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Travel Money – What are My Options?

Security. Accessibility. Exchange rates. Hidden costs! 

These are all things we worry about when considering how to pay for expenses when travelling overseas. Whether you are a first time traveller or a seasoned nomad, assessing the options available before setting foot on the plane can make a big difference to your travel experience. As with all things in life, each travel money option has its pros and cons, so I'll share some insight on what to expect from each:

Foreign Cash

No matter where your travels take you, you'll be hard-pressed to find an outlet of any description that doesn't accept cash, and in remote places paying with plastic may not be an option. Before you leave, visit your local currency exchange and change it all up.

Travelling with enough cash to last the entire trip helps alleviate issues of accessibility and budgeting. No wasted time looking for suitable ATMs, no worrying about fluctuating foreign exchange rates and a tangible way to keep track of spending. The obvious downside of travelling with a large amount of cash is the risk of theft. More often than not this occurs through pickpocketing of bags and wallets. However, if you use common sense you can minimise your risk: 

  • Consider the amount of cash you are comfortable carrying. If you are travelling for longer than a month or plan to spend a significant amount, cash might not be the option for you.
  • When you are out and about, only carry in your wallet the amount you will need for the day
  • Keep your remaining funds locked up at all times. Secure your cash in a safe or locker when you arrive at your accommodation and padlock your bag when you are moving between locations. Pickpockets are surprisingly good at their job!
  • Avoid people seeing your cash reserves (Don't flash your cash)

The other risk to avoid is getting stung by currency exchanges that offer highly unattractive rates. As a 'Rule of Thumb' avoid any operators located next to major transport hubs such as airports or coach terminals. Unless ordering in advance, fees and exchange rate profit margins can be up to 8% greater than elsewhere, so buying $1000 of foreign notes could cost you an extra $80. Significantly better rates are often found at financial institutions or dedicated currency exchange operators located in commercial areas and city centres.

Travel Money Cards

Travel Money Cards are often considered the best way to access money overseas, particularly if you need to withdraw cash periodically. They provide more security than carrying cash, are widely accepted and allow you to pay in local currency without having to convert your money prior. For foreign currencies you can also "lock in" your exchange rate, including the exchange rate margin when you load money onto the card. This is particularly useful if you think the Aussie Dollar will weaken against the destination currency during your trip.

The trick with Travel Money Cards is finding a product that minimises fees and avoids issues associated with accessing your cash or making a payment. With competing providers offering various fee structures, it is easy to confuse a seemingly good product with one that will soak up your funds fast through additional charges. You can avoid this trap by being aware of relevant fees and comparing what is on offer.

When comparing products keep in mind how you intend to use them. In essence, you will be loading the card with Aussie Dollars (AUD), paying in foreign currency whilst travelling and withdrawing any remaining money in AUD upon your return home. You may also need the option to access cash from overseas ATM's for those times when paying by card is not an option. The best product will allow you to perform these actions as cheaply and easily as possible.

Focusing on the following features will help make your research a little easier: 

  • Check the exchange rates for the destinations you are travelling to on the card provider's website. Be wary of providers offering exchange rates outside of the norm.
  • Compare the fee structure of each card. Remember, the vendor is already charging you through the exchange rate differential so additional fees are not a necessary evil. For easy comparison, I would check the following fees:
​Card Issue Fee ​Cash Withdrawal Fee
Initial Load Fee​ ​ATM Balance Enquiry Fee
​Reload Fee​Currency Conversion on Purchases and Withdrawals
​Transfer Between Currencies Fee​Transfer to Transaction Account Fee
​Purchase Transaction Fee​Card Closure Fee
  • Ensure you can access your money from an ATM without having to use 2 factor authentication (i.e. pin code sent to your phone). This can cause a significant hassle when trying to access your money overseas.
  • Check which overseas ATM and EFTPOS networks will accept the product. Regardless of coverage, many overseas ATM's will still reject your card. However the greater the acceptance of your chosen product, the lower the chance of access issues.
When comparing products keep in mind how you intend to use them!

Credit Cards

Credit cards can be a suitable option for overseas purchases if the exchange rate and associated fees are low. They are more secure than carrying cash and will provide you with an additional source of payment, should you run out of funds and need a little extra to get you through.

However, credit cards generally charge a currency conversion fee and a cash advance fee for withdrawals. Coupled with interest building up on withdrawals, this can make accessing cash from a credit card while overseas a very expensive option. In addition, although credit cards are widely accepted within Australia, this is not always the case overseas, even in other developed nations. There are however, benefits to using a credit card you won't get with other payment methods:

Pre-authorisations

Presenting a credit card is often a prerequisite to checking-in at hotels. A pre-authorisation ensures that a nominated amount is 'withheld' from your credit card during your period of stay as security against any damages or unpaid bills. Rental services such as car hire and city bikes will also require pre-authorisations. Most will refuse cash or debit cards as a deposit, so having access to a credit card is a must.

Complimentary Travel Insurance

Many credit cards offer complimentary travel insurance. Eligibility usually requires paying for a portion of your trip with the applicable card, but this is not always the case. On some policies family members who travel with you will also be covered, although strict eligibility criteria often applies. Ensure you read the relevant Product Disclosure Statements to check eligibility and policy inclusions.

Frequent Flyer Points

Points earned through Frequent Flyer programs, such as Qantas Frequent Flyer and Virgin Velocity, can be used to pay for flights or cabin upgrades. Who doesn't like business class? Many credit cards will reward you with points in return for purchases made with the card.

Word of warning. Amassing a meaningful quantity of points can take a long time, particularly if you don't have large expenses to pay for via your credit card. However, you can get a head start by selecting a card which offers bonus points for signing on, or, if you are a business owner, using your credit card to pay for business expenses. There are also differences between Frequent Flyer Points and credit card Reward Points. Reward Points are a separate system and have to be converted to Frequent Flyer points before they can be redeemed for flights, often at an expensive rate. 

Other

Travellers cheques are a secure alternative to carrying cash overseas, but offer little benefit when compared to Travel Money Cards and their usage is declining.

Standard debit cards can be used overseas, however the fee structure can work out more expensive, particularly if withdrawing from foreign ATMs incurs a percentage fee. To assess this option properly, check the fees and charges with the relevant financial institution.

Verdict

There are a variety of options for accessing your money whilst travelling overseas, each with their own merits. When choosing, it is not only important to consider the nature of your trip, but also the specific payment products on offer and their associated fees. For me, travelling with a credit card as a back-up in case of emergencies and for pre-authorisations is a must. However my primary payment method will vary depending on the length of travel and destination. When travelling to remote areas for a short period of time, say less than one month, I usually forego the security of a Travel Money Card and take cash for the entire trip. For other trips the Travel Money Card is my preferred method.

 Check your options before your next trip overseas and get the most out of your money!

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