You’ve booked your airfares and probably your accommodation and even some activities – depending on whether you’re a super-organised traveller or prefer to wing it – so now all you need to do is look forward to your overseas trip.
Or have you missed something? Have you given enough thought to the payment methods you’re going to use when you get there? There are plenty of options – foreign currency in cash, credit cards, debit cards and travel cash cards. Let’s take a quick look at all of these.
Foreign currency in cash
Wherever you’re going, you can be reasonably sure that no one is going to turn down a payment made in local banknotes or coins (although it could be a problem in Norway and Sweden). But on the whole, cash is a universally accepted payment form, although the downside is that it’s bulky and a security risk in large amounts. It can also be a nuisance if you’re going to visit a few countries with different local currencies, which means you’ll end up paying foreign exchange commissions several times, as well as getting a poor exchange rate if you have to convert your cash at an airport. So although you’re definitely going to need some cash for small purchases, and possibly tips, you shouldn’t plan to carry large amounts of it.
It’s not safe to assume that your credit card will be universally accepted wherever you travel. While Visa and Mastercard are almost certain to work at large hotels and other tourist-oriented businesses in major cities in the developed world, you may have less luck with an American Express card. Even in a city, small convenience stores and less luxurious types of accommodation may turn away your credit card, and if you plan to venture off the beaten track you risk entering a credit-card-free zone.
Before you leave Australia you should certainly plan to pay for your airfares and prebooked accommodation and tours with your credit card, especially if you have one that will give you rewards points and lock in free travel insurance or airport lounge access. But most cards charge a fee of 2-3% for transactions with an overseas merchant, even if you’ve been charged in Australian dollars. This makes using a credit card overseas a slightly more expensive option than you may have provided for in your budget, unless you have a card with no foreign transaction fees.
You can, in theory, also use your credit card – Visa or Mastercard, but not Amex – for cash withdrawals in an overseas currency, but to do so is to let yourself in for a potential barrage of additional costs. These include the certainty of interest charges at a high rate, applied immediately, plus the probability of an overseas transaction/currency conversion fee, a cash advance fee and a further fee for using an overseas ATM.
Unless you are very careful, using a credit card overseas can also play havoc with your holiday budget in another way. It’s easier to keep track of a dwindling pile of cash, and draw in your horns if necessary, than it is to monitor a growing credit card balance (since overseas transactions usually take longer to process) and avoid the temptation to overspend.
Most debit cards can be used overseas in much the same way as credit cards, with the obvious difference that you are paying with your own money, from a linked bank account, rather than using credit. They are a convenient way to pay overseas, where they are accepted, because there’s no requirement to plan ahead for how much you will need in one or more foreign currencies. And although you’ll lose the benefit of a credit card’s interest-free days, you’ll be less tempted to overspend.
You may still have to pay foreign transaction fees and cash withdrawal fees, but your debit card may be more acceptable to merchants than a credit card because the processing fee they pay is likely to be lower. There will still inevitably be places where the technology for processing any kind of card transaction is not available.
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Travel money cards
A travel money card is a prepaid debit card. It is not linked to your Australian bank account, so you need to preload it with either a single currency or multiple currencies before you travel overseas. It’s much more secure and convenient than carrying foreign currency banknotes, and could be preferable to using a credit card because you can lock in the exchange rate before you travel, instead of having to accept the rate prevailing on the day you make a purchase transaction. You’ll also avoid the 2-3% foreign transaction fees charged by many credit cards.
Your travel money card can be used in just the same way as any credit or debit card. Use it for shopping, eating out, travel fares, tours and entertainment, and cash withdrawals in local currency. Some travel money card issuers recommend not using the travel money card as payment security when you arrive at a hotel or pick up a hire car, because the pending charge will restrict your access to your cash. Use a credit card for payment security instead, then pay with your money card when you check out of the hotel or drop off the car.
Some platinum travel money cards come with platinum benefits. These may include things like discounts on tours and entertainment, overseas assistance for travellers and free global Wi-Fi, and even rewards points earned on card spending. Each card is different, so you need to check out the individual fees and benefits, plus any limits and restrictions, before deciding which card is right for you.
A travel money card survey conducted by Choice found that, while exchange rates used varied from card to card, so did fees and charges – effectively offsetting the exchange rate variations because the cards with better exchange rates tended to charge higher fees. All cards factor a profit margin into the exchange rate they use.
Although you can’t do much about the exchange rate, some features you will need to consider are which currencies can be loaded onto the card, and the minimum and maximum load amounts. Fees you need to compare include:
Card purchase fee
Currency loading fee
Monthly inactivity fee
Card closure fee (to avoid inactivity fee, if any)
Cross currency conversion fee (charged when you need to use currency B on your card because you’ve run out of currency A)
ATM withdrawal fee
Card replacement fee
We’ve done the work for you, by comparing five popular travel money cards side-by-side.
|Features||NAB Traveller Card||Travelex Money Card||Australia Post Travel Platinum Mastercard||Cash Passport Platinum Mastercard||Qantas Travel Money Card|
|Currencies available||USD, GBP, EUR, THB, NZD, SGD, HKD, CAD, JPY, AUD (no AED)||USD, GBP, EUR, THB, NZD, SGD, HKD, CAD, JPY, AUD (no AED)||USD, GBP, EUR, THB, NZD, SGD, HKD, CAD, JPY, AED and AUD||USD, GBP, EUR, THB, NZD, SGD, HKD, CAD, JPY, AED and AUD||USD, GBP, EUR, THB, NZD, SGD, HKD, CAD, JPY, AED and AUD|
|Purchase fee||None||Greater of 1.1% of initial load/top up or $15||None||None||None|
|Load/reload fee||None||Free booked via travelex.com.au, 1% via BPAY, 0.77-1% via card||None online, but $5 using debit card, 1% using BPAY, 1.1% in store||None online, but $5 using debit card, 1% using BPAY, 1.1% in store||None (but 0.5% using debit card)|
|Monthly inactivity fee||None||$4 per month, starting after 12 months of inactivity||None||None||None|
|Closure fee||None||$10||$10 for withdrawing remaining balance over the counter||$10 for withdrawing remaining balance over the counter||None|
|Cross currency conversion fee||4%||5.95%||None||None||None|
|ATM withdrawal fee||No overseas ATM fee charged by NAB (overseas ATM operator may charge), $3.75 in Australia||No overseas ATM fee charged by Travelex (overseas ATM operator may charge), 2.95% in Australia||2.95% in Australia, AUD3.50 and approx. equivalent in other currencies (possible extra charge from overseas ATM operator)||2.95% in Australia, AUD3.50 and approx. equivalent in other currencies|
(possible extra charge from overseas ATM operator)
|AUD1.95 and approx. equivalent in other currencies|
(possible extra charge from overseas ATM operator)
|Card replacement fee||None||None||None||None||None|
|Minimum load amount||AUD50||AUD100||AUD100||AUD100||AUD50|
|Maximum load amount||AUD45,000||AUD100,000||AUD100,000||AUD100,000 per 12 months||AUD100,000 per 12 months|
|Other benefits||Free 24/7 global emergency assistance||Free Boingo global Wi-Fi and merchant discount offers||Free global Wi-Fi for 3 months with each $100 reload||Free Boingo global Wi-Fi and Flight Delay Pass||Earn Qantas Frequent Flyer Points on purchases|
These are, of course, basic comparison parameters. You should read your chosen card’s Product Disclosure Statement before making your final decision.
Do your research to pinpoint your best option
When it comes to deciding which overseas payment method will work best for you, a little research will go a long way towards narrowing down your options. First of all, try to find out what payment options are going to be available at your destination, especially if you are travelling to an obscure country or to isolated or remote locations in a developed nation.
Will card technology and ATMs be universal or intermittent? How much cash are you likely to need for transport, tips and minor purchases? Is it safe to carry reasonable amounts of cash? Are you going for a relatively short trip, in which case a credit or debit card may be all you need, and possibly a cheaper option?
If, when you’ve answered these questions, you decide that a travel money card will suit you best, use our comparison table to work out your likely cost after factoring in the number of times you’re likely to reload cash or withdraw cash from an ATM. Don’t forget to assess the possible value to you of any other benefits accompanying the card.
And above all, travel safely and have fun.