Travel Tips: Travel Money Options Explained

What is the best way to take my money? This is a common question for travellers. The answer depends on where and how long you will be travelling.

What is the best way to take my money? This is a common question for travellers.  The answer depends on where and how long you will be travelling.

This article focuses on short term travel money options, where you will be visiting a country for short periods as a tourist.

What is an Exchange Rate?

Every currency in the world is traded, and the value of your currency changes every day.  These changes relate to economic strength, interest rates and other economic influences such as the Global Financial Crisis (GFC).  Each currency has the official exchange rate, and each bank has the exchange rate they use to calculate transactions which has their profit margin added to the official exchange rate. 

Exchange Rate Calculation

When you try to determine how much something is costing you when you travel internationally, you need to factor in a few factors as follows:

  • The amount in the foreign currency
  • Your bank exchange rate of the day
  • The cost to obtain your money (eg. ATM withdrawal fees)
  • Your bank charges for international transactions.

For example, if you are a citizen of Australia with bank accounts in Australia, if you withdraw €300 from an ATM in France, if your bank exchange rate for the day is $A1 = €0.7107, the ATM withdrawal fee is €2, and your bank charges you a 2% fee per international transaction, then you calculate it as follows:

€300 = (300+2)/0.7107 = $A424.93

Bank Fee = $A424.93 * 0.02 = $A8.50

Most smart phones have a currency converter application available to help make the calculations easier.

Money Types

The type of travel money you use will depend on many factors, including the length of your trip, the risk of being robbed or losing your wallet, and how quickly you will need funds if you can no longer access your funds.  Each person makes a decision on which option will suit them, and many people use a combination of options.

Cash

Options to purchase foreign cash can vary, depending on what exchange rate is used.  Reputable exchange options will normally be close to the official currency exchange rate.  XE provides up to date information about the exchange rates for most countries.

Be wary of non-official currency exchange options, such as a street side offer to exchange money – these will be black market options and are illegal in most countries.  You are at high risk of being scammed and you could also be arrested.

Carrying too much cash is a risk, because if you are mugged or your luggage is stolen, you may lose your money and have no option to recover it. Review your travel insurance terms and conditions to see what is covered.

Debit Cards

There are several options available to use money directly from your bank account when travelling internationally.  These include debit cards which are branded with any of MasterCard, Cirrus, Maestro, and Visa.  Debit cards can be used both to withdraw cash from ATMs, and at any business which displays the relevant logo.

To find ATMs where you can withdraw cash internationally, look at MasterCard, Cirrus and Maestro ATM Locations, and Visa ATM Locations.

If your debit card is lost or stolen, you should phone your service provider as soon as possible to cancel your card.  A replacement card should be provided, but may take some time to arrive.

Check with your bank to use your debit card internationally and also to advise them of your travels so they do not cancel your card due to unexpected transactions.  Also check what fees and charges will be applied to international transactions.  Obtain the phone number to call if you need assistance.  Check whether you will need a card with a chip, and also whether the countries you are visiting will accept signature or pin or both, and prepare accordingly.

If your card is lost or stolen, consider whether you also use the card for automatic payments, as you may need to make many phone calls in this event to cancel your payments.

Credit Card

There are several credit card options available when travelling internationally.  These credit cards are branded with any of MasterCard, Cirrus, Maestro, Visa, American Express and Diners Club.  Credit cards can be used both to withdraw cash from ATMs (with extra cash advance fees), and at any business which displays the relevant logo.

To find ATMs where you can withdraw cash internationally, look at MasterCard, Cirrus and Maestro ATM Locations, Visa ATM Locations, AMEX – ATM Locations and Diners Club – ATM Locations.

If your credit card is lost or stolen, you should phone your service provider as soon as possible to cancel your card.  A replacement card should be provided, but may take some time to arrive.

Check with your bank to use your debit card internationally and also to advise them of your travels so they do not cancel your card due to unexpected transactions.  Also check what fees and charges will be applied to international transactions.  Obtain the phone number to call if you need assistance.  Check whether you will need a card with a chip, and also whether the countries you are visiting will accept signature or pin or both, and prepare accordingly.

If your card is lost or stolen, consider whether you also use the card for automatic payments, as you may need to make many phone calls in this event to cancel your payments.

Pre-paid Cards

There are also pre-paid card options affiliated with MasterCard and Visa which are offered by banks and businesses.  These involve purchasing a new card which is either:

  • An ATM only card which you can use to withdraw cash from any affiliated ATM, or
  • A debit card which you can use to withdraw cash from any affiliated ATM, and use in any affiliated business or on the internet.

There are a range of options to transfer money onto the card both before and while you travel, including over the counter, online and via SMS message.

If your pre-paid card is lost or stolen, you should phone your service provider as soon as possible to cancel your card.  A replacement card is often provided when you purchase the main card, and only needs to be activated which provides an almost immediate replacement.

An advantage of the pre-paid cards is that they are separate from your normal bank accounts, so in the event of loss you only need to deal with the loss of that card, and none of your other personal finances.

The pre-paid cards may have an expiry period if they are not used, so ensure you review what to do with them after your trip has finished, and how to obtain any remaining funds.

Travellers Cheques

Travellers cheques are becoming less common, however are still a viable option to take travel money with you in a secure manner.  You purchase them before you departure in the currency of your choice, which locks in the exchange rate, and you may also have to pay a fee to purchase them.  When you are travelling, you go into any bank or currency exchange provider and exchange the travellers cheque for local cash, often with a small fee.  Some businesses will also accept them as a form of cash, and give you change in local currency.

Travellers Cheques are secure, as you sign them when you receive them, log the serial numbers down, and in the event they are lost or stolen you can contact the provider and you will receive replacement travellers cheques within a short timeframe (some providers advertise within 24 hours).  When you cash the cheque you sign it a second time and currency is provided to you in exchange.  Travellers cheques do not expire, so can be retained for several trips or exchanged back to your local currency when you return.

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