When travelling overseas, there is a long list of decisions to make, from airfares and accommodation to travel insurance. A significant factor that will impact your budget is the method you use to pay for your purchases overseas. Here we look at the pros and cons of the five most common methods used by Australians.
1) Specialist Debit Card
Traditionally, debit cards have been an unfavourable option for Australians with poor exchange rates and high fees for overseas use. This has changed though, thanks to some international providers including Citibank. Their card, Citibank Plus has:
- No annual fees
- No currency transfer fees
- Exchange rates quoted by Visa
- The ability to have cash withdrawn at most ATMs
There are two issues with this method. Firstly, you need to apply for the card, which has some paperwork and lead times. Secondly, this is a debit card so you need to load up the account with funds that you will use.
2) Specialist Credit Card
Historically, one of the most popular cards for travel savvy individuals has been a credit card designed specifically for travellers, such as the 28 degrees card. This card has similar benefits to Citibank Plus, including:
- No annual fees
- No currency transfer fees
- Exchange rates quoted by MasterCard
- Up to 55 days interest free on purchases
This card’s popularity has decreased however, due to changes that see users charged up to 3% if they use the card at an ATM.
3) Cash
Previously, many Australians have exchanged cash to another currency prior to their trip. A key reason for this is to secure an exchange rate ahead of time. This has similarities to forex trading where individuals speculate on currency movements but with leverage. There are issues though with cash, which include:
- Poor exchange rates (especially from the banks)
- Restrictions on how much cash you can take
- The risk of theft
These three factors are a few of the main reasons why cash is losing popularity with Australian travellers.
4) Travel Money Cards
These cards are often promoted in banks, financial institutions and even Australia Post. These money cards have positives and some hidden negatives, which most people aren’t aware of.
The key strengths can include:
- They are easy to purchase and load
- You can lock in your exchange rate
- Security and back-up card options if lost or stolen
- Insurance on purchases that are lost, damaged or stolen
These features may sound great, but there is a reason these cards are pushed hard by the banks and other companies, including:
- High currency conversion fees of up to 4.5%
- Fees, fees and more fees from issue, transaction to withdrawal
- The card has an expiry date when your cash is lost
- Additional conversion fees are charged to convert back to Australian dollars.
It’s important to understand the travel money card you are considering inside and out, and weigh up the pros and cons before choosing this option.
5) Traditional Credit Cards
Most credit cards can be used overseas from the big banks and other Australian financial institutions. This is the most convenient option but also can have the highest costs, including:
- High currency conversion fees
- ATM withdrawal fees
- Cash advance fees
Check the terms and conditions of your existing card to fully understand these fees and charges before you use your card overseas.
So What’s Best For Me?
The best combination for Australians is to take with them a specialist debit card (Citibank Plus) and specialist credit card (28 degrees card). This allows you to withdraw cash at ATMs for small transactions (or vendors that don’t accept credit cards) and use a credit card for the remaining transactions with interest free on purchases. It’s worth noting these cards do take time to apply for and receive, so be sure to plan well ahead.
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