Cash Converters
Sydney Morning Herald
Wednesday December 4, 2002
How do you carry money while travelling overseas? Christine Long reports on your options.
Packing your bags and heading overseas is one of the most exciting feelings. But, as anyone who has gone travelling knows, it takes money to make the world go round.
Whether roaming the art galleries of Paris or trekking in Nepal, it takes only a stolen credit card or a lost wallet to bring your travel plans to a temporary halt.
To help ensure you don't end up on the wrong side of a travel disaster, pack a range of financial options in your money belt.
TRAVELLER'S CHEQUESIt often seems easier to flash your plastic when travelling overseas, but there are still valid reasons for taking traveller's cheques, particularly if you are going to far-flung destinations.
Briony Grogan, from Lonely Planet Publications, says: ``You are often better off with traveller's cheques in places like India because there are not so many ATMs around."
The same goes for parts of Africa, Japan and Eastern Europe, where ATM networks are still relatively undeveloped, according to Graham Perry, from Travelex.
Traveller's cheques can lock in a particular rate and there is less chance of spending beyond your means.
Polly Wilson, from American Express, emphasises the security of traveller's cheques. They also never expire.
``Generally, they can be replaced within a 24-hour period if they are lost or stolen," she says.
But it can be relatively inconvenient to cash traveller's cheques and this is making them a dying breed, particularly in the youth market, says Meagan Reay, national marketing manager at STA Travel.
The cost of traveller's cheques varies, with point-of-sale commission ranging from 1 to 2 per cent. Travelex charges 2 per cent while American Express charges 1 per cent, with a minimum charge of $10.
American Express has made a distribution deal with Australia Post so you can buy its traveller's cheques from post offices. You can only buy $6000 worth of cheques per transaction there and the 1 per cent commission is capped at $20.
You need not pay more to cash the cheques. Wilson says American Express traveller's cheques will be cashed free at its 65,000 outlets around the world.
But if that means travelling halfway across town, it's easy to put up with the high commission charges or less competitive exchange rates offered by a hotel or bureaux de change.
CREDIT CARDS AND CHARGE CARDSFor people such as David Mitchell (see breakout), who like their cash in a hurry, credit cards can be the answer.
Mike Ebstein, credit card analyst at MWE Consulting, says there is nothing extra to arrange before you travel and any purchases made while travelling will lift your reward points.
If you are a gold credit card holder you may also get free travel medical insurance and commission-free traveller's cheques a significant benefit when insurance can cost up to $500, says Ebstein.
ANZ, Commonwealth, Citibank and Westpac have travel insurance with their gold cards.
However, they have been whittling away these benefits and in many cases you have to make a minimum travel-related purchase on your card to be eligible. Cover may be restricted to three months.
Credit cards also offer the protection of charge-back, which can be worthwhile if you are spending up big and having purchases delivered to your home. Should one of your new purchases fail to turn up, under charge-back you can ask your bank for a refund of the transaction. But there may be time limits, often as little as three months.
Plastic may seem the only way to travel, but you should consider the costs, which will depend on how you use the card.
Apart from annual fees and potential interest charges, there are fees for using the card overseas.
Currency-conversion fees are generally 0.5-1 per cent of the Australian dollar amount per transaction.
The Commonwealth is raising its currency-conversion fee from 1 per cent to 1.5 per cent in January and American Express has a currency-conversion fee of 1.9 per cent on its credit and charge cards.
But Lisa Montgomery, the chief executive of InfoChoice, says the costs really mount up if you use your card to get a cash advance. For starters you will be paying interest on the cash advance from the date of withdrawal. Then if you don't pay off your bill in full each month you will effectively be eroding any interest-free period you would normally receive on purchases.
As the table shows, the major banks also charge cash advance fees. Rather than paying a flat fee for an overseas cash advance, cardholders are having to pay the greater of a percentage of the amount withdrawn or a flat fee.
To avoid paying hefty cash-advance charges, Ebstein suggests loading the credit card with cash before you leave home.
Rita Zonius, a spokeswoman for ANZ, says: ``If the account is in credit balance at the time we process the cash advance, the credit amount will offset the amount of the cash advance in the calculation of the 1.5 per cent fee."
Let's say you put $2000 on your credit card and have a $1000 limit. If you make purchases of $1500 and then withdraw $1000 from an ATM, you will pay a cash-advance fee on $500.
Not all banks apply fees this way so it's worth checking.
Charge cards such as Amex and Diners Club can be another option. You don't incur interest with these cards but you must pay off the whole balance each month.
James Atkins, a spokesman for Diners Club, says it charges a currency-conversion fee of 1.5 per cent when the card is used to make purchases overseas. You can access a maximum $400 a day in a cash advance through Cirrus network ATMs for a 4 per cent charge.
DEBIT CARDSIf there is cash in your bank account to fund your travels, a debit card could be the better option. You don't spend more than your budget can bear and there are no interest costs unless you dip into overdraft.
Again, check on the charges at your particular bank. Commonwealth charges $4 for an ATM withdrawal overseas but there is no currency-conversion fee. National Australia Bank charges $4 for withdrawals, $1 for a balance inquiry and 1 per cent currency-conversion fees.
Overseas EFTPOS purchases are cheaper than making a withdrawal, with the major banks charging fees ranging from $1 to $2.
Still, it is worth having a credit card or traveller's cheques as a back-up. A survey by American Express found that one in five travellers experienced problems with their credit or debit card while they were overseas because of broken or malfunctioning ATMs, a damaged magnetic strip, language barriers on overseas ATMs and lost or stolen cards.
Grogan warns that people planning to use a debit card should also check their PIN will work overseas. ``If you remember your PIN as a word, think again as not every country puts letters on the keypad," she says.
PREPAID CARDSThis option sits between traveller's cheques and a debit card. Travelex's Perry says it now sells more of its prepaid cards than traveller's cheques.
The Cash Passport card is loaded up with cash before leaving Australia and you can access the money in local currency via Visa's worldwide network of 700,000 ATMs. Like a debit card, money is accessed using a PIN.
Perry says the card can be issued on the spot because it's not embossed with the user's name and details, like other cards, and it can be replaced within 24 hours if lost or stolen.
To provide back-up, Travelex issues two cards to the buyer with the same PIN and up to nine cards can be issued to draw on the same pot of money.
The minimum amount that can be placed on the card is $250 and the maximum $25,000. However, it is possible to top up the card to a maximum of $99,000.
When more than $5000 is loaded onto the card, the cardholder gains access to emergency services such as medical referrals, emergency translation and legal assistance, says Perry.
Users pay a 1 per cent commission at the point of sale for the card and withdrawal fees of $3.75 per transaction. There are no currency-conversion fees.
If there is still money on the card at the end of your journey you can withdraw it or keep it for your next trip, says Perry. However, money left on the card will not attract any interest and the card expires three years after being activated.
FOREIGN CURRENCYIt's still a good idea to have some foreign currency at the ready when you arrive at your destination to cover small expenses such as a cab fare to your hotel.
Perry recommends changing about $100 into foreign currency before you leave home.
But be warned: the charges for this service can be high. Travelex, for instance, charges a flat rate of $7, making it a 7 per cent fee if you change only $100.
Each to their own money
When David Mitchell and his wife Leticia Tarabay strap on backpacks and head overseas they each have strong ideas about the best way to take their money.
Tarabay, from Brazil and used to seeing the impact of fluctuating exchange rates, prefers the security of traveller's cheques. ``I usually like to have some traveller's cheques just in case I need money somewhere and there's no ATM," she says.
Mitchell gave up on traveller's cheques a couple of years ago after battling with queues and forms during a trip to Central America. ``I missed a ferry in Costa Rica because I was standing in a queue waiting to get money changed," he says.
Now he relies almost solely on credit cards and often goes straight to an ATM to get a cash advance when they arrive in a new destination. To reduce the cost of the convenience, he transfers money from his bank accounts to his credit card via the internet before getting a cash advance and he pays his bills in full each month. ``I never pay more than a day or two in interest on any cash advance," he says.
But their choice of travel money also depends on their destination. In the United States they have found the credit card is king and traveller's cheques can be used in shops like cash.
``If you try and buy a cup of coffee for $3 at Starbucks with a $50 or $100 note, they won't change it but they will put it on your credit card," says Mitchell.
They also make sure they do their homework before they travel to a country, says Tarabay.
When they went to Vietnam last year, they knew the only ATMs were in Ho Chi Minh City and Hanoi and they also made sure they were cashed up with US dollars for a recent trip to Cambodia.
The couple also carry a list of foreign exchange rates.CL
Exchange rates online
www.anz.com.au/australia/support/general/fx.asp
www.commbank.com.au/business/daytoday/def-exchangerates.htm
www.national.com.au (click on Exchange Rates under Areas of Interest banner at bottom right)
www.westpac.com.au/internet/publish.nsf/Content/PBSV+FX4You (able to buy traveller's cheques using BPAY)
www.oanda.com (for rates history)
www.pacific.commerce.ubc.ca/xr/plot.html (for graphing of rates history)
OVERSEAS CASH ADVANCE FEES FOR THE MAJOR BANKS
Institution Overseas ATM cash advance fee
Foreign currency conversion fee
ANZ 1.5% or minimum amount of $4
1.5% (First & Gold cards - 0.%)
(Gold Card exempt)
CBA $4
1% (1.5% from 20/1/03)
NAB $4
1%
Westpac 1.5% (with a minimum of $2.50 and maximum of $50)
Nil
© 2002 Sydney Morning Herald
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