Venezuela’s late socialist leader Hugo Chavez set money controls a decade ago that have caused a wacky system of disparity between official and black market rates for local currency. One result has been flights out of Venezuela booked for months in advance as locals take advantage of a loophole to gain financially.
In Venezuela, the disparity between the official and black-market rates for the local bolivar currency is insane. It sells on the illegal market at about seven times the government price of 6.3 to the dollar. To compound the problem, there are strict limits on the availability of dollars at the 6.3 rate.
But a special currency provision for travelers with a valid airline ticket allows Venezuelans to exchange up to $3,000 at the government rate. The result has sold out planes flying half full, tickets bought by Venezuelans who had no intention of traveling. Others are exchanging currency, easily paying for their travel via the financial gain afforded by the special travel provision.“It is possible to travel abroad for free due to this exchange rate magic,” said local economist Angel Garcia Banchs in a Reuters report.
Better yet, those actually flying take credit cards abroad to get a cash advance, bringing back dollars to sell on the black market for about seven times the original exchange rate.
To International travelers, the name Travelex should sound familiar. They are the largest airport currency exchange operator in the world. But a recent currency exchange study comparing the cost of using Travelex, some of the largest U.S. banks and credit cards revealed what experts already knew.
CardHub’s 2013 Currency Exchange Study compared the cost of the currency exchange services offered by 15 of the largest banks in the U.S. as well as Visa, MasterCard and Travelex. The study proved that using a no foreign fee credit card is the way to go on spending internationally. Banks charge an average of exchange rate of 7.1% and Travelex charges 15.5%.
Worried about using a credit card outside of the U.S.? Don’t be. Credit cards also provide fraud protection for just that reason.
“Even if a consumer uses a credit card with foreign fees – the average foreign transaction fee is 2.24%, according to CardHub’s latest Credit Card Landscape Report – he’ll still save 4.86% on currency conversion relative to the services offered by banks and 13.26% compared to airport currency exchange providers,” said CardHub CEO Odysseas Papadimitriou in aHeraldOnline report.
The best banks for currency conversion? The CardHub study indicates Northern Trust and Harris Bank lead the pack as they did in the 2012 and 2011 editions of the study while U.S. Bank and SunTrust hold the bottom two spots. On average though, banks are better than Travelex, saving an average 8.4%.Still, many travelers do not feel like they are fully packed for an international trip without some local currency from the country they are visiting. They want to arrive with local cash for a cab, food or supplies they may not have been able to bring on the plane.
“It’s just one of those things that have been traditionally recommended,” says Papadimitriou. “But with the banking system becoming increasingly digital, it makes sense that the easiest way to buy things in a foreign currency is with plastic.”
Credit cards are good. No foreign fee cards are better. Still, some cash will probably be necessary along the way tipping or making purchases in places that do not take cards. With that in mind, Papadimitriou recommends a debit card with low international ATM withdrawal fees but warns travelers to avoid dynamic currency conversion, when a merchant offers to convert your purchase total from the native currency to U.S. dollars.
It might seem as though that merchant in Venice is trying to be help make sense of how much a purchase really costs, in our own currency, but “they could be looking for an excuse to apply a high exchange rate and squeeze a bit more money out of you. It’s best not to find out, especially when you can use your phone or a small pocket calculator to make quick conversions and better understand how much things cost,” says Papadimitriou.
As long as we’re talking about financial security when traveling, what about pickpockets? Well, the days of those villains are ending. In this video we see that all it takes now is a smartphone to steal your credit card information.
I’m a huge sports fan and no matter where I am in the world, my morning routine always involves combing through box scores, standings and tournament draws. But as soon as I get my sports fix, I turn my attention to the fate of the U.S. dollar. Nearly every weekday, I check to see how our currency is faring against the Euro, and other currencies of countries I might be heading to.
I’m currently in the middle of a three-month trip to Italy and Greece, two of the sickest economies in Europe, so Wednesday’s news that the Euro had sunk to just a 25 percent advantage over the U.S. dollar, a two-year low, had me in a celebratory mood. Yes, I do feel bad for people suffering from the economic crisis that has paralyzed Greece and threatens to do the same to Spain, Italy and perhaps other European countries, but I’d be lying if I didn’t admit that I was rooting for the Euro to crash just as vigorously as I root for the Bills, Sabres and all my other favorite sports teams.
I still remember the good old days when the U.S. dollar traded higher than the Euro, and as someone who has lived in and spent quite a bit of time on the continent over the last decade, I’ve been frustrated by the U.S. dollar’s slow downward spiral in recent years. When the Euro dipped below 30 percent recently, I assumed it would creep right back up, as this has been the usual pattern over the last year, but it keeps going down and I couldn’t be more pleased.
Yes, I know that a strong dollar is bad for U.S. exports and for our economy more broadly. But I’m still rooting for our currency. Am I selfish? Absolutely, but here’s hoping the dollar continues its comeback.
A lot of travelers stop by the United Kingdom as part of a European trip, but they have the problem of what to do with their euros when they are in a land that uses pounds.
This is becoming less of a problem, according to a report by the BBC. More and more businesses are accepting euros as well as pounds in an effort to attract tourists. Shops, restaurants, even hotels are accepting euros. I noticed this trend several years ago in London, but it has spread across the country now, and is gaining ground in places like Northern Ireland towns that want to draw in shoppers from the Republic of Ireland, which uses euros.
There are some limitations, however. Most places only accept banknotes and give change in pounds. Also, the exchange rate may not be all that good, although the little town of Dunster is offering a one-to-one rate, a great deal considering that in a bank a euro will only buy you 85 pence, minus whatever fee they slap on you.
But before you whip out your euros in the Green and Pleasant Land or Emerald Isle, be careful. Some places defiantly stick to the pound. I’ve even seen signs telling in no uncertain terms that euros are not welcome. For the UK, integration with the Eurozone is still a long way off.