It pays to plan ahead
Accessing your cash abroad has become easier than ever for travellers, writes Christine Long.
The No.1 piece of advice for taking money when you're heading overseas: pack a back-up option. If a pickpocket grabs your wallet or an ATM swallows your debit card, you'll be glad of plan B.
As an academic, Paul Giles often travels overseas to speak at conferences. So far this year, the University of Sydney English professor has been to New Zealand, Taiwan and the US. Next month he's off to China. Mostly he relies on his Commonwealth Bank debit card to access cash from ATMs while he's on the road.
"Often I get cash out and then change it back," he says, adding that he doesn't really worry about the cost. Convenience and the safety of carrying around small sums of money are what counts.
But he hit a snag on a recent trip to Los Angeles when his debit card wouldn't work in a shopping mall ATM.
"I thought in a shopping mall there would be ATMs everywhere and there wasn't and I needed money for a taxi," he says.
Fortunately, a British bank account saved the day. He plucked his Barclays Bank debit card from his wallet and was able to withdraw the dollars he needed. The professor is not alone in using ATMs when he travels. According to Visa's second annual Cash Access Survey, released in April, 56 per cent of Australian travellers use ATMs to access cash.
Visa's country manager for Australia, Vipin Kalra, says the debit cards "allow consumers to spend abroad much like they do at home accessing their own funds safely and conveniently with competitive exchange rates." It comes at a cost, however. The major banks charge $4-$5 for a cash withdrawal from an overseas ATM, plus a currency conversion charge of 2 per cent to 3 per cent of the transaction, and the overseas ATM operator may attach another fee.
In some countries you can run into trouble if your PIN has letters or more than four digits and there are still places, such as Myanmar and parts of Africa, where ATMs are sparse or non-existent.
Westpac offers a way out of its $5 cash withdrawal fee if travellers use ATMs in its global alliance network, which includes Bank of America, Barclays and Deutsche Bank. The Citibank Plus account allows users to access cash free via the 20,000 ATMs in its global network. Publisher of the comparison website Finder.com.au, Jeremy Cabral, says currency conversion rates on debit cards are generally better than other methods of travel money. The rate is applied, however, at the time of the cash withdrawal or purchase.
Prepaid travel cards come into their own for those concerned about the direction of exchange rates and want to lock into a particular rate. The money is converted into the preferred currency or multiple currencies when the card is loaded. Darren Brown, Asia-Pacific director for Travelex, which issues the Cash Passport prepaid travel card, says: "It can help the consumer manage their budget [because] they know how much foreign currency they have."
From a security perspective, the cards are not linked to an individual's bank account and access is via a PIN. They can be used to withdraw money from an ATM or to shop online or in-store.
General manager of Flightcentre's Travel Money Oz, Dion Jensen, says these advantages make them attractive to travellers embarking on long trips.
"The trend is really now towards prepaid cards if they are travelling for a longer period of time," Jensen says. "Those cards can be used like a normal credit card but they are not subject to the fees that a bank would normally impose." They are, however, yet to enter the world of contactless payments where you don't have to sign or enter a pin for payments less than $100.
The latest development in this space is Virgin's Global Wallet, which links a travel money card with its Velocity frequent-flyer membership. Charges vary on prepaid travel cards, which are offered by the major banks as well as players such as Travelex, OzForex and Travel Money Oz. Some charge a fee of $10-$15 to buy the card, and there may be a transaction fee of up to 1.1 per cent to load the card with money initially or to reload it. Monthly inactivity charges can apply after 12 months of non-use.
OzForex issues the card free, charges $15 for the first load and then nothing for reloads, but there are flat fees for ATM withdrawals and balance enquiries and a 3 per cent fee if a transaction is made in a currency not loaded on the card.
Cabral discovered one of their potential disadvantages in Germany when he wanted to transfer funds from his bank account to his prepaid travel card from the same institution to buy his partner a special present. "Because it was a Friday night in Australia it took up to six days to get the funds off the card," he says. He also found the currency conversion rates attached to the cards can be up to 1 per cent higher than those associated with credit cards.
