I’m posting this from the Sydney International Airport, where I am about to board a flight for the fourth international trip in six months. I hadn’t travelled much since I came back from Taiwan four years ago. And then, suddenly, this year I have had a rush of overseas travel. It happens. And each time, I feel like I am such a rush preparing to go that thinking about money is the last thing on my mind.
Being a frugalista, I watch my money closely. But I must admit that I’ve had this feeling for a while that I don’t have a good handle on managing money overseas. It was also with interest that I noted Australian Competition and Consumer Commission is launching an investigation into foreign currency services. Now, admittedly most of that was about transferring funds overseas (i.e. remittances), but it got me thinking about how I could be more savvy with all that AUD into other currencies stuff.
So I asked around on The Joyful Frugalista Group for ideas, and chatted with my global trotting second cousin aka Travel She Sez, and my Neil and I did some research. These are some of our observations:
- Cash is king. There were several moneychangers near our apartment in Singapore, and all of them offered much more competitive interest rates for changing Aussie dollars into Singapore dollars than our cards did. My cousin Sez told me the same thing. The big downside is of course security. Tourists are often vulnerable because, well, they look like tourists so they can be more easily targeted. If you are travelling around with wads of cash, it’s not the safest.
- Order your foreign currency in advance to get a discount. It’s often a good idea to exchange some money before you get on the plane to ensure you have a bit of cash for taxis, buses and trains etc in the local currency. I had no idea about this until I saw a sign at Global Exchange at Sydney Airport. They said they offer a discount of 50% on the exchange rate if you order at least two days in advance. I exchanged AUD$80 to NZD$65, and I could have gotten NZ$75 if I had booked in advance. I’m sure that would have bought me an extra coffee and some date scones. Or lamingtons (best not get into that debate).
- Some credit cards are marketed specifically for travellers and offer zero transaction fees. There are two in this category that my Neil and I find interesting:
- 28 Degrees Mastercard – offers zero annual fee, zero transaction fees and free global WiFi. We have no idea how this global WiFi works, but we are intrigued (have you tried this?) It also includes a free concierge service (has anyone tried this?) But this card does not have travel insurance, and has a high interest rate for purchase of 21.99%.
- Bankwest Zero Platinum Mastercard – no annual fee, no foreign currency conversion fee and no overseas ATM withdrawal fee. It includes travel insurance. Downside: interest rate for purchases is $17.99 (has 55 days interest free), but it offers a better rate than 2
- Some credit cards, notably Visa, include high quality travel insurance. If you travel overseas at least once a year, you might find investing in a credit card with a rewards program is worth it just for the travel insurance. I can’t believe I’m saying ‘invest in’ and ‘credit card’ in the same sentence, but we’ve done the sums and often – but not always – it costs more to take out travel insurance than to pay the annual premium of good quality, competitive credit card with a decent rewards program (note: you might even find one with no annual fee such as Bankwest above). It is important that you read the product disclosure statement to see what you are covered for. Usually there is a stipulation that all or at least a large portion of your travel was paid for on your credit card. It is important to see if other family members are covered, and whether you have to notify about pre-existing conditions (e.g. heart attacks like the one my Neil suffered.)
- Have a back up credit card just in case. On our recent cruise ship, one of our travel companions was notified that her card had been compromised and that it had been cancelled. There she was, in the middle of the Great Southern Ocean, on a cruise ship with no credit card. No more cocktails for her! Well, thankfully she could indulge in some aperitifs a she had another credit card just in case. And thankfully also, her bank rang her while the ship was in port, so she was able to receive the phone call notification. Otherwise, being overseas and suddenly having your card cancelled could have been awkward.
- Travel cards can be useful but not everywhere accepts them. I like my Qantas Travel card, but I am in no delusions about the costs. It is transaction free in Australia but charges atm transaction fees overseas. While it doesn’t charge an overseas transaction fee, it does okay on the exchange rate it charges. These types of travel cards are a bit like cash except that if you lose them you don’t lose the cash. You need to upload cash on them first before using them, so there is a limit to how much you can spend. You can also choose to upload money in certain currencies (note: you can still keep in AUD but you might like to load up another currency if the AUD is going up relative to that currency). You can also earn Frequent Flyer points but they are nowhere near as generous as most credit card rewards program. Our experience is that not all places will accept travel or debit cards (e.g. our cruise ship line would not), but it is handy for buying things in convenience stores (e.g. Seven 7 in Singapore and Carrefour in Brussels). I like the fact that I don’t have to stand at a check out awkwardly working out what money I have, nor do I get stuck with small denominations of foreign currency as much. (Note: there are other products including a Velocity card linked to Virgin and an Australian Post card that works well with Union Pay. I think the rewards with Velocity are better than Qantas Travel.)
- Some bank accounts do not charge foreign transaction atm fees. Some banks, notably ING and UBank, do not charge you anything if you withdraw funds from your Australian bank account at an overseas atm. They won’t charge an overseas transaction fee on purchases either. These bank accounts are essentially accessed via a Visa or Mastercard debit card. Like travel cards, not all places accept them. I find it is a bit random – sometimes a place will only accept a credit card, sometimes only a debit card or a travel card.
- The exchange rate is important. While having a bank account or card that doesn’t charge overseas transaction fees can save you money, the most important thing to watch for is the exchange rate. You might not mind paying AUD$2 or $3 if you are withdrawing AUD$1,000 and the rate is 1% better (i.e. that would save you $10 just there). It is, however, devilishly hard to compare rates. But my second cousin Sez says it can sometimes pay to withdraw a small amount first, check the interest rate on your receipt, and then decide if you want to withdraw more on that card or on another card. Some useful resources for this are:
- Mastercard has an exchange rate conversation online
- Qantas cash card holders can see the daily exchange rate online or on their app before they make a transaction.
- Some banks publish their foreign exchange rate, e.g. ANZ.
These are some of my observations. I’m still learning, still making mistakes with this. And it strikes me that if I am a frugalista and money blogger, and if I am confused by all of this, then it is pretty complex stuff. So, over to you – how to you manage your money when you are overseas? What tips and tricks have you developed to manage your money wisely?