It is late in the year for summer vacations, but a number of folks travel in the fall. I just return from a trip to Niagara Falls where we stayed on the Canadian side of the border. I did not give a lot of thought to the financial implications of the trip before we left, but I did some last-minute checking and learned some things I did not know. If you are taking a trip abroad or to Canada or Mexico, hopefully some of things will help you.
First, understand the way to ensure you get the best deal on exchange rates. In Canada, all the merchants were willing to accept US currency, but they would not give you full value. For example, one US dollar on Aug. 17 yielded $.9885 Canadian dollars. Some merchants were willing to give us $.91 or $.92, which represents an 8 percent discount. This was easy profit to the merchant and is completely legal. Mind you, this is on top of the 12- to 13-percent tax you pay on every purchase.
Most hotels will also exchange currency for you, but may charge you 5 percent for the convenience. This is better than dealing with a merchant, but not by much.
Second, be aware of how your credit card company treats international purchases. What I found with my cards was that all international purchases were tagged with a 3 percent surcharge. I did research and it seems hard to get around this. The one benefit of using the card is that you do not take a hit on the exchange rate. You can find some that do not charge a fee for international purchases, but it can be a challenge.
Third, you can exchange dollars for the foreign currency before you leave, but you should only exchange an amount that you are comfortable carrying around. You have to keep in mind that many foreign countries are in desperate financial straits (Ireland, Italy, Greece, Spain and many others). You have to be on constant alert that people may be looking to pick-pocket you.
Finally, before you leave on your trip, contact all your credit cards (the ones you are taking with you) to let them know exactly where you are traveling. Otherwise, you may find that your purchases will be rejected for suspicion of fraud. Another often-forgotten thing is your cell phone. Some carriers will allow you to purchase international coverage for an incremental fee for your time abroad. Unfortunately, my carrier did not and because Canada is out of my coverage area, it cost $.59 per minute or each call and $.25 cents for every incoming and outgoing text. We kept our phones off during our two days, as this would have cost us fortune just for the texts alone.
The views expressed are not necessarily those of Cambridge and should not be construed as an offer to buy or sell any security.
Jim Heisler, CFP®, CDFA™, CASL™ Family Wealth Services, LLC 8725 Frankford Avenue Philadelphia, PA 19136 firstname.lastname@example.org 215-332-4968