Traveling Abroad? Here's How to Leverage the Strong Dollar
Jane McManus can hardly believe her luck. The New York-based sportswriter for ESPN.com is planning a summer vacation with her family in Ireland.
Following the strength of the U.S. dollar, McManus upgraded their travel plans, reserving a swankier hotel room in Dublin and booking a couple of days at a 13th-century castle. The overall cost will be about 30 percent less than last summer's vacation to Italy when the dollar was much weaker, McManus estimates. "Wow, it's so different," she marvels.
With the dollar near parity with the euro, airfares to Paris are down 14 percent from a year ago, according to popular travel site Orbitz. Hotel rates have sunk 10 percent from last year. London, Rome and Barcelona are among other popular locales with cheaper hotels and airfares than last year, according to Orbitz data. The Points Guy Brian Kelly also singles out Japan, thanks to the weak yen; Finland, the only Scandinavian country to use the euro; and South Africa, whose currency has sunk by almost half over the last few years.
You do not have to leave North America to feel the impact. Canada's currency has slumped to around 80 cents on the dollar. As a result, travel trends are already shifting: International air traffic for U.S. citizens in January was up 7.2 percent over the previous year, according to the National Travel & Tourism Office.
Of course, it is still only March. Currency markets are famously volatile and could turn at any moment. That is why some travelers are wondering how to lock in these favorable exchange rates, and make sure that they are able to see Europe or Canada or Mexico on the cheap.
What You Can Do
- Prepay at current rates -- your flights, hotel rooms and excursions. "Hotels that used to be $160 a night in U.S. dollars are now $130," says Carl O'Donnell, 23, a New York-based reporter for Mergermarket who is planning a summer jaunt with his girlfriend to historic French-Canadian Quebec City. He is thinking about locking in some prices now. O'Donnell is tacking on additional days to their trip, and adding pricey excursions like boat rides. "It feels great to be getting a big discount," he says.
- Hedge your cash needs with a foreign-currency bank account. Florida-based EverBank offers a variety, ranging from the Indian rupee to the Chinese renminbi, that you buy at today's rates to hold and spend later. "Usually, most of our clients are investors," says Chris Gaffney, president of world markets for EverBank. "But recently, with the euro hitting multi-year lows, we have seen more people coming to us to lock in travel-related expenses." EverBank's foreign-currency deposit accounts do not charge monthly fees, but they do require a $2,500 minimum. Before you depart, Gaffney suggests buying a bank draft, or having the money wired overseas, so you do not have to convert cash back and forth (and get hit with fees both ways).
- Secure traveler's checks now or load some money onto a prepaid card like the Travelex Cash Passport. That comes with a card-purchase fee and foreign ATM withdrawal fees at about $2.50 a pop. You can even buy a few euros at your local bank to spend later, although you have no consumer protections if that cash gets lost or stolen.
- Do not blow any exchange-rate windfall by using the wrong credit card, though. With every $100 trinket you buy, you might be getting knocked another $2 or $3 for foreign transaction fees without even realizing it. One card Matt Schulz, senior industry analyst for CreditCards.com, likes: Barclays Arrival Plus World Elite MasterCard, which has no foreign transaction fees.