Q&A: Money, currency and traveling

Hello again everyone! After having dealt with some more Q&As regarding winter wear this week, I realized upon reading the forum at HWZ that there are some Singaporeans who are extremely well traveled whilst others are really quite nervous about their first long haul trip. (And then there's everything in between the two extremes, of course.) So this Q&A is really aimed at those who are less experienced when it comes to traveling and some of the issues I will discuss here may seem really obvious to you, but you'll be amazed how many people take them for granted.

Q: I am traveling to Europe, what currency should I get? It's the Euro, right? 

A: Not necessarily so, it depends on what country you go to and if they use the Euro. 18 countries  use the Euro as their officially currency whilst a small number of other small countries/states have adopted it as their de facto currency (such as Andorra, Monaco, Montenegro and Kosovo) despite not officially in the Eurozone. There are however, a large number of European countries that do not use the Euro: the UK, Norway, Sweden, Lithuania, Czech Republic, Bosnia, Iceland,  Denmark, Poland, Macedonia, Moldova, Switzerland, Hungary, Romania, Croatia, Bulgaria, Serbia, Albania, Belarus, Ukraine and Russia. So when traveling to any of these countries, you need to have the local currency rather than Euros. Really, it will take you a minute or so to check on the internet, so do it!

Q: If I am in somewhere like London, will they accept Euros if I turn up at a shop with only Euros?

A: In the case of the UK, it will be a flat no in 95% of cases, though some shops (notably Marks & Spencer, WH Smith, Dixons, Body Shop) will happily accept your Euros - but we're talking about major department stores in big cities frequented by tourists. However, there is no guarantee that they will offer you a favourable exchange rate. Otherwise in most shops, the cashier has a till which will be in local currency - pound sterling - and will therefore be unable to process a transaction in Euros. Even if a shop does make an exception and accepts your Euros, you will be given change in pound sterling, not Euros. So in the UK, you should always make sure you have British pounds.

Many retailers in the UK will not accept Euros.

Q: But I am only passing through Poland for 2 days, I don't want to be stuck with Polish Zlotys which I cannot spend outside Poland. That is why I am so reluctant to change money each time I go through a different country. 

A: I understand your frustration. In a country like Poland, you can always pay with your credit card for things like hotel bills, train tickets, meals in restaurants, shopping in department stores - such places will definitely accept credit cards. But it is also useful to have a small amount of local currency with you for purchasing very low value items like souvenirs and drinks/snacks from places which may not accept credit cards - thus before you go to the money changer, bank or ATM, sit down and take a moment to work out a sensible amount of local currency to exchange.

Q: When I am in a non-Eurozone country, will prices be displayed in both Euros and local currency? 

A: In most cases, no. The only exceptions are very touristy areas where they are dealing mostly with foreigners who will be unfamiliar with the local currency. Another exception would be clothing retailers like H&M which have a presence all across Europe - hence when you pick up an item like a shirt in a H&M boutique anywhere in Europe, the price tag will show the price in a range of European currencies. Be ready to do some mental arithmetic to convert the local currency to Euros (or SGD, USD, whatever you're familiar with) and I'm sure your phone will have a calculator function to help you do just that. Don't assume that the shopkeepers are honest - always do the maths.

Marks & Spencer in the UK accepts payments in Euro.

Q: What about US dollars? Will it be accepted in Europe? Surely everyone likes US dollars, right?

A: Oh no. Don't joke. My parents did just that. They turned up in London with US dollars and I had to tell them that they brought the wrong currency. My ignorant suaku father was indignant and insist that the US dollar is accepted everywhere in the world but he is wrong. Imagine if you turned up in a shop in England trying to spend US dollars - let's imagine for a moment that the shopkeeper does accept payment in US dollars. What is the shopkeeper meant to do with the US dollars after he takes your American money? He still has to go to a money changer or a bank to change it back to local currency and the money changer or bank is not going to do that for free - of course not! The money changer/bank is going to charge commission for that transaction (that's how they make money) thus the shopkeeper is going to pass that onto you when you turn up with a foreign currency because it is a lot of extra work and hassle for him!

Think about it: it is extra work for a retailer to accept payment in a foreign currency. Thus to make it worth his while to do so, he's going to give you a really bad exchange rate to work - retailers are less like to be honest and say, "I can take your American dollars but I will have to charge you a 5% service charge for a non-Sterling transaction." No, he's just going to give you a really crap exchange rate instead: so for example, today £1 = US$1.57, so if you were going to buy an item that costs £10, that should be around US15.70 but instead the shop keeper is going to ask you for US$18 and unless you have your calculator at the ready or are really fast with mental sums, you wouldn't have spotted that he has just slapped on a 14.6% surcharge for taking your payment in US dollars. What were you expecting? Duh.

Do not bring your US Dollars to Europe!

Q: Can I use my debit card to withdraw cash in local currency at the ATM? 

