How to buy euros at today's low rates for a vacation in the future

Sandra,

I started exploring this very question a few months back and, so far, haven't found a good answer. You might want to ask your broker about ETFs (e.g., iShares has a Euro ETF). Here is one write-up:

http://www.marketwatch.com/story/euro-etf-provides-hedge-against-us-dollar

However, our broker advised against going the ETF route.

Some time ago I did some consulting for a bank that has accounts for customers who want to hold a dual-currency account (e.g., Dollar-Franc ... said it was long ago! ), but that was a PRIVATE bank and the customer account balance started at a million. Opening an account directly overseas can get you 'interesting' attention that may not be worth the savings.

The good news is that the dollar has continued to improve since we first started to investigate, so 6 months hence may not find you've saved much (if anything) through extraordinary measures.

You are trying to engage in currency speculation. Nearly impossible to win at that game. Traders who have more knowledge and experience often lose. For someone like you and I it is a lose/lose game. Save money somewhere else in your budget.

I also like to hedge against currency fluctuations. Unlike your broker, I like using an ETF (FXE) since it is an easy and inexpensive trade. I do not agree that this is speculating. You decided to "speculate" in euros when you committed to the trip. Without the hedge, you do not know how much that trip will cost.

"Can I open a bank account in Euros, then use it's debit card when I'm abroad?"

Yes, you can, but not at any US bank. I have an account with Citibank, in Spain. They will open accounts for non-residents, and you get a debit card in Euros. I think you can also open a Euro account at some British banks, such as Lloyds, but they seem to have a lot of charges that go with the account -- such as withdrawal fees every time you use your debit card. Not such a good deal. By contrast, Citibank in Spain is free, as long as you maintain a balance of 3,000 Euros; otherwise, they charge you 7 Euros a month maintenance fee.

It's really a "tossup" whether this sort of thing will save you money in the long run. I think it saved me a little, over a couple of years of buying Euros off and on, when the exchange rate seemed favorable, but as others have said, currency fluctuations in general make it difficult to make much of a profit on currency speculation.

I buy my Euros from XE Trade in Canada and have them sent to my account in Spain (electronic transfer). There is no charge for the transfers, and XE Trade's rates are much better than banks.

Another way to invest in Euros, or other foreign currencies, is EverBank, in St. Louis. You can open a Euro account with them for a minimum $2,500 deposit. However, to take out the money you have to have it either wired to an account in Europe, or have them issue you a bank draft that you then mail to the European bank to make your deposit.

EverBank is mainly for investors who want to speculate on foreign currencies. They do, however, give a very good exchange rate, equivalent to what you would get at an ATM in Europe.

Douglas, I believe that our broker's objections had to do with the commissions involved cancelling gains. What has been your experience?

I use Charles Schwab online trading. I think they charge $8.95 per trade.
Using a Rick Steves like budget of 100 euros/person/day for two people without airfare, your budget for a two week trip would be 2800 euros. Recent fluctuations have been in the 10% range, so you could save several hundred dollars if the euro went back up to ~$1.50.
Of course, it might go the other way. I do not use this technique to try to profit from the (hard to predict) fluctuations, but to fix my costs and reduce uncertainty.

Now that travelers cheques are a thing of the past, AAA has prepaid Visa cards you can buy in Euros -- at least in the Seattle area. I believe there is a service charge applied to each purchase, however, but not as much as what is charged on most Visa or MC credit cards. It's something to check into, though.