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Money matters

    The other day, my friend asked me for advice about travel money cards – worth it, or no? It’s one of the essential questions any traveller needs to ask themselves in preparation for a big trip – just how will I access my money once I’m on the road? (Or in the air, or on the water, or on the rails, or…)

    The answer is changing rapidly, just as anything remotely digital is changing rapidly these days. Older guidebooks will tell you it’s all about travellers cheques and foreign exchange bureaus, but I think we all know that those are so outdated they’re not even worth considering these days.

    So what are your options?

    You can end up with a lot of different currencies sometimes...

    You can end up with a lot of different currencies sometimes…

    You need to do some research.

    First things first, step one, do a little research on where you’re going. What is the currency? What is the exchange rate with your usual currency? Are there likely to be banks with ATMs at your destination? ATMs are nearly ubiquitous, but there are a few destinations where they remain few and far between, for example in Myanmar, or in many rural areas.

    If there’s not going to be any ATMs, you’ll need to take currency with you, and you’ll need to pack it carefully, as no one feels safe wandering around with large wads of cash. Spread your cash over different hidden pockets in different bags, that way if you’re robbed, you’re unlikely to lose everything. And again, you must research your destination, ensuring you find the most up to date information possible about how to get your money in the first place. For example, when I travelled to Myanmar in late 2013, guidebooks published in 2011 recommended the black market as the best way to change money, but a bit of research showed that the official rate had finally caught up to the black rate, and the airport was now regarded as the best place to change money. My research also told me that my Australian dollars would be useless there, and that I would need to exchange pristine US dollars. It felt odd packing US dollars for a trip to Asia, but there you have it.

    But let’s say you’re heading to a destination where ATMs are abundant. Should you bother with a travel money card? Well in the end, it all comes down to fees.

    Ugh, bank fees.

    Banks like to advertise what fees they don’t charge, but it’s important to remember that there are always fees. Some of the fees you might encounter while travelling are:

    • Fees to withdraw money from an ATM (charged by your bank and the ATM itself)
    • Fees to convert money into another currency (usually called commission)
    • Fees to convert leftover money back into your own currency
    • International transaction fees (ie currency conversion fees on your credit or debit card)
    • Credit card surcharge fees (could be much higher than at home, up to 20% in some places)
    • Fees to buy a travel card
    • Fees to load money onto that card

    So your job as a savvy traveller is to minimise fees and thereby maximise your spending money. You’ll need to employ a different strategy depending on not just where you’re going, but how long you’re going for.

    For a short trip, by far the simplest option is to just use your own ATM card to withdraw money once you’re in the foreign country, an extremely simple process if you have a Visa or Mastercard debit card. Yes, you will be slugged with an international transaction fee and an ATM use fee, so it can be a good idea to try to withdraw all the money you’ll need in one hit. But you will save yourself a lot of time, energy and effort by not worrying about the other options!

    If you’re not sure whether you’ll be able to access am ATM right away, it can be a good idea to purchase some foreign currency before you leave. Expect to pay commission, but it can be worth it for the peace of mind of being able to get a coffee at the airport and a taxi straight to your hotel. Not all currencies will be available in your home country though, it depends what the exchange bureaus stock. You might be able to get more unusual currencies by ordering in advance through your bank.

    While you’re overseas, you can use your credit or debit card for larger purchases, such as at hotels, to minimise how often you have to withdraw money (and hence minimise your ATM fees). You will pay an international transaction fee, usually about 1-2%. Keep in mind some tellers such as hotels will charge you an additional credit card surcharge, which can be over the top, so check before you hand over your card and use cash if the charge is too high.

    If you’re going for a longer trip and expect to use your credit card a lot, a travel money card can be a good option, because you can use it as a credit card without international transaction fees. You will still get charged ATM fees though, likely from both the card and the ATM. You’ll also be charged to load money onto the card in the first place. Ignore the fuss about the convenience of multiple currencies on the one card – that’s just marketing spin. Your basic Visa or Mastercard debit card can already withdraw any currency from a local ATM, whether it’s Canadian Dollars, Vietnamese Dong or Mongolian Tughrik.

    How does all this work?

    So how do you work out what fees you might expect to pay, and what’s better value for you? A few simple calculations will help.

    Let’s say you’re going on a three week trip. You’ve booked (but not paid for) your hotels, they’re around $100/night and probably have credit card facilities. You’ll be travelling overnight sometimes. You’ve worked out your spending money needs to be around $100/day, and many of the places you’ll be spending money (cafes, museums) have credit card facilities. On your own card, you could expect your fees to be something like $100 per hotel x 1% international transaction fee + 1% credit card surcharge x 15 nights = $30, 2x$500 ATM withdrawals x 1% international transaction fee + $3 bank fee + $6 ATM fee = $28, $1000 on the credit card x 1% international transaction fee = $10, so your total fees would be $68. On a travel money card, you don’t pay the international transaction fees, but you do still pay the ATM fees and credit card surcharges, so your fees overseas are $33, plus the $15 or so to buy the card in the fist place, and the $10 fee to load money onto the card, so the total is $48. That’s less than using your own card, but only by a little bit, and your have to consider in the additional hassle and running around to organise it before you go, not to mention getting any leftover money off the card once you’re home. But the longer you travel for, and the more you use it as a credit card, the better value the travel money cards become.

    Here’s another scenario. Another three week trip, travelling overnight sometimes, but you’ll be staying in dirt cheap backpackers places, no more than $10/night. You’ll be eating street food and at local cafes, so credit card facilities are probably not going to be readily available. Your spending money is going to be around $40/day. In this situation, you need to pay for everything in cash. Your 2x $500 ATM withdrawals will cost you around $28 with your own card (2x $500×1% international transaction fee + $3 bank fee + $6 ATM fee) or $18 with a travel card (because you don’t pay the international transaction fee). But the travel card has those initial establishment costs ($15 to buy the card, $10 to load it up), so your total fees wind up being $43, vs only $28 with your own card. This one’s a no brainer – don’t bother with the travel card.

    Hopefully that all makes a bit of sense! If you have questions about how to estimate your potential fees, comment below and I’ll see if I can help you work it out. Remember, the key is always to research your destination to figure out any quirks of the local economy, and then to guesstimate how much you’ll be spending on your trip.

    Happy travels! 🙂