The Best Way to Exchange Money in Europe

••• Jupiterimages/Creatas/Getty Images

With that European vacation booked and travel imminent, you'll be turning your thoughts to spending money while you're there. With 19 European countries using a single currency -- the euro -- exchanging is easier than it once was, especially if your plans include a number of countries. And even though the U.K. and some other Europeans are sticking with their own currency, the best way to exchange money in Europe remains the same wherever you are.

Use an ATM

Banks and other financial institutions have finally caught up with technology, and these days it is an increasingly good value to simply withdraw cash from a bank ATM at your destination using your debit card. You can also use a credit card to obtain cash, but the additional charges levied for such withdrawals -- considered cash advances -- make this a poor value. Your card should have a "Cirrus" or "Plus" logo to make sure it works, and you will need a 4-digit PIN code; if yours is longer, ask your bank for a change before you leave. European ATMs don't have letters on the keys so make sure you memorize your code.

Maximizing the Exchange

The basic rate you get from an ATM will generally be good, but you must be aware that your bank might levy additional charges on top of the exchange transaction. These vary from bank to bank and may either be a flat fee of between $2 and $5 or a percentage of the amount withdrawn, typically 1-to-3 percent, or both a fee and a percentage. You'd be wise to check out the applicable fees before you travel, and even shop around among banks for the best travel offers. It makes sense to take out larger amounts of currency at a time, especially if your bank charges a flat fee, to minimize any unnecessary charges.

Know Your Limits

As with banks at home, you will likely have a maximum daily withdrawal limit, so you may need to make further visits if you need more cash. You should also familiarize yourself with the general exchange rate of the currency in your destination so that you know how much money you have left in your account and what you can withdraw in local notes.

Let Your Bank Know Your Plans

Before you leave home, make sure you inform your bank of your travel plans so that overseas transactions are not flagged in their systems as potentially fraudulent. If you do not take this precaution you may find yourself abroad with a card and account that has been frozen.

Where to Avoid

In general terms it is best to avoid exchanging your cash in the kind of exchange kiosks that are frequently found close to popular tourist sights. Hotels and airports are also notorious for poor deals on currency exchanges. If you find you must exchange some cash you've taken with you, head to a bank.

Managing Your Cash

To preserve your funds, you might find it convenient to use your cash for smaller, everyday expenses such as local transportation, light meals and entry fees. Where you have larger expenses, such as longer-distance travel, car rental, hotel bills and dinner, you may find that it is more convenient to use a credit card. You'll get the same good exchange rate as with your debit card and won't need to settle until you return home.