There is nothing like coming home from a great trip abroad thinking you had been really savvy about sticking to your budget only to be hit with unexpected currency-exchange fees on your bank statement and credit card bill.

Almost every overseas traveler needs to exchange currency at some point during his or her trip. If you don’t know the tricks, it can be extremely expensive.

According to the 2014 Currency Exchange Study conducted by CardHub – which looked at the euro because it is the most prevalent foreign currency – some kiosk and hotel exchange services have a high exchange rate and also charge high additional fees.

Fortunately, there are less expensive ways to exchange currency.

How to Avoid the Charges

The world has become so digital that most people no longer walk around foreign countries with traveler's checks and money belts. That’s why you should take both a no-foreign-fee debit card and a no-foreign-transaction-fee credit card with you on your trip.

The currency study found that, on average, the cheapest cards for converting currency when you buy in euros and pay your bills in dollars are on the Visa and MasterCard networks. The ones it listed that waive exchange fees include Capital One, Northern Trust, Bank of America, Key Bank, TD Bank, Chase and PNC. Watch out for the exchange rate (how many dollars it takes to purchase a Euro); the study says it can range from $1.4341 to $1.4936.

If you prefer a credit union card, State Employees Credit Union offers a no-fee card with one of the best exchange rates; the study listed it at $1.4201, which even beat the leading major banks. ESL Federal Credit Union waives fees and has a higher exchange rate. The only other two credit unions in the currency exchange survey that have a currency exchange service – First Tech Federal Credit Union and Citizens Equity First Credit Union – both charge a $10 fee.

Beverly Harzog, a credit card expert and author says that if you prefer using your Discover card, you are in luck; it also charges no foreign-currency transaction fees.

Stan McGahey, an international tourism professor at Saint Leo University in Florida, while talking to Fox Business warned travelers not to be tempted to exchange currency in the U.S. before traveling. He says to always do exchanges in the country you’re visiting; you’re likely to get a better exchange rate.

As for those airport kiosks? “Avoid airport kiosks, such as Travelex,” says Harzog. “You'll pay a higher exchange rate and you'll also have to pay a fee for the service.”

To check out whether you are getting a good deal on exchanging currency, download a free app such as GlobeConvert or XE Currency to your smartphone before you embark on your journey, After typing in the amount you want to convert, it will give you a good rate in the new currency.

While both banks and Travelex (the world’s largest currency exchange operator) have reduced their fees by 17% and 37% respectively since 2012, they remain pricier than other alternatives. If you have to exchange currency through a bank you’re still likely to pay, on average, 6.73% more than if you used a no-fee credit or debit card. At Travelex, on average, you will be paying 10.17% more, CardHub reports.

Debit Card Vs. Credit Card

"If you need cash, it's best to use a debit card and do ATM withdrawals,” says Harzog. Especially if you don’t use one of the top banks mentioned above, she recommends that you call your bank and find out what the fee is for using a foreign ATM. “Decide how much you need and make one withdrawal instead of several so you'll save on fees.”

While you're checking, Harzog adds, inform your bank that you will be out of the country and provide your destination(s). “When your spending patterns change, the bank may accidentally freeze your account for fraud,” she says.

For most purchases, use your no-transaction-fee Visa, MasterCard or Discover credit card. If you’re not using a no-transaction-fee credit card, you could be paying an average of 2.21% more for everything you charge.

Another reason it is best to use a no-transaction-fee credit card and use currency only as a backup is because your credit card will offer fraud protection. You can replace lost or stolen credit cards, but lost cash can never be replaced. Make sure that you carry the number to call your bank collect in case something happens, so that you can put a stop on your card for further purchases. Most banks will overnight a new card to you wherever you are.

However, don’t use your credit card for a cash advance. "You'll pay a cash-advance transaction fee – even if the card waives the foreign transaction fee – and interest starts accruing right away,” Harzog said.

Harzog added that one thing you definitely want to avoid while using your credit card overseas is dynamic currency conversion. “This is when a merchant offers to convert the dollar amount of your purchases to U.S. dollars. This gets very expensive because they'll use a high exchange rate,” she says.

The Bottom Line

The bottom line is that if you do a little homework before leaving for your trip and prepare to check exchange rates while you’re away, you’re likely to get an A+ on your trip budget.

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