Saving for vacation

I agree with Randy's analysis. However, according to xe.com, in the past 12 months the euro's value has ranged from a low of 1.1922 to a high of 1.51368 - a range of far more than 5%. If someone had timed their euro purchases correctly last year, they could have done very well. But someone timing their purchases incorrectly could have lost substantially. Do you want to gamble your savings on something this volatile?

This is a common question and the answer in a nutshell is this; Yes it is possible to do. No, it is not wise to do unless your ability to predict the future is much better than most. Converting currency always costs money, so you start out immediately behind. You are making a bet that the currency exchange will worsen, not just a little (in which case you might come out about even after fees) but a lot (in which case you would come out ahead, but only by a little. It's a fool's gamble. Most likely, exchange rates for next summer will be within 5% of where they are now, and could very well move in your favor despite your fears (wouldn't you then feel foolish with your pile of Euros). Even in a worst case scenareo then, you would be "out" only about 5% of the non-pre-paid portion of your costs. What does that amount to? Maybe the cost of a couple of dinners out?

OK, Randy answered the most complicated part of the question. To answer other parts: Nobody accepts travelers checks (or any kind of check) in Europe these days. The cheapest option is usually to get your cash from the first ATM you encounter once you land (they'll be easy to find at the airport). Unless you want to get blitzed with a huge surcharge, always pay with the local currency... in Europe...

The local currency in Switzerland is the Swiss franc and in Greece it's the euro. Use your ATM card to get cash and use credit cards if you're making a large purchase (paying for a hotel room or train tickets).

A few years ago, I had the same idea about saving Euros and Pounds in advance of a trip, and I opened two savings accounts at CitiBank in London, one in Euros and another in Pounds. Had the economic crisis not happened, I probably would have earned some significant interest on the Pounds, because when I opened the account, CitiBank was paying six percent! Then, everything crashed. The Pound took a dive (from 2.00 to now around 1.60) and the bank is now only paying about one percent interest. I don't regret opening the accounts, because they are convenient. When I go to Europe, I just use my London CitiBank card, for free withdrawals just about anywhere. But, as far as making a profit on the deal, it's not going to happen. The currency markets are too unpredicable these days and no bank is paying good interest on savings accounts, anywhere.

You should go to another cart of this web site: Graffiti Wall - (click on) Money/Communications -(click on) ATMs & Fees to see LOTS of information on how to do smart money management in Europe.

Thanks everyone for the advice, keep it coming!