Best way to pay when abroad

2011-11-19 08:40

Historically, traveller’s cheques were the main payment option when taking spending money for your overseas trip.

While traveller’s cheques still have their place, especially if you are travelling in the US or in Africa, credit cards and the travel wallet are fast replacing cheques as a more convenient way to pay for goods and services.

With a traveller’s cheque, you have to find an exchange bureau that won’t charge you to cash in the cheques and you may end up carrying more cash than you feel comfortable with.

Travel card
A travel card or travel wallet is a prepaid debit card that allows you to load your currency before you leave.

You know the rate at which you bought the currency and have the convenience of being able to pay at the merchant or draw cash from an ATM without the hassle of cashing in traveller’s cheques.

The four major banks – Absa, FNB, Nedbank and Standard Bank – offer travel cards across a range of currencies. For example, the Absa Cash Passport is available in the following major currencies: the US dollar, euro, pound sterling and the Australian dollar.

MasterCards are protected by chips and PINs (personal identification number). Visa Cards are PIN-protected, have a signature panel at the back and can be replaced after loss or theft, like traveller’s cheques.

A travel wallet allows you to budget for your holiday as it is prepaid.

Credit card

Credit cards can be used virtually anywhere and you can draw cash from ATMs.

The downside, though, is that you do not know exactly the exchange rate on the day of your purchase. So you may have a nasty surprise if the rand suddenly collapses as it did earlier this year, throwing your budget out of the window.

You also need to monitor your spending carefully so that you don’t have a scary credit card bill when you arrive back home.

Even if you do opt for a travel wallet, a credit card is still a good option to have as a back-up especially for emergencies.

From experience I have also found that the travel card cannot always be used for low-value transaction points like the Metro underground or to get a trolley at JFK Airport in the US. In fact, there were times when the merchant’s terminal could not read the card. Having my credit card was a money saver in those situations.

Travel cards are also limited in the number of currencies available and Absa advises that if the country you are travelling in has a less popular currency, then a credit or debit card is the best way to go. Basically, a travel card will be converting your money into the major currency and then into the foreign currency, so it will be more expensive.

Cash
It’s great to arrive in a foreign country and already have some cash available to pay for taxis or grab that first cup of coffee.

The best option is to buy a small amount of foreign currency from your bank before leaving South Africa. You don’t want the risk of walking around with a wad of cash, so just get a small amount to see you through until you can draw cash at your destination.

Costs
As individual banks have their own cost structure, it is worth finding out the most cost-effective way to spend.

You can use your MasterCard or Visa-enabled credit, debit and cheque cards anywhere in the world. There is usually no merchant fee when using your credit card overseas, however, there is a 2% foreign currency conversion charge.

Your debit card will carry costs each time you swipe it but the conversion fee may be lower. For example, Absa charges a 1% conversion fee on their debit cards. Remember that if you have a bundled fee option, this doesn’t usually include overseas transactions.

There is also a fee to withdraw cash at an ATM machine which can be pretty expensive. And in some countries there may be an additional charge from the ATM provider, but this will generally be mentioned on screen.

According to Absa, if you intend spending more than R15 000 on holiday then the bank’s Cash Passport is cheaper than taking cash or using a debit card.

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