A: Of course! There will certainly be a small surcharge by your bank for using the card abroad. I would usually use the ATM from a well known reputable bank rather than a bank that I have never ever heard of. These banks will usually offer a slightly worse exchange rate - that's how they make their money. So for example, when I use my British debit card in a German ATM, even though the official exchange rate today is £1 = 1.26 euros, the German ATM is likely to only give me £1 = 1.21 euros as that is how they make money. The margins are not huge but it is always slightly worse than the official exchange rate. And yes, the machine will realize that your card is not local and will give you the option to do the transaction in English.

When I was in Russia, I used my debit card to make two cash withdrawals in Rubles. The first one was with a local Russian bank's ATM at the ferry terminal in St Petersburg, the other one was with HSBC. HSBC gave me a far better exchange rate than the other local bank - perhaps the currency moved a little between the two transactions, but certainly, that experienced warned me about using ATMs from local banks who prey on unsuspecting foreigners. Always make sure you do get a receipt for the transaction from the ATM just in case anything goes wrong.

Limpeh in St Petersburg

Q: Will my bank charge me for using my credit card abroad? 

A: Almost certainly yes, but different banks will have a different charge so you will need to speak to your bank about what they are going to charge you for using your credit and debit cards abroad. Do check if there will be a difference between what they charge you for withdrawing cash at an ATM and what they will charge you for a credit card transaction. My bank charges me slightly less for cash withdrawals than credit card transactions, so I usually try to just get enough cash and not use my card - but sometimes when I am shopping and I stumble across something expensive that I really want (and whoops, I don't have enough cash), then yeah I'll just use my credit card. I usually trust my own bank because they're unlikely to rip me off (as I am a loyal customer) - but a money changer would have no qualms about ripping me off as he is unlikely to see me ever again.

Q: What about money changers? Some claim "no transaction fees" or "no commission" - should I use them?

A: I am always suspicious of money changers who make such claims. They are a business, they need to make a profit, like how are they going to make any money if they charge neither a transaction fee nor any commission at all? They have all these overheads as a business - they need to make some money. The profit will be hidden in the poorer exchange rate they offer - that's how they make their money. Always check online what the exchange rate should be before approaching such money changers, then you will realize just how much profit they are making per transaction.

Why would a money changer exchange currency for free?

Q: Should I get my money in Singapore first or should I wait till I get to Europe?

A: It depends on how you are going to obtain your foreign currency. Check with your bank if you can withdraw cash from an ATM abroad (the answer is almost certainly yes - but do check first) and if you are landing in a major airport like London Heathrow, Amsterdam Schiphol or Paris CDG, then you will have no problems finding an ATM from a reputable bank within the airport. That would be my preferred method of obtaining foreign currencies. Otherwise, if you insist on going to a money changer, then at least go to a place like Change Alley where you will be able to shop around and see who can offer you a slightly better deal on the currency you need. Many banks also offer a currency exchange service, so it is worth shopping around.

Airports are particularly bad for this - imagine if you have arrived in a country without the local currency (and you're not prepared to use your cards abroad). The money changers know that they have you trapped. I remember in Bali where they many money changers at the airport offered a particularly bad exchange rate for SGD-IDR and a local helpfully told me, "just get out of the airport, and find a money changer, any money changer outside the airport - they will offer you much better rates." And he was totally right!  If you show up in a money changer in somewhere like Hamburg, Reykjavik or Warsaw with Singapore dollars, they will undoubtedly offer you a very poor exchange rate because they money changer has to take a risk to buy the Singapore dollars off you - what are the chances of someone turning up at his shop, asking if he has Singapore dollars?  He could be stuck with your Singapore dollars for a long time.

Limpeh in Warsaw, Poland

Q: Should I tip in Europe? If so, how much?

A: Unlike America where tipping is mandatory, in Europe, tipping is at your discretion. Do tip if you have received good service and refuse to tip if you have received lousy service - this makes the service staff work harder to earn those tips! Hence if the service was good, offer a 5-10% tip (in cash, for the staff to keep), but otherwise don't feel bad if you refuse to leave a tip if you don't think they have earned it.

Q: What should I do with my leftover cash before leaving the country? 

A: There is little point in keeping very small amounts of cash in a currency you're unlikely to use again. It will just collect dust in your home for years. I don't mind hanging on to some Euros as it is used in so many countries but for something like Polish Zlotys or Tunisian Dinars, I would try to spend them. Work out how much you need for the journey to the airport (some countries have a departure tax) - make sure you do not run out of cash but otherwise, what I would do is to go to a local supermarket to buy some sweets or snacks just to use up all the leftover local currency. If you have a little bit left even upon leaving the supermarket, then leave them as a tip for the cleaning staff at your hotel room - they usually get paid so little and would appreciate the little tip. Otherwise, there is usually some kind of charity collection facility at most airports.

OK so that's it from me on this topic. I will blog more upon my return from Germany, until then, tschüß! Danke!