On the flip side, when his wallet was stolen in Rome, he was glad a back-up card had been automatically issued with his prepaid travel card.
The credit card is how travellers tend to pay for flights and accommodation, Cabral says. It can also be the "in-case-of-emergency" option. A recent study by technology provider HP and research firm RFi found that the preference for using cash as a payment method had dropped from 51 per cent of Australian travellers in September last year to 40 per cent in March, because of the increased use of credit and debit cards.
"Card issuers have started to identify the removal of international transaction fees on credit and debit cards as a means to capture a greater share of online spend," the report says.
The GE Money 28 Degrees MasterCard is one of the new breed, catering to travellers wanting to withdraw cash at ATMs. It doesn't charge for ATM withdrawals overseas. Where it can hurt is if you spend up big and don't pay off the balance within the 55-day interest-free period, Cabral says. The interest rate for purchases is 20.99 per cent.
Tips and fast facts
Taking your debit or credit card overseas?
It’s a good idea to let your bank know. Bank fraud detection systems get nervous when an Australian suddenly starts racking up payments in foreign countries. The last thing youwant is a frozen credit or debit card when you’re in a bar in Barcelona or sampling the pilsner in Prague.
Spend that change. In March a Visa Payments Attitudes Study found that Australians have on average $298 lying around in unused foreign currency from a
holiday or business trip. Rather than bring it home, use the change to make a
last-minute purchase at the airport before jetting out or give it to charity. You can donate coins at Commonwealth Bank branches or on Qantas flights within Australia to support UNICEF.
Have a back-up plan. Research by Virgin Australia’s Velocity frequent-flyer program found 37 per cent of Australians only take cash overseas, leaving them with no back-up if their money is stolen.
For a withdrawal, your bank charges:
ANZ $5 plus 3 per cent of transaction value.
Bank of Queensland $5 plus 3 per cent.
BankWest $5 plus 2.95 per cent.
CBA $5 plus 3 per cent.
Citibank 2.5 per cent.
HSBC $4.50 plus 3 per cent.
NAB $4 plus 2 per cent.
St George $5 plus 3 per cent.
Westpac $5 plus 2 per cent.
Using your debit card at an overseas ATM
'I need to keep it simple'
Melbourne accountant Phil Derham (below) is planning to cram a whole lot of holiday into the space of a month when he jets overseas in September.
"I'm going to ride my bike in Italy up in the mountains, I'm visiting friends in the UK and Switzerland, and I'm catching up with a friend in New York and we're going to do a car trip down to Nashville and get countrified," he says.
With an itinerary that sounds something like a triathlon, there's no way he would consider taking travellers' cheques. He doesn't want to waste a precious moment changing money in banks. "That's why I need to keep the money simple," he says.
His preferred option? A prepaid travel money card loaded with euros, pounds, US dollars, and possibly a few hundred Swiss francs.
Part of the appeal is that he pays just one fee when he buys the card and there are no transaction fees when he uses it.
He wasn't overly concerned about locking in exchange rates, even though it's touted as one of the advantages of prepaid travel cards.
"To me, when you're spending the amount of money I'm spending on an overseas trip, a few dollars here or there on an exchange rate pales into insignificance, really," he says.
"What I need is convenience, and that is what I'm paying for."
Flights and a deposit on his Italian accommodation are already on his credit card and he will probably flash the plastic again for flights and trains when he's on the road, and to pay the balance of his accommodation costs.
While the 56-year-old has a mental picture of his daily travel budget, he's also got a fall-back solution if he ends up living larger than expected. "I've always got a credit card."
How do you prefer to spend your money when overseas?
Travellers cheques 5%
Credit/debit card 40%
Travel money card 16%
What are you most of concerned about when travelling overseas?
Getting ill 29%
Not being able to speak the language 14%
Unable to exchange foreign currency 2%
Fees for overseas purchases 5%
Lost or stolen card 11%
Theft, fraud or stolen money 31%
Source: Galaxy / Virgin Australia