1. Know Your Exchange Rates
When you are starting to plan your trip, you typically start by setting a budget. And if you don’t — well, you probably should. However, with your budget, you must consider the current exchange rate. Depending on where you travel in Europe, the US Dollar may be stronger — or — more frequently, weaker than the foreign currency of the country you are traveling to. Therefore, you must budget according to what your trip will cost you in US Dollars + the exchange rate.
For example: Many European countries are on the Euro. This includes Spain, France, Belgium, Germany and Italy to name a few. The exchange rate is currently 1.15. This means that $1.15 USD is equal to 1 Euro. So if you plan to have a spending budget of $500 — that means spending €435
2. Get Cash
When you prepare to travel, the best and most cost efficient way to get local currency is by pulling from your ATM card. Even if there is an ATM withdrawal fee, it will still be better than exchanging your money at an airport or other exchange depot. By doing this, you get your monies at the official exchange rate.
Bet you're thinking: "There isn’t a 'fee' when I exchange at the airport.”
This is a common misconception. When you exchange cash at an airport, although it may be true that there is no “fee," it’s because they charge a service fee within the exchange rate. The official exchange rate may be 0.87, however, when you exchange at airports, they add another 8% on average. That means that the “new” exchange rate is 0.79 not 0.87, as we thought. So…even though it “looks” like there is no fee, you are most definitely paying more.
3. VAT tax
What is this VAT tax thingy? This is value-added tax. In a nutshell, some countries have this tax already included on everything you buy. Like a generic tax that is built into all items. It is a tax based on where you are going.
But hey, great news: when you purchase big ticket items overseas in a VAT tax country, you can actually reclaim that before you leave. Some stores will allow you to claim it immediately. Please note: you must carry your passport with you in order to qualify for it. And just because they give you the credit at the store, doesn’t mean that you can fly home scott-free. You still have to fill out and send the minimal paperwork, otherwise, your credit card will end up being charged that VAT tax.
For example, when traveling to the UK, they have a VAT tax of 20%. That means that for every $100 US Dollars that you spend on items there, you can get $17 back!! So when you are looking at a price tag that says 77£ — what it really means to you, is 64£. BUT you have to be willing to fill out and send the paperwork. If you plan on buying some really cool stuff and spending a fair amount of money, it is totally worth getting your VAT tax refund when you hit the airport.
Here is a chart to help you understand.
*calculations rounded to nearest dollar
I hope that these three money tips will help you with planning your European Adventure. Have fun!