Travel money mistakes to avoid

Most seasoned travellers would have made some of these slip-ups at one time or another, but you don’t have to make the same mistakes. Here are some common money mistakes to watch out for on your next trip to help you make the most of your hard earned money.

1. Only preparing one travel money option

The problem with this is… putting all your eggs in one basket can be disastrous if that basket gets stolen or misplaced. We’ve all heard the tale of how John Smith brought a bag full of cash on his holiday and was mugged. Also, you may find that your one travel money option might not be feasible in your destination country, but more on that later.

It’s probably better to… diversify for the sake of safety. If you carry cash in small denominations for everyday expenses, take a prepaid travel card for meals and shopping, and leave a credit card in your hotel safe for emergencies.

2. Using a travel card that doesn’t support the local currency

The problem with this is… you could end up stranded in Mozambique and not have access to the metical (Mozambique currency) despite having packed all your travel cards well.

It’s probably better to… ensure that your travel card supports your destination currency, and lock in the exchange rate by loading that specific currency on your card before you go. If no travel cards support that currency, you may wish to organise a credit card or debit card with no currency conversion fees.

3. Exchanging money with street vendors

The problem with this is… street vendors aren’t all famed for integrity or consistency. Melissa was shopping in Bangkok and spent all her Thai baht, leaving her with only Australian dollars in hand. She exchanged $1,000 with the first street vendor she came across at a rate of 24.50, which seemed fair to her. A few steps later, she saw another vendor offering a rate of 25.10, and then another offering 26.20. She’d forgone THB 1,700 (more than $60) by exchanging with the first vendor instead of the last.

It’s probably better to… get your currency exchanged with a reliable source like the bank. That said, you can sometimes get more favourable rates at an independent vendor. Shop around and compare foreign exchange rates.

4. Exchanging money at the airport

The problem with this is… airport exchange rates are usually terrible, not to mention the high fees that some money changers charge for the exchange.

It’s probably better to… do your currency exchange in advance. If you’ve forgotten, it would be better for you to get cash out of a machine using your ATM card, credit or debit card. Otherwise, you’d be better off exchanging money with a reputable bank once you’ve reached your destination.

5. Carrying all of your travel money cards at once

The problem with this is… similar to putting all your eggs in one basket. What do you do if your wallet goes missing or gets stolen? Tim had done his research carefully and chosen the best rates and the best travel cards for his long holiday in Europe. Unfortunately, the one thing he hadn’t thought to do was spread them around, so he was left with nothing after being pickpocketed in Rome.

It’s probably better to… pack one travel card in your wallet, one in your carry-on, and keep your credit card in your checked-in baggage. You might also want to carry some cash on you and leave some in your hotel or secure luggage for safekeeping.

6. Waiting until your balance is empty to reload your travel card

The problem with this is… that it might take some time for the online transaction to be processed, and you might run out of money before the cash gets credited to your travel card. For instance, BPAY transactions can take up to three business days to appear in your account, while online transfers take up to two.

It’s probably better to… reload in advance. Check your balance often to make sure you don’t get caught with no money. Also be aware that some card providers charge fees for reloading, in which case you should reload a large amount in one go instead of many small amounts.

7. Writing your travel card PIN down

The problem with this is… the person who stole your travel card may also have found that piece of paper tucked inside your wallet. No prizes for guessing what happens after that.

It’s probably better to… memorise your PIN and discard any written trace of it. Better yet, change your PIN to one you can easily remember (although not something so simple as your date of birth). Also, a good practice is to check your list of transactions regularly when tracking your account balance, just to make sure you haven’t been defrauded. If you have, make sure to contact your bank as soon as possible.

8. Withdrawing cash frequently via ATM and debit cards

The problem with this is… most banks charge a transaction fee for every withdrawal made. If you’re using a debit card, this can be a flat fee or a percentage of the withdrawal amount, and it’s separate to the currency conversion fee. Sometimes, there is even a foreign ATM owner fee, which is charged by the bank that owns the ATM you’re using. If you're using a prepaid card, different fees apply depending on the currency you're withdrawing. If you’re using a credit card, expect high cash advance fees, currency conversion fees and interest rates to accrue from the day you make that withdrawal.

It’s probably better to… make a single large withdrawal from the ATM instead of many small withdrawals. Also, do your research and be aware of which fees apply to your specific card.

9. Using your regular credit card or debit card

The problem with this is… foreign transaction fees can amount to a very expensive holiday. Some cards charge an average 3%-4% fee on each transaction, which means a USD$200 dinner in Detroit costs an additional $11 or so. Susie was appalled when she saw her credit card bill after a fortnight in the US. She had incurred more than $500 in fees alone for meals and big purchases. Some credit cards don’t charge foreign exchange fees, but their interest rates will be substantial if you forget to pay your monthly balance.

It’s probably better to… use a travel card that you can preload with cash in your destination currency and transfer more cash electronically if you need. If you’d still prefer to use a credit card, look for one that’s designed for overseas use and doesn’t charge currency conversion fees. Otherwise, consider using a prepaid travel card for everyday purchases and leaving your credit card for emergencies.

10. Not informing your credit card issuer that you’re going away

The problem with this is… some banks are so vigilant about preventing fraud that they may freeze your account once they spot unusual foreign activity, which is what happened to Darren when he went to Singapore. Although no serious harm was done to his holiday, it was embarrassing and inconvenient when his card was rejected at the store. When he called his bank to sort out the issue, he was put on hold for 20 minutes and that IDD phone call ended up costing more than the shirt he was trying to buy.

It’s probably better to… call your bank before you go and let them know your travel dates and destination.

11. Making credit card purchases in your home currency

The problem with this is… dynamic currency conversion. Kimmie was paying for her new LV bag in Hong Kong when the lady at the counter asked if she’d like to pay in her home currency (Australian dollars). Since Kimmie had read all about dynamic currency conversion, she politely declined and saved herself some money. The retailer’s exchange rate is often less favourable than your card provider’s, as it usually includes a profit margin for the store. On top of that, your credit card company still levies a 1%-3% foreign transaction fee on the purchase.

It’s definitely better to… pay in the local currency at your credit card company’s exchange rate. It’s the cheaper option.

12. Carrying traveller’s cheques

The problem with this is… there are multiple potential problems. Firstly, they can be lost or stolen. Secondly, they are costly and troublesome to obtain. Thirdly, and most importantly, these are no longer accepted in many places and you will find yourself limited to the few establishments that still accept them. This is what happened to Patrick on his trip to Morocco. He could not find a bank or hotel that would cash his cheques for days, and when he finally did, he had to pay a high commission rate for the service.

It’s probably better to… get with the times and forget about traveller’s cheques altogether.

Travelling always comes with a degree of risk, but your finances are something you don’t want to leave up to fate. Depending on your travel destination and spending style, you may find that a combination of travel money options will suit you. The key is to research your options, call your bank, ask for rates and compare rates the options before making your decision.

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