Do you have any money on you? I rarely do it these days. The supermarket, the gas station, the cafe – it’s all tick and go, and I’m not the only one. Going out to dinner with friends, it’s cards and transferring money to whoever pays the bill. Only rarely does someone carry cash with them. Does this also apply abroad?
Do I still need cash abroad?
Yes, probably less than you needed a few years ago, but how much less depends on where you’re going. In most parts of Western Europe or North America, a few hundred dollars in local currency can easily last you a week. In Southern Europe, morning coffee with a croissant in a cafe or bar is king, cash is king. The same goes for taxi fares, gratuities and shopping at markets. You can usually pay for hotel bills, meals and just about anything else with a card in cities and tourist areas, but in more remote regions where not many tourists come, local currency is still the best choice. In other parts of the world, especially the developing world, you are likely to find more cash-only merchants.
Traveling almost cash-free is a good move. You don’t have to carry around a pile of notes, spend time finding an ATM and worry about getting the right change. In fact, pay your hotel bill, your meals and all other major expenses with the right card and you’ll get a better exchange rate than with cash. “And remember, cash is easy to lose and hard to insure,” said Taylor Blackburn, personal finance specialist at Finder.
To make your travel payments hassle-free, you’ll need a chip-and-pin card, which looks like it has a SIM card in it, and one that allows you to pay contactless. Look for the contactless indicator on your card, four curved lines that resemble the signal strength indicator on your phone. You should also inform your financial institution that you are going abroad.
The choice of cards is crucial, according to Blackburn, when traveling without cash.
“In Bali my partner accidentally used another bank card with one of the big four to withdraw money and got an ATM, a transfer fee and a conversion fee that was almost 25 percent of the withdrawal amount! definitely less hassle to get a card abroad, unless your debit or credit card offers a zero percent international transaction fee, you may be charged a currency conversion fee or foreign transaction fee.”
An example is the Latitude 28 Degrees Global Platinum Mastercard. This is a credit card while most of the others like the ING Orange Everyday Visa card and the Citibank Mastercard are debit cards, and debit cards have a security issue.
“Credit cards are usually the best choice when you travel because of fraud protection,” Blackburn says. “It’s their money not yours if the card gets jammed. A good friend of mine had her debit card skimmed when she was in Africa and ended up out of her pocket for weeks. If that had been a credit card she could have claimed the fraud before it came to her account.”
One way to protect your debit card from fraud is to keep the balance low and only top up money from your bank account when you need it, and most cards allow you to do this through an app or through their website.
There is also a difference between the way you use credit and debit cards. When leaving a deposit on a rental car or when a hotel asks for your card for a pre-authorisation, use a credit card. Use a debit card and the money will be frozen, and it can take up to a week after you check out or return your rental car for the credit to be unblocked.
If you are driving in Europe it is common practice to place your card in the central terminal of a petrol station before refueling, but in addition to deducting the fuel payment, the system can also block an additional amount. This happened to me twice recently in Italy and each time the system froze €100 off my debit card. This was listed as a “pending” charge, but it stayed that way for a full month after the transaction, debiting $200 from my available credits. Lesson learned – I should have used a credit card.
Is this the optimal travel card?
Many travelers praised the Wise debit card, which charges low fees for foreign currency transactions, even if you keep your credit in Australian dollars. Most travel money cards require you to exchange your Australian dollars to buy other major world currencies, which you use to pay for goods and services abroad. Deposit money and you buy Euros, Swiss Francs or whatever the local currency is. You can also do that with a Wise debit card, or you can keep your deposit in Australian currency. If you have the local currency in your account, the Wise card will use it. If not, your Australian dollars will be automatically converted at the prevailing exchange rate, minus a small fee. That gives you more flexibility when you hop from one country to another. If you have Aussie dollars left on your Wise card when you return from abroad, you can transfer them to another bank account for a small fee. On a $1000 wire transfer, the fee is just 57 cents. Other travel money cards incur a significant cost if you convert your foreign currency back into Australian dollars.
So how does this work on the ground?
On the morning of June 22, a $1000 credit on the Wise debit card would be worth €657.81, £564.90 or $692.86 at an overseas point-of-sale (POS) terminal. For each of these transactions, Wise charges a currency conversion fee of $4.38. That is a modest amount, and it compares well with other travel money cards.
By comparison, if you used a Qantas Travel Money Card at a POS terminal on the same date, that $1000 would be worth either €31.84 less, £27.95 less or US$26.31 less than it was on the Wise card.
The Travelex Travel Money card gave you more bang for your buck than the Qantas card, while the Citibank debit Mastercard I use was better. But Wise still came out on top.