its signs in the native language. You may encounter words such as Geldautomaat (Holland), Multibanco (Portugal), Carte Bleu or Carte Bancaire (France) or Bancomat (Italy).

1. Check that the dispenser shows the logo listed on your card, although that does not guarantee that you will be able to access the machine. If you have difficulty finding an automated teller that will accept your plastic, ask any bank clerk where you should go.

2. To prevent fraud, before inserting your card, feel along the inside edge of the machine for anything that may prevent it from being returned. Next, insert your plastic and, without entering your PIN, press the “Cancel” button, the one with the red square. If your card is returned, it should be safe to proceed with the withdrawal. Note that in a number of ATMs in Turkey, the dispenser may retain your plastic until you press the “Intal” (Cancel) button.

3. If you have trouble with an automated teller, try it no more than twice to prevent your plastic from being swallowed by the system.

4. For safety, use an ATM inside a bank. Don’t accept help from strangers, and put your money away immediately, without counting it. Extract your proffered currency instantly from the dispenser, since, if you tarry, the machine may repossess your bills (this happened once to me).

5. In certain countries, automated tellers may be open only during business hours. In Italy, for instance, Banc­omats often are closed during siesta. To find out whether you can withdraw money, look for a small, lit-up sign, which will either say “Aperto” (Open) or “Chiuso”(Closed).

6. Don’t waste precious vacation time hunting down the cheapest ATM.

Credit card considerations

After discussing debit instruments at length last month, I would like to devote a short section to credit cards.

1. Credit cards obviate the need to carry a large quantity of cash. They protect your investment when you’re shopping, in case of a merchant’s default or a disputed amount. They may extend the warranty on certain purchases. They postpone the day of reckoning — important if you owe a large sum. Keep in mind, though, that businesses abroad may add a surcharge on payments other than those in cash.

2. Never use a credit card for a cash advance, since you will owe a finance charge and interest.

3. Arrange for automatic monthly withdrawal of the amount owing from your checking account.

4. While traveling, carry two cards, each with a different number.

5. Before departure, notify the issuing company of your whereabouts, so that charges in faraway places will not trigger suspicion of fraud.

6. Choose a card that will provide you with frequent-flyer mileage on your preferred airline (difficult nowadays with so many airlines in or near bankruptcy). Other considerations in choosing a particular firm’s offering are its annual fee, its interest rate and other applicable costs. While the bank may waive its annual assessment upon request, the fee on frequent-flyer programs usually is not negotiable.

Note that Diners Club, which is now associated with MasterCard, offers nonexpiring mileage on many airlines.

7. Credit cards are indispensable for car rentals, since every company requires one in the name of the driver. If practicable, prepay your rental in U.S. dollars, which locks in the rate and obviates bank charges. (The disadvantage of this is that upon arrival you are stuck with the company, unless you get permission in writing to cancel at no cost.) Alternatively, you could use plastic at the beginning of the rental and settle with cash upon termination.

8. Charge cards are also required to guarantee hotel reservations, especially when arrival is after 6 p.m. Although many establishments like to make an imprint of your plastic when you check in, you are free to settle with any legal means you wish at checkout. This frequently is a good way to get rid of leftover local cash before traveling to a different country, where foreign banknotes may be negotiable but alien coins are rarely accepted.

9. While a number of toll superhighways accept debit and credit cards as payment, carry cash for eventualities, such as the occasional French autoroute exit requiring cash.

Travelers’ checks or dollar bills?

In a country with an abundance of ATMs, should you still take travelers’ checks, dollar bills or euros as a backup? The answer is yes, since you may not always find a cash dispenser when you need one or, worse, the people stocking the machines may be on strike, which happened in France a few years ago. It also is possible that the contraption will swallow your plastic (fortunately, this has never happened to us).

All bank branches that handle foreign exchange transactions accept travelers’ checks and banknotes, but not all take debit cards.

What should you take: dollar bills, euro notes or travelers’ checks? Carry the ones that will give you the best exchange rate. For details, read the guidebooks (the Lonely Planet guides have the best information, in my opinion).

Travelers’ checks

Take travelers’ checks in U.S.-dollar denominations (free at certain savings banks and credit unions and at AAA for members). Avoid the ones issued in foreign currency, which usually carry a higher price. Many hotels will not accept travelers’ checks even in their own currency.

Keep a record of the drafts in a separate place. Find out where to go if you lose them.

Carry only large-denomination checks ($100, $500 or $1,000) if you are going to stay in one country for a long time.

Exchange as much as you think you will need, since you will pay a commission for each conversion. Some offices charge, in addition, a per-check service fee. Therefore, it is usually more expensive to exchange five 20-dollar drafts than one 100-dollar check.

In certain countries, you will need, besides your passport, a purchase receipt to conclude the transaction.

Do not take the dual-signature drafts. Merchants and financial institutions overseas often do not understand that only one autograph is required.

American Express travelers’ checks are the most widely accepted.

Dollar bills and euro notes

Take greenbacks and/or euro notes in various denominations when visiting a country that has no ATMs and where the rate for cash is better than that for travelers’ checks.

Carry brand-new one-, 5-, 20- and 100-dollar bills when traveling to developing areas where the use of plastic money is not well established.

Where to convert dollar bills or euros

In most areas of the world, you get the best value for your money at banks. If these are closed, go to the railroad station or post office or try hotels.

In a few countries, such as Chile, exchange houses offer a better return. However, in many nations these establishments deceptively advertise a good rate, one which in effect is nullified by a large commission and service fee. Alternately, they may display signs saying “No commission” and proffer you an abnormally low conversion rate. Always find out beforehand the amount of currency you will receive.

Occasionally, hotels will offer you an exchange rate that is only slightly less than the one available at financial institutions, something we experienced in Bangladesh and Costa Rica.

Avoid frontier exchange bureaus, since they generally offer a poor return. Take your business to the bank in the nearest town (if there is one), but make sure the branch is not closed for lunch or for its weekly day of rest.

General recommendations

• If it makes you feel more comfortable, obtain just enough foreign cash to tide you over. This can be obtained from U.S. financial establishments or from exchange facilities at the airport from which you are leaving.

• If possible, plan your arrival at a time at which you have access to money-changing facilities, local tourist offices and stores to buy supplies.

“Smart” cards

I would like to add to the above discussion a small section on so-called “smart” cards, which are cards with an embedded microchip that can store cash.

They have been tried for years in various countries, including the U.S., but have never taken off.

The exception is the Netherlands, where the Chipknip is ubiquitous. This electronic pass is used to pay for small expenses (up to €15) at such venues as vending machines, public transportation, parking meters and pay phones. Businesses love it.

It is eminently practical. You insert the credit card-sized pass in a special reader, the seller punches in the amount and you click “OK.” Since the card is anonymous, there is no danger of identity theft. You can load up the pass at any bank or at other designated locations. Like cash, when you lose it, anybody can use it.

Happy savings!

Dr. Wagenaar welcomes questions but may not be able to answer them individually. Write or email him c/o ITN.