Money tips for smart travellers

2012-05-15 11:16

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Once your flights and accommodation have been booked, the biggest concern thereafter is spending money. Well for some of us that is. For the purpose of this article, do try to soberly forget the planning of that adrenalin-infused itinerary or the list leading you to all the best sightseeing spots at your preferred destination. After all you’re going to have to pay for these things somehow, no?

Despite all of its problems of late, the Euro certainly makes it simpler to travel across multiple European destinations – saving most of us the hassle of having to swap forex at every border crossing. Would it be selfish to hope that austerity measures prevail within its 17-member alliance, ensuring its survival, for this very reason alone?

Whatever the required currency, it goes without saying that the benefits of credit cards or prepaid plastic eliminates many of the risks associated with travel forex, what with chip and pin safety measures, but it is impractical to think you will be able to escape carrying cash around with you during your globetrotting adventure.

So the question to ask is: What are the risks associated with plastic, paper or cold, hard sterling?

Plain and simply put, it can be summed up in three phrases…

  • High bank charge
  • Foreign transaction fees
  • Unpredictable exchange rates

While the money in your bank account is yours, banks stake their claim to a certain portion of it through services rendered – and when those services include making your money available far, far away from home it can become quite an expensive business.

Money in the Wall

When using your debit card in a foreign ATM, money is taken directly from your bank account and instantly gives you the currency of the country you’re in. It’s important to remember that while you'll pay fees for the convenience, more often than not you’re getting a better rate than exchanging traveller's cheques.

Pitfalls in this instance for using a foreign bank’s ATM facilities could see you being charged a fee by that bank, besides your own. Charges your bank may levy against your account, besides the normal service fee, is an additional percentage for the currency exchange. It is best to familiarise yourself with all of these charges before you go.  The best way to get around it would be to plan better with your cash and reduce the number of ATM visits you make while abroad.

It’s also important to remember that certain overseas banks set an independent withdrawal limit - safeguarding you but an inconvenience if you’re not aware of it and have the need to spend more than you are able to access.

Bank rolling your holiday

Plastic fans gloat that you get a better exchange rate by using a card instead of buying the forex before you go. This may be true only if you have a card with particularly low fees. Irrespective, choosing to make purchases or withdrawals with your credit card always means you’re absorbing costs somewhere along the line for using the banks money instead of your own - you're simply not aware of it because it's been seamlessly worked into the credit system.

Some establishments also employ what is known as the forward exchange rate. This is a specific rate agreed upon to exchange one currency for another at a specified future date. The forward exchange rate acts as a buffer for settlements made by card, safeguarding institutions for delayed transfer of funds and any exchange rate fluctuations that may occur during this time. Thus it is always higher than the current exchange rate. So the key piece of advice here is be aware of this rate when making payments while on holiday – sometimes the ‘secured rates’ can work in your favour, especially is there is a big fluctuation,  but our advise is, "Don’t bank on it."

It’s also important to consider dynamic currency conversion fees. Some opportunistic European merchants can charge you for converting their prices and while this may seem like a convenient service it only translates into more middle-man fees being added to your transaction. If the conversion is detailed on your receipt, reflecting a dollar rate and the original currency rate, you have right to refuse the converted rate. But then again the bank may end up charging you for the conversion anyway. What to do? Be aware of whose having a slice of your ‘holiday savings pie’ and factor these cost in so that you don't come up short or in shock.

Before you leave, ask about all these unknown fees. Banks are required to detail international transaction fees as line items on your statement, helping you to see exactly what you've paid for – but this doesn’t help much as you will only see the charges after your return.

It’s also wise to confirm with your bank that you'll be making withdrawals while traveling or else you could find your card frozen due to unusual spending patterns. Another important thing to check if you are going to solely rely on swiping your plastic when abroad is that the validity period of your card matches the time frame of your trip.

In touch with your Internet

Don’t rule out the benefits of online or mobile banking while away. Admittedly, you may not be making many EFT payments, but it will be useful to log on to check balances and monitor those unforeseen charges mentioned above. It’s also useful when there are payment delays for the conversion and exchange rates. 

Still unsure? Here are the benefits of a few forex options provided by local banks and credit card merchants.

American Express® GlobalTravel Card

  • Locked in exchange rate with cash loaded prior to travelling
  • The American Express GlobalTravel Card can be used to purchase products and services at overseas merchants, and make ATM cash withdrawals at millions of locations that accept American Express worldwide
  • Access to 24 hour global assistance programme
  • As a measure of precaution American Express issues two cards (one being a backup card) at the time of purchase. Both cards are magstriped and require the card member’s signature or personal PIN to transact, keeping security tight.
  • If the primary card goes missing, it can immediately be blocked and the backup card activated at no cost via a call to the 24-hour Customer Service Centre.
  • Is subject to local exchange controls
  • Introductory Offer – No Card Purchase Fee until 31 December 2012, thereafter regular purchase fee of R100 is applicable
Visit the Amex site for their rates and fees

FNB: Visa Cash Passport

  • Withdraw cash from any ATM displaying the VISA logo
  • Swipe at any point of sales displaying the VISA logo
  • Accepted around the globe
  • 24/7 global emergency assistance
  • Visa Cash Passport is pre-loaded with your travel money before your trip, making it easy to stay within your budget

Visit the FNB website for their rates and fees

Standard Bank: TravelWallet

  • Manage Exchange rate fluctuations: You spend at the rate that you bought your foreign currency; hence there is no exchange rate fluctuation if used in the same currency as that loaded on your card
  • Your TravelWallet is both a payment and ATM card. Your money is available to you 24/7
  • Draw money in the currency of the country you are visiting at any MasterCard ATM
  • There is no transaction fee for using your card at a MasterCard merchant but there may be a currency conversion fee if the currency you are paying is different from the currency loaded on your card as a foreign exchange transaction will take place
  • The exchange rate will be the same as that offered by MasterCard on that date

 Visit the Standard Bank Website for their rates and fees

Have any money tips of your own to share, why not post a comment below?

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Read more on:    forex  |  travel tips  |  travel international  |  money

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