Dollar-to-euro exchange rates vary considerably, both in the U.S. and in Europe

(Hugh D'Andrade for The Washington Post)
By Nancy Trejos
Washington Post Staff Writer
Sunday, May 16, 2010

Figuring out the best way to convert U.S. dollars into foreign currency is about as easy as predicting when the volcano in Iceland will stop spewing ash.

The world of currency exchange is Byzantine, with unfavorable exchange rates and fees that aren't always transparent. Which is better: converting dollars at home or overseas? At a bank or a currency exchange booth? At the airport or the hotel?

Or should we simply rely on plastic?

"In the last few years, it's all sort of gotten hazy," said Erik Torkells, an editor at TripAdvisor.

Even the experts can't agree. Some say you should convert at least a little bit of money in the United States so that you have enough for transportation when you get to your destination. But you'll lose a lot in fees. Others say that you should wait until you get to the first ATM you see. But what if your bank cuts off your supply because you forgot to tell it that you were going overseas? Or a thief spots you withdrawing a lot of money and tries to rob you?

We set out to try to make some sense of it all, taking a theoretical $200 and seeing how many euros it would buy both here and in Europe.

What we found is this: Withdrawing cash from an ATM overseas or using your credit card is probably the best way to go, but it wouldn't hurt to have a little foreign money in your pocket when you land. If you want to convert money stateside, avoid the airport exchange booth and pray for a customer-friendly bank. And if you want to use plastic, let's hope you have a card from an issuer that doesn't charge a high foreign transaction fee.

Here's how we reached those conclusions.

Home turf

Before heading off on our search for euros on April 28, we checked the published rate online at XE-Universal Currency Converter. We found that $200 would give us 151.70 euros, so each euro would cost us about $1.32. We were thrilled.

Our first stop was Citibank, where we have a checking account. "The euro has gone down from a few days ago," the teller told us. Fantastic.

For $200, the bank would give us 142.42 euros, so each euro would cost about $1.40, more than what we'd found on the Internet. That's because the Internet rate isn't what consumers get, but what banks get charged to convert large pots of money.

"Where people are most misled is with the exchange rates," said Evan Shelan, chief executive of eZforex.com, which sells foreign currency to banks and credit unions. They think they'll get the same deal banks get for exchanging $1 million, and "that's the biggest misconception."

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