Money savvy travel

When you’re travelling abroad and soaking up new cultures, money is the last thing that you want to think about. Thinking about money before you travel is vital, however, if you want to make the most of your budget. These days there are three financial options available to travellers: cash in the form of foreign currency, traveller’s cheques, and plastic (debit or credit cards).

For convenience you can’t really beat cold, hard cash. Cards are also incredibly convenient, but they might not be as widely accepted as cash, especially in smaller towns or villages. One thing you’ll probably never hear is, “Sorry, no cash facilities, only cards”. Traveller’s cheques, on the other hand, might not be as convenient but are generally considered to be a wiser investment than cash. Cheques can be insured and replaced if lost, while cash can’t. Traveller’s cheques are also not easy to use once stolen, because they require signatures and in some cases, photo identification needs to be accepted.

One thing to watch out for when using traveller’s cheques is the conversion fee. In the US, traveller’s cheques can be used as proper currency, and shops and even taxis accept them without charging any additional fees. This is not the case in many other countries where vendors charge a percentage of the transaction (anything between 1% and 3%) to recover their conversion costs.

If you’re going to use cash, it’s recommended that you exchange it at a local bank before you go. According to ivillage.co.uk, the only places worse than exchange booths in town are the ones placed so conveniently around airports and train stations. These booths rely on the fact that you may be slightly desperate for money and make you pay for their convenient location. Banks generally offer better exchange rates. Sometimes they don’t even charge you for the service, although more often than not a small fee is tacked on to the transaction. It’s usually best to take a combination of cash and traveller’s cheques, rather than considering the two options to be mutually exclusive.

Credit cards are the perfect alternative if you’re worried about the ease with which you can exchange traveller’s cheques but don’t want to expose yourself to the risks of carrying a lot of cash. They are accepted in most establishments, although don’t expect welcoming smiles if you whip one out at a spice market in the middle of India. You could be pleasantly surprised, but carry some cash in the likely event that you’re not.

Many credit cards also come with travel insurance, so you’re covered on several levels. Like traveller’s cheques, credit cards have a hidden, rather sneaky, disadvantage. Your bank will charge you a percentage of each transaction, and when you’re dealing with foreign currencies, those amounts can add up to much more than you expect. It might be a good idea to charge your accommodation and hotel meals to your credit card, and then use cash for daily transactions.

Debit cards are a nice alternative to credit cards, provided you have the funds in place to cover all your charges. You won’t be charged interest on your balance. It can be cheaper to draw money from an ATM using a debit card rather than a credit card. Credit cards charge a cash advancement fee with ATM withdrawals. With debit cards, you draw from funds that you already have, and so are spared this fee.

Dealing with money is an inevitable aspect of travel, but with some thought and appropriate care, it need not be an onerous or cumbersome one.

Recommended sites:

http://www.ivillage.co.uk/travel/essentials/health/articles/0,,563212_565956-2,00.html

http://www.mg.co.za/personalfinance/articlePage.aspx?articleid=318820&area=/personal_finance/pers_fin_tips/

http://www.ramblersholidays.co.uk/foreign_exchange.aspx

Sandra wrote this article for the online marketers Exchage4Free leaders in international money transfer services leaders in the provision of exchange rate services across all currencies, to both the corporate and private sector.