Skip Unnecessary Fees And Cash In On Holiday Fun

Sun Herald

Sunday November 28, 2004

Jane-Anne Lee

It's worthwhile doing your homework to find out how to pay while you play, Jane-Anne Lee writes.

AS the holiday season hots up, so too does the battle for a place in your wallet, pocket or money belt. On offer is a dazzling array of traveller's cheques, credit/debit cards, cash and preloaded cash cards.

But before deciding on your combination of travel currency, you need to be aware of all the costs, which vary from $4 for a withdrawal straight from your bank account to three sets of fees for a credit card cash advance (see table).

TAKE A DEBIT CARD

Garfield Wright, financial analyst at Cannex, believes the best option is a debit card linked to your bank account. They are relatively cheap and you are not slugged with a recharge fee (as you are with prepaid cards, of which more in a moment). Having said that, you may be charged as much as $5 for each overseas ATM withdrawal.

"While some people like to overpay their credit cards [instead of taking a debit card], not everyone has a zero balance to start with," Wright says. And, he points out, there is a currency conversion fee of up to 2 per cent every time you use a credit card overseas.

However, credit cards become even more expensive if you use them for cash advances. For example, on top of the 1.5 per cent currency conversion fee, withdrawing cash from a National Australia Bank card will cost you another 1.5 per cent plus $4. Other providers levy similar charges.

Wright adds: "The interest starts right away and includes outstanding purchases. You also lose the advantage of up to 55 days interest-free. But if using your credit card for big purchases, MasterCard and Visa do negotiate great foreign currency rates because of the volume they can purchase."

CARRY CASH

Depending on where you travel, it may also pay to take some US dollars, especially in less-developed destinations. For example, if booking a domestic flight in Cambodia, it's a $US cash only transaction. If all you have to flex is plastic, you may be left with no other option but to catch the slow boat up the Mekong to Angkor Wat. You may be able to negotiate better accommodation/travel deals with cash, and single dollars are handy for tips.

LOAD UP YOUR CARD

Two years ago, Travelex launched its prepaid cash card, Cash Passport. About 100,000 have since been issued. After a 100-point check, you get two cards, one to take with you to use at Visa ATMs and one to keep in a safe place.

Cash Passport product manager Lorna Sneddon says the advantages are: you can set a spending limit before you leave; you can put up to $25,000 on the card; you can buy it in Euros, US dollars, GB pounds and Australian dollars; you can get a new card within 24 hours; it is PIN protected (so can't be used if stolen); and you can reload it through Bpay. This card comes with a 1 per cent commission recharge fee and a flat $3.75 withdrawal charge.

Another option is the brand-new Emerchants' prepaid card, complete with MasterCard logo. It costs about 25 cents to load and $2 per overseas withdrawal from a Maestro-Cirrus ATM. There is no maximum load limit, the application form can be downloaded from www.emerchants.com.au and it can be used at some points of sale.

CHEQUES BACK IN VOGUE

While cash card providers aim to capture the traveller's cheques market, Nick Dinopoulos, head of American Express Travellers Cheques for Australia and the South Pacific, is not so convinced they will succeed.

He says traveller's cheques are back in vogue with double-digit growth this year, mainly due to the lure of exotic locations with limited electronic facilities.

Amex recently did a survey with Australia Post the only provider that charges no commission on Amex foreign exchange sales and traveller's cheques and found that 20 per cent of sales were to new users.

He says banks are working to make traveller's cheques more accessible, citing ANZ's service where you can buy traveller's cheques and foreign currency over the phone, whether a customer or not, using a credit card as payment. You just nominate a branch for collection.

If using American Express traveller's cheques, now issued in eight different currencies, see www.americanexpress.com before departing to find out fee-free partners. Like prepaid cards, traveller's cheques can be replaced within 24 hours, a reassuring thought if you're left penniless in paradise.

CASE STUDY

Dianne Thomas is cautious about travelling with credit cards after Visa froze her card during a trip to the United States this year.

"My husband and I had informed Visa that we would be away but the card was still suspended," she says. "It was such a disaster. We had our daughter back in Sydney trying to do the negotiating for us and she had just had a jaw operation.

"Fortunately, we had some cash and an Amex card to help us get through."

Restaurateