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When Changing Money, Don’t Take Big Loss

It’s no secret these days that unwary travelers can lose a bundle when changing currency abroad, but you don’t have to be a financial wizard to come out ahead.

Travelers going abroad should carry one or more (preferably more) of the following: cash, traveler’s checks, credit cards and a bank or debit card. How you use them can determine whether you are a winner or a loser in the foreign exchange game.

Credit cards, such as Visa, MasterCard and American Express, offer a number of advantages. Generally, they are the best way to pay hotel and restaurant bills. Lodging and food tend to be the costliest items on your budget.

Most credit card companies automatically give you a better exchange rate than you could get on your own when they convert your charge from a foreign currency into U.S. dollars. Usually the transaction is made at the interbank rate - a commercial rate used in the transfer of huge sums of money. A conversion fee of 1 percent of the charge amount may also be added, but you still should be better off than if you exchanged traveler’s checks at the tourist rate to pay your bills.

Credit cards also provide certain protections if you have a problem with gifts or souvenirs you purchase abroad with the cards. The Fair Credit Billing Act, a U.S. law giving consumers the right to dispute questionable charges, applies to foreign as well as domestic purchases.

Not everyone is enthusiastic about plastic, however. Establishments accepting cards usually are pricier because the service costs them extra and they pass the costs along to their customers. Plus, an unscrupulous waiter might easily add an extra zero to a bill, and in your confusion with a strange currency, you may not notice.

Automatic teller machines, which now have spread throughout much of the world, are seriously competing with traveler’s checks as the preferred source of pocket money abroad. Insert your bank or debit card into an ATM, and you can withdraw cash from your hometown checking account in the currency of the country you are touring. Insert Visa or MasterCard plastic, and you can get an immediate cash advance in foreign currency from your credit card issuer. But you can expect to pay a hefty interest on these impromptu loans.

With ATMs, you generally will get the favorable interbank exchange rate. However, you probably also will be assessed a charge that may range from $2 to several dollars per transaction - depending on the bank owning the ATM you are using.

Cirrus, one of the two international ATM networks, says it operates 300,000 machines in 94 countries. To find out where, call the Cirrus Cash Machine Locater number, 1-800-424-7787. Plus, the other network, maintains 265,000 machines in 100 countries. They are available by calling the Plus ATM Locater Service, 1-800-843-7587.

An ATM is a handy alternative to exchanging traveler’s checks - which I’ve found often requires standing in a slow line, showing a passport, signing bureaucratic paperwork and getting a lousy exchange rate. So far, I’ve had only favorable experiences with ATMs, which I’ve used mostly in big European cities.

On the other hand, you may not find an ATM in working condition when and where you need it. Not surprisingly, many rural or remote areas of the world remain outside the networks. Or an errant machine may take your card and not return it. Before going abroad, verify with your bank that your Personal Identification Number (PIN) is valid for use outside the United States.

Traveler’s checks still are very much in use - at the least because they are an emergency backup when no functioning ATM can be found. American Express sold $26 billion worth in 1996, according to Handwerk, a record amount for the firm. But to get traveler’s checks, you generally have to pay a fee - probably 1 percent of the dollar amount of checks you buy.

Once you have landed abroad, you should keep alert to the exchange rates being offered, because they can vary widely. Airports, hotels and department stores are notorious for offering poor exchange rates. You are likely to get a much better rate at a bank, a center city currency exchange firm or the company that issued your traveler’s checks.