Currency Exchange

Banks are in business to make money, period. They are not nonprofit organizations. You maybe should have been suspicious when they offered to waive the $5 fee for exchange -- you have to have known they were going to make it up somewhere. It's too bad that you didn't investigate further before making your transaction. They count on you jumping at the "no fee" thing before you ask too many questions. As for using an ATM or credit card instead, 3% is better than 8%. It's never going to be completely free.

I have always used my ATM card while in UK and other counties, but mostly in the UK. When I use my card in the UK I have never been charged a fee by the bank in the UK or my bank here. I bank at a small local bank here, not a national chain bank.

Robin, "never been charged a fee"? But how much over was the exchange rate over the interbank rate? Unless you deal with Bank of America and deal in UK with Barkleys, you are going to get charged at least 1% by the network for handling the transaction (paying the bank over there in Euro and charging your bank in $). With a lot of banks, if the deal in foreign currencies, that's more like 3.6% over the interbank rate.
Banks can advertise "no fees" real easily, because they make their profit on the exchange rate.

Looking at my bank statements and comparing ATM withdrawls in Europe with the matching exchange rate on that same day (http://www.oanda.com/convert/fxhistory) , it looks as if USAA charges less than 1% on currency exchanges. So if you use this bank (which is pretty much restricted to members of the military and their families), it looks like you can't get a better exchange rate anywhere else. Plus, they refund all ATM surcharges.

Ok, folks, we can certainly do research and try to reduce our fees as much as possible, but the bank does make a little money. Isn't it wonderful that we can have our account at home and then access it while travelling? The networks, the machines, servicing the atms, all this costs money. Consider that here in the US, every time you use a credit or debit card for a purchase, the merchant pays about 3% to the cc services processor to take your card. That merchant doesn't charge you back that 3%, but it does mean higher overall prices. People love to pull out that card for a $4 latte or a meal at McD's.

Karen, you make some very good points! There's always a cost when dealing with Banks.

Brian, I'm assuming you'll be using a different method next time? You might check Credit Unions in your area, as I've found they often have better rates than the Banks.

I normally just take about Eu$100 to get me started and then use ATM's for cash after that. It's always a good idea to have a "backup" ATM card and at least one credit card also.

Cheers!

Thanks to everybody for their sympathy and good advice. Since my posting, I researched which of my credit cards was best to use (Capital One, no transaction fee), and I opened a checking account with IndyMac Bank, which has no fee for ATM usage abroad. I even got a partial rebate from the manager at my Citibank branch, because there was a $27 discrepancy between what I was quoted for my euros, and what I was actually charged (a bit a dyslexia on the World Wallet agent's part, apparently).

In one of my previous lives I was a branch manager and trust officer for a big bank.

Banks are trying to get away from the traditional way of making money - burrowing money (deposits) at a low rate and lending it (loans) at a higher rate. For at least 15 years the emphasis is on generating as much fee income as possible by charging fees on everything. The big banks at least also insist on operating every part of the business at a profit, meaning every possible service you as a customer use will be priced for profitability.

The sad thing is, the credit unions are following the same trend (with few exceptions). They are now working to expand their base beyond their original non-profit status. Services provided by the credit unions are more likely to mimic bank services both in rate and fee structures and policy decisions.

Brian-

For my recent trip, I contacted the bank ahead of time to find out the deal for my ATM card. It was a $3 fee for each overseas transaction, but I got an excellent exchange rate.

We didn't need to do a cash advance on our credit card, but I had checked out that option just in case. I specifically got a Capital One credit card because they do NOT have a charge for using your card internationally. They only have their cash advance policy that would apply at home as well as abroad.

Karen, that 3% is a "currency exchange fee" that the bank charges you because they pay the "network" (Plus, Cirrus, etc) in Euro and charge you to convert it to dollars when your account is debited. For about 4/10%, the network will pay the ATM owner in Europe in Euro and bill your bank in USD, but the banks don't make any extra money off of it, except they do charge for an out-of-system transaction. Major banks, with foreign currency operations forgo paying the 4/10% to the network (and passing that on to you) so that they can charge you another 3% for currency exchange.

Nice guys, huh?

Lee, I am not in any way sticking up for the poor little banks. I agree with Brad that they generate way too much revenue from all the fees. I just want to point out that paying 3% for the great convenience of using an atm overseas is probably worth it. So many people get so upset about it but never think about the hidden cost for all their purchases at home. That said, as a store owner, I'd much rather pay the merchant discount fee than take a personal check. When those go bad you never see the money.

And Brian, back to your original post, you should pursue that with Citibank. With persistence you may get a little of that back.

Tom, thanks for the info about USAA--I'll have to check that out. About Bank of America, if you use an ATM at a Deutsche Bank while in Germany, you will also avoid the transaction fee. However, I believe the Deutsche Bank in Italy will charge you a fee--go figure.

Hello:

I will be taking Rick Steves 21 days in Europe come this September and have asked a lot of questions. I carry Capitol One credit card and they do not charge a fee, except the exchange rate. A Capitol One rep told me this over the phone and it says so on their website. I will use my credit card for dinners and larger purchases, but I will pay it off when I get home with the money I've saved for this trip. (no interest fees) :)

I use Wells Fargo for my banking and they will charge me a $5 fee for every time I take money out of the ATM when overseas but, they do not charge any other fee except the expected exchange rate. Of course, I will double check this with my branch manager.

I will follow Rick Steves advice and not take any money out of the ATM until I get to Amsterdam.

Hope this helps,
Angela

We live in Miami and before our trips to Europe we buy our euros at Abbott Money Exchange in Downtown Miami. I am sure your city has Money Exchange places. The rate is published and they dont charge you commissions or any other fee.
You have to provide identification, like driver license.
Dora

I still don't get why people bring money with them before arriving in the country they are traveling to. ATM machines work just fine. I've used them in Japan many times with no trouble. I usually bring a couple hundred dollars just in case of an emergency and I need to get cash and have no access to an ATM but can go into a bank. But I've never needed to do that, fortunately!