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Choosing the right currency for your trip

  • Story Highlights
  • Credit cards are secure and widely accepted, just beware of foreign transaction fees
  • Cash is convenient but it's risky to carry too much
  • Traveler's checks are insured but they mark users as tourists
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By Debra Alban
CNN
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(CNN) -- Confused about whether you should book your hotel room with a credit or debit card? Or how much cash to exchange when you arrive overseas? While there are no steadfast rules about what types of currency to bring on your trip, travel and money experts do have recommendations on your best bets and what to avoid as you hit the road.

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Cash is handy for emergencies and small purchases, but carrying too much can be risky.

Check out what experts have to say about the four commonly used forms of payment.

CREDIT CARDS

Pros
Security:
Whether you lose your card or it gets stolen, your credit card company has your back, says Ben Woolsey, director of marketing and research at CreditCards.com. The company will ship a new card to you if it's lost or stolen, and they won't make you pay you for fraudulent charges, he explains.

Wide acceptance:
Cards have "almost universal acceptance across the globe" among restaurants, airlines, hotels and merchants, Woolsey says. They're also almost always required if you want to reserve a rental car or hotel room, Woolsey says, to cover things like incidentals or trashing the room or the car.

Good exchange rates:
Credit card companies have negotiating power with the banks in foreign countries to convert money at more favorable rates than an individual could, Woolsey says.

Cons
Foreign transaction fees:
Most cards will carry fees up to 3 percent, Woolsey says. Some cards, including Capital One cards, don't charge these fees, but Woolsey warns that these cards tend to have lower credit lines.

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Limited use in less-traveled destinations:
"If you're going to a Third World country, you most likely can't rely on credit cards and you shouldn't," Brice Gosnell, Lonely Planet's regional publisher for the Americas says. Case in point: on a recent monthlong trip to Ethiopia, Gosnell says he was restricted to using cash because "no one" uses credit cards.

Before you go
Find out where your card is accepted:
Of the four major issuers, Visa and MasterCard are the most widely accepted cards worldwide, followed by American Express, then Discover, Woolsey says.

Call your credit card companies:
"It's always a good idea to take the five minutes to call your credit card company and say, 'FYI, I'm going to be out of the country for the next two weeks.' It's in their computer. That way they ... don't think your card is stolen."

Make sure your credit line is sufficient for the trip, Woolsey says.

CASH

Pro
Convenience:
Cash comes in handy for local transportation and small purchases, such as coffee or entry into museums as well as emergencies.

Cons
Easily lost or stolen:
As you decide how much to carry, consider your personal comfort level and how much you can afford to lose, says Fritz Elmendorf, a spokesman for the Consumer Bankers Association of America. He suggests carrying your cash in a money belt or storing it in your hotel's safe.

Conversion fees:
There can be high fees attached to changing money into foreign currency at airports, hotels and kiosks, Gosnell says. If you're going to change your cash into foreign currency, banks are your best bet, he says.

Leftovers:
You could lose out if you don't use all your cash in the country where it's accepted. When it comes to coins, Gosnell gives those away, "either to the taxi driver who dropped me off, kids, beggars, whomever." As for cash, he'll change it to dollars or, if he expects to revisit the country, he'll save it for next time.

Before you go
Change some money -- maybe $200 -- into the currency you'll need, Gosnell says. "Especially if you're doing an international flight, you get off the plane, you're a little disoriented, you're tired, you're groggy, that's one detail you don't want to have worry about," he says.

DEBIT

Pro
Convenience:
It's an easy way to get local currency.

Cheap (with the right bank):
Some international banks might not charge a fee if you use one of their ATMs abroad. For example, Bank of America customers can withdraw money sans fee at a Global ATM Alliance branch, whose members include the British bank Barclays, Germany's Deutsche Bank and Canada's Scotiabank.

Cons
Big-time fees:
Elmendorf, who is currently working in Costa Rica, is charged $7 each time he hits the ATM. To minimize the extra cost, he says he always withdraws $400, the maximum amount. Likewise, cash advances using your credit card will levy heavy fees. On top of a fee, you will immediately incur interest charges, Elmendorf says.

Before you go
Budget ATM fees into your travel plans Gosnell says there's often no way around the fees, so people shouldn't try to fight them. "If you want the cash, you're just going to have to budget that ... if that's something your bank does. If you need the cash, you need the cash. What are you going to do?"

TRAVELER'S CHECKS

Pro
Security:
Traveler's checks, which are refundable if lost or stolen, "were kind of the original insured currency" before credit cards, Woolsey says.

Cons
Not universally accepted:
In a Third World country, or even a slightly more developed nation, you might have to go to a bank to get your traveler's checks cashed, Elmendorf says. Even some smaller hotels may not accept them or they might put additional restrictions on using them, he adds.

Fees:
"If you're going to pay for [traveler's checks], why don't you just pay the conversion charge or whatever that you might get on your credit card?" Gosnell asks rhetorically. You can also opt for travel debit cards, which are stored value cards similar to traveler's checks, but they do not offer benefits over credit cards, either, Woolsey says.

The dreaded "tourist" label:
Traveler's checks scream "tourist," Gosnell says, adding that some people want to avoid that distinction. E-mail to a friend E-mail to a friend

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