Record numbers of Australians are travelling overseas. In 2011, over 7 million Aussies were expected to have travelled overseas; that’s around 3 million more of us than 10 years ago. The strong Australian dollar, plus new low-cost international airlines have made it much easier for the average Aussie to afford an overseas visit. But all this travel means that many of us have to think about foreign exchange for the first time ever, and the wide array of choices about how we pay for our expenses overseas.
The good news is that there are several ways of paying as you go, as opposed to the days when travellers cheques or large wads of cash were the only alternatives! Here are five main options you can consider.
Travel cards – these “pre-loaded” cards are a relatively new phenomenon. A good example is the ANZ travel card. For an $11 purchase fee, you can load the card with up to 10 major currencies. It’s a debit card, not a credit card, so you’ll be using your own money. In this particular case, you can use it free for purchases, but you may pay an ATM fee depending on where you are. Because you purchased the foreign currencies on the day you bought the card, you don’t pay a foreign exchange commission when you use the card at a later date.
Debit card – a debit card accesses cash directly from your everyday transaction account, so the good news is you’re not going into debt to fund your holiday when you use it. You need to be aware of ATM access fees, and currency conversion fees – these differ from card to card.
Credit cards – the growth of the Visa and Mastercard networks makes using a credit card overseas very simple. You should always tell your local institution when and where you’ll be travelling so they don’t suspect card fraud, but credit card acceptance worldwide is now very widespread. There are some big and scary costs that can arise though – most notably around currency conversion fees, and avoid using credit for cash advances!
Remember a credit card debt is just as much a debt as a home or personal loan – and generally more expensive. Even the cheapest credit card will charge you a double-digit interest rate, so make sure you pay your debt in full. Don’t just pay the minimum; if you just pay the minimum of 2%, a $3000 credit card bill at the end of your trip can literally take over 20 years to repay!
Many credit cards come with automatic travel insurance, which is good, but some of these policies may be more restrictive than is suitable for you.
Cash – as a general rule, it’s the one form of payment that you know will be accepted everywhere! It’s obviously convenient to carry cash, but it can also be risky in terms of theft. If you’re bringing it from Australia, be sure to shop around for the best foreign exchange rates and lowest fees. If you’re getting it overseas from an ATM, make sure you’ve done your research on the ATM and currency conversion fees that might apply to your account. Many accounts offer low or no fees provided you use a particular ATM network, and you should be able to check this on your local financial institution’s website or by calling them.
Travellers cheques – they’ve fallen out of fashion in recent years, but they can still be a useful back-up plan. Traveller’s cheques are pre-printed for a fixed amount, and you’ve already purchased them in a nominated currency (often US dollars). They’re still widely accepted, and can be replaced if stolen or lost (unlike cash!). Some establishments charge fees for the use of travellers cheques, but there’s no golden rule on this.