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The Absolute Best Ways to See Europe on a Budget

Unfortunately for all of you globetrotters out there, traveling to Europe just became more expensive.

Airlines have realized that controlling the number of international flights can help them sharply boost fares. As a result, a flight to Europe in 2011 can be 40% to 50% more expensive than a year ago.

A recent check on found that a round-trip flight from New York to Paris in the last week of July starts at $1,300. At that price point, travel costs alone can take a hefty bite out of your vacation budget.

Of course, airfare is just the beginning. If you don’t watch out, you could end up spending a few thousand dollars more just to enjoy a city like Paris.

Here are a few of the best ideas on how to visit Europe on a budget -- while still seeing all of the magic that a European vacation has to offer.

Plastic or Cash?

Deciding how to pay -- with money or credit cards -- can make a big difference. Cash is more widely accepted, though you’ll lose a bit when you sell dollars at the start of the trip and buy dollars back at the end of a trip.

If at all possible, avoid changing money at the airport, as exchange rates can get quite unfavorable at those kiosks. The same goes for hotel front desks. The rates they offer are among the worst you’ll find. Instead, ask the front desk to direct you to the nearest bank branch. (If they really want to help, they’ll tell you which bank is known for the best rates.)

A word of caution on traveling with large sums of cash: Many cities have a cluster of currency exchange bureaus situated in highly touristed areas. These are generally trustworthy, but can be a magnet for pickpockets that linger just outside. There’s no need to be overly paranoid, but I like to hop in a cab right after exchanging a bunch of money instead of walking down a local side street.

In many instances, it pays to use a credit card. First, you’re covered if you buy any goods that turn out to be damaged, as you can challenge the charge through your credit card issuer.

Second, credit card companies use global exchange rates -- the kind that big financial institutions use with each other -- which are typically better than you’ll find at the local currency-exchange desks.

But not all plastic is equal. Capital One is the best choice and doesn’t tack on any additional fees when you charge a purchase. Most other card issuers can take a 1% or 2% bite out of every transaction. That can add up if you drop big money on a hotel room or rental car.

Speaking of rental cars, the big names such as Hertz and Avis are often the most expensive. Local car-rental chains tend to offer better prices, although they may not be as easy to work with when it comes to booking in advance. Call ahead to the hotel you’ll be staying at. See if they work with local rental-car companies. If the hotel likes to work with them, then they are likely to be quite reputable.

Dining: When to Splurge and When to Skimp

A key reason many people travel is to dig into the local food scene. A splurge on fine dining can be fun, but as you know from your own hometown, some of the best food can be found at humble inexpensive places that appeal to locals.

Plan on spending several hours online compiling solid restaurant ideas that won’t break the bank. Popular travel websites like LonelyPlanet, Fodors and LetsGo offer a great selection of local eatery ideas for a wide number of destinations.

Also consider the web counterparts to popular TV shows such as Rick Steeves and No Reservations for ideas on the best local eateries in your destination. Additionally, there are a number of smartphone apps that can help with your local restaurant search and offer first-hand accounts of local favorites -- and places to avoid. Check out Zagat to Go, Foodspotting, Yelp and TimeOut.

Lunch deals are often better in places like Europe, as most countries have some sort of prix-fixe culture. The same meal at lunch can often be had for half the price of a similar dinner. Another cost-cutting move: supermarkets. I like to load up on bread, fruits, sandwiches and other snacks, which can help you skip a pricey breakfast or dinner, freeing up your budget to splurge when you do decide to dine out.

Tourist Passes

Virtually every major city offers a “culture pass” that provides access to many fine institutions for one bundled price. It’s usually a great deal. For example, has everything you need to see all of the important sites in Paris.

The same approach can be used for the local transportation system. A daily or weekly pass for the use of buses and subways can be far cheaper than a clutch of separate tickets, especially if you plan to get around. Lastly, inter-city rail can be quite a bargain if you buy a pass such as a Eurail pass, though you’ll need to buy the pass before you leave the U.S. to secure the best prices.

In addition, as I noted in my article on the 5 Global Escapes Perfect for a Month-Long Sabbatical,
you’ll find an increasing array of low-cost lodging options if you’re willing to take out a room in a personal residence. The most affordable lodging can often be found in people's homes. Websites such as Home Away, Couch Surfing, and Airbnb often have many listings for the city or town you want to visit. Prices are often a fraction of a typical hotel room, and you can get keen insights into what's going on locally from a city resident.

Also, don’t forget the value added tax (VAT) rebates. All European companies tack on a hefty 10% to 15% value added tax on all purchases.  That figure can rise to 25% in Scandinavian countries. As a foreigner, you’re entitled to a VAT refund for many of the goods you purchase. Simply save your receipts and be sure to arrive at the airport early, where the local VAT rebate desk will process your refund.

The Investing Answer: Probably the best way to save money is to travel in the off-season. A place like Amsterdam may be gray and rainy in January, but airfares and hotel rooms can be heavily discounted. Plus, you won’t have to jostle with a horde of other tourists as you take in the awesome sight of Rembrandt’s Night Watch. When it comes to saving money on a European vacation, going against the grain offers many money-saving opportunities. This way, you'll have more leeway to take advantage of the unexpected adventures that great vacations are made of.

Photo courtesy of flickr.