Travel Tip: Exchanging Money Abroad

The US Dollar is worth a lot less than it used to be in most foreign countries. Here are some common mistakes many travelers make:

Buying travelers cheques
Travelers cheques do have one big advantage -- if you lose them, they can be fairly easily replaced. But you can often get gouged when changing them to local currency. If you want to bring travelers cheques, get them issued here in the US in the local currency if you can get it commission free (usually available to American Express cardholders). You can then change them at any local bank with your passport for no charge.

Changing your dollars in the airport or at your hotel
You should actually never do this. Ever. You should only do this at the airport if you need a little bit of cash for transportation.

Instead, here are some better options to stretch your dollars.

Use a credit card with a low foreign exchange fee.
There's been an antitrust settlement against the credit card companies for cheating consumers on these fees, which charge you for using your credit card abroad. If you travel abroad or buy in foreign currencies frequently, consider getting a card with a very low fee (some are as low as 0%). Take a look at this compiled list of frequently updated information on foreign exchange fees for credit cards.

For cash, always withdraw from an ATM machine.
ATM machines will withdraw from your bank account without a ridiculous commission. Airports almost always have reputable bank ATM's for you to make your withdrawal. Be sure to check if your bank has a international ATM fee -- many brick-and-mortar banks have them, while many internet banks are fee-free. Here is some more info on what banks are charging.

Be sure to notify your credit card issuer if you are going to be visiting lots of different places, since they might start declining charges out of fear you've had your card stolen.

Taking little steps like these could save you hundreds of dollars that you didn't even know you were spending. Use that money to enjoy your travels, rather than giving it away to bank commissions.

Buying Health Insurance

Matching

A. No Health Insurance
B. Comprehensive Traditional Policy
C. High-Deductible Catastrophic

1. Probably Getting Ripped Off
2. Independently Wealthy or Delusional
3. Savvy

Answers
A-2, B-1, C-3

Choosing health insurance is annoying and something that most young adults don't pay close attention to. Many young people fall in one of these categories:

No Health Insurance at All

It's important for everyone to realize that this is completely irresponsible. Unless you have substantial wealth, you could ruin your financial future and potentially drain your parents or family of their retirement savings if you have an accident. Even if your employer doesn't offer it, you should still get insurance.

'Over'insured

Many young people have a comprehensive policy provided by their employee, even though they are healthy and rarely need any care. (This is more your employer's problem than yours)

How to Choose a Plan

For those of you who are self-employed, a student, or don't have an employer-provided plan, the first question to ask yourself is whether or not you are healthy. Do you need to see a doctor for any conditions? Are you on medication? If you only expect to see a doctor for a routine check-up, you'll want to get some catastrophic insurance to protect you in case of an accident or an unexpected major illness.

You can often subscribe to these plans for about $50 a month. Generally speaking, you won't receive any benefits, since these plans have a high deductible (often $2,500 to $5,000). You'll be responsible for this amount, and your benefits will kick in after you've incurred these expenses.

Generally speaking, the lower the deductible, the higher the premium. You'll also want to check to make sure that local doctors and hospitals accept the insurance plan.

This can be a serious savings from a student health plan through a university or a comprehensive traditional policy. Some of these plans have monthly premiums triple the amount of a catastrophic plan.

Check availability at sites like www.ehealthinsurance.com, where you can compare different plans.

More info on catastrophic plans: Pros and Cons of Catastrophic Health Insurance

Should You Be Borrowing More?

Yes, borrowing more. More people than you might think are racking up the wrong kind of debt, when they don't need to be. Take a look at these debt situations:



The total amount of debt is the same, with drastically different amounts of interest. Don't forget that student debt has deferred payments and is often tax deductible, making it even better than credit card debt.

Students and recent grads often develop terrible financial situations simply because they aren't taking out enough funds through their student loans. Recent grads are often paying back too much, since they feel their student debt is a burden.

If you think about it, it's totally silly if you have credit card debt, but thousands do it. The interest rate is probably much higher and will be more burdensome in the long-run with a credit card, and student loan interest is often tax-deductible and doesn't impair your credit score.

Hundred of thousands of students often borrow money only to cover tuition expenses. Instead of taking out more money for living, food, and other school expenses, they just rack up credit card debt.

The same goes with recent graduates who have agreed to an accelerated loan repayment schedule, which doesn't give them enough money to get by on.

As the new year and new semester is coming around, take a look at your spending over the last several months and see if you need to be borrowing more from your student or home loan. If you're a student, contact your financial aid office to increase your loan amounts and have the funds transferred to your bank account (if you have the self-control to use it wisely) -- you might even be able to get enough to pay off your credit card debt. If you're in the repayment process, call your lender to see if your monthly payments can be reduced, so you don't have to depend on your credit card.

Remember, no matter what the so-called pundits say, getting rid of credit card doesn't have to be solved by cutting spending dramatically. Managing your loans and lowering your interest rates is often much more effective.