Buying Euros

You can go to your bank and purchase Euros, which will cost you at least 5% in fees and exchange rates, probably more. Which means that the euro will really have to increase by - did you mean NEXT September, as in 2013? Then add in the interest lost on the money over 20 months, too. Which really makes this no different than trading currency through a brokerage account, at least then losses are deductible. Suppose you need 1,000 euro for your trip. Today, this will cost $1,266 PLUS at least another $65 in fees. Let's say that the euro costs $1.40 at the time of your trip, obtained at that rate from ATMs in Europe with no fees. You have tied up over $1,330 to possibly save $70. Maybe less, maybe more. In this example for a 3% annual gain (albeit tax free), and not guaranteed. If this makes fiscal sense to you then go for it! I don't mean to be rude with this reply, but this has been discussed ad infinitum on this board (and also on the graffiti wall), and recently. With similar answers. Consider this also - you are taking a trip that with all costs considered will amount to a few thousand dollars. Is the possible savings of a few dollars that critical, and worth the risks?

The one thing I would consider doing is making deposits and pre-payments on "for sure" lodging or tours, or on cancellable reservations . You can make the deposits or prepays via US credit card or PayPal and gather some savings while the exchange rate is favorable. I recommend a Capital One card because there are no foreign transaction fees.

I posted this in an earlier thread on this topic that is now buried a few pages back. Actually, the chance of losing money buying euros ahead of time is higher than making money. Because the purchase rate is at least 5% more than the interbank rate, the rates must improve by at least 5% or you lose money (assuming the 1-3% fees you pay using the ATM equal the 1-3% interest you lose having money under the mattress). If you wait to use the ATM on your trip, the rate would have to rise by that 5% before you lose out. And if the rate drops after buying your euros, you lose. And to put this in persective: if you plan to spend $2000 on your trip, that 5% is worth $100. If you bought euros last January (2011) for a summer trip, you would have indeed saved 5-10% and made $100-200. But if you waited until March (when rates were still rising sharply), you would have lost some money as rates did not rise more than 5% through the summer. And if you waited until May for a late summer/fall trip(when rates were at their peak), you would have lost all of your $100-200 and more as rates began dropping. The previous advice to pre-pay for things like hotels or tickets is good. But overall, no one knows what currency rates will do.

I happen to know someone who is traveling in Europe now so I'm going to gamble and have her get ~$600 worth of euros for us. I know the rate could come down even more but I'm willing to risk that since I haven't seen the rate this low in awhile. We aren't going until July and I only brought back 20 euros from our trip last summer so this is my gamble with the rate strategy for this year.

Mona - the key word you use is "gamble." That's essentially what currency speculation is. Having said that, you seem to be aware of the risks so you are making your own informed decision. How will your friend be getting the euros? From a bank? From the ATM? Or a currency exchange? Have them carefully review the rate and any fees to be sure you aren't paying more for your euros now than you would later (thus offsetting any savings).

The friend was traveling to the Christmas markets and into the new year. She carefully checked her ATM statements to know what rate she was getting plus a $5 charge (higher than we pay with our own ATM card but oh well). We all really liked the rate she was getting so we asked her to withdraw the funds for us. Still, I know, a risk to buy so early with the exchange rate hovering and dipping ever so slightly lower.

I have bought Euros thru my bank a couple of times. When the exchange rate seems favorable and I have the money I will buy 1000 or 2000 euros before my trip. There are advantages to pre-buying foreign currency: I like to have some of my trip pre-paid, and it is convenient to have enough cash when landing to pay hotels, etc for a while. Sometimes pre-buying foreign currency saves money, but if the rate goes down further "all bets are off." Having said that, I probably would not buy Euros this far in advance of a September trip. Too many things can happen between now and then.

Please, all those buying euros now report back after their trips regarding ultimate savings. For me, carefully planning an itinerary is more productive.

What if the Euro is $1.20 when you travel?

How come all of you pointing out that buying currency over here costs 5% seem to ignore how much it costs over there? A great many people have ATM cards with major banks. They all seem to charge 3% plus a fee (Wells Fargo charges 3% + $5. For a $500 withdrawal, that's 4% total). I use a local bank that charges 1% + $2 (1.4% for $500). That said, I still wouldn't play the currency exchange game. At 5% now vs 4% then, it's still biased against you. You have to win on the exchange rate change just to break even.

Maybe I'm the only one, but I really don't care about the exchange rate when preparing for a trip. If there's a place I want to go and I have the money, I go and use ATM machines for cash when there. If the rate is more favorable, great. If not, oh well. Only once when the GBP was something like 1 GBP = $1.85 did I select two Euro countries over the UK for a trip...Euro was much more favorable at the time (as it is now). I'm interested in saving money for sure and do so in lots of other areas related to my trip...just not in this area.

We are not ignoring the cost of "buying" currency over there. We are working with cards that do not charge for ATMs and give a rate surcharge of maybe .8% on the published exchange rate, so there is a large differential. I for one do not understand why someone wanting to save money (so badly that they will tie up over $1,000 to possibly save $50) does not have these cards and is willing to simply give a bank 5% or more of their money on speculation. Trade currencies with a discount broker - you will get a better rate. And prepaying a bill, such as lodging, at a favorable exchange does make sense, provided one can do it for free, as in no bank transfer costs, using a credit card with no foreign transaction fee, and assuming that the recipient is going to require the same payment whether it is cash or credit. Many smaller places will give a cash discount.

Lee - To answer your question about the fees for using an ATM in Europe, see my post above. In my analysis, I factor in the 1-3% fees charged by your own bank to use a European ATM. If you compare that to buying euros in the U.S. months in advance, those fees are essentially balanced by the "lost" 1-3% interest that money could be earning if it wasn't tucked under your mattress. You would think that those willing to go through the effort to watch currency rates and buy euros in advance would be the same ones to get a second bank account with better ATM fees that are often recommended here.

I checked what it costs me to gain euros while in the US and when traveling in the eurozone. When in the US, it's about a 5% premium through Wells Fargo. While in the eurozone, it's less than 1/2 of 1% using my Schwab ATM card, in the range of interest earned for the time in question. Bottom line at least for me is is about a 5% premium to buy in advance of a trip. Just to break even, the euro needs to become stronger by 5%. For those able to guess correctly future currency rates, have at it. Me? I'll hone our itinerary.

Gina, Probably not worth the risk at this juncture. The Eurozone has kicked the "Greek Debt Can" down the road a little bit, but at the very best scenario, is that a lot of eurozone banks will have to eat a 50% loss on their Greek debt. If Greece has an "unruly" default, (where the Greeks walk away from their debt,) they will have to absorb even more of a loss. People a lot smarter than you and me, are shorting the euro in massive numbers. (Betting it will go down.) They have actually had to put stops in place in europe to curb their own financial institutions from shorting the euro. IMHO, its going lower. But that's just me. Just your Average Joe.