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Travelers checks or credit cards? Safest currency for travel

Mar 2, 2012, 9 a.m.

Foreign travel can be confusing, especially when it comes to different currency and fluctuating exchange rates. It's easy to pay too much when products are priced at a rate that seems unusual to you. In addition, carrying large amounts of currency when you travel can be a security risk. How do you avoid these pitfalls?

Pros and cons of using travelers checks

Travelers checks offer you the security of knowing that you can get your money back if the checks are lost or stolen. However, many retailers and even countries (such as Cuba) do not accept them. Depending on the issuer, you may also have to wait overnight or a couple of days to get a refund. Be sure to keep the serial numbers of the travelers checks separate from the actual checks. You'll need these numbers if your checks are lost or stolen.

Pros and cons of credit cards

Credit cards make it easy to purchase items and pay for meals without worrying about having the right currency. They also protect you against theft since you can cancel the account if the card if stolen. However, it's easy to make currency exchange mistakes using credit cards. That vase you thought was $10 could really be $100 if you did the math wrong in your head. In addition, most credit card companies use the exchange rate on the day the transaction is settled in the United States, which could be days after your purchase. This is especially worrisome in countries where the exchange rate fluctuates widely.

When cash is best

Having a little bit of the local currency in your pocket when you arrive in a foreign country is a good idea for immediate expenses, such as paying for a taxi or tipping a bellman. Buying foreign currency for travel is relatively easy. Many big banks in major cities have a foreign exchange desk, although the rates in the United States will generally be higher than in the currency's country of origin. There are also foreign exchange counters in most overseas airports. Be wary of anyone that approaches you at the airport offering a dramatically lower exchange rate than the bank rate. There are many exchange scams that target foreign travelers.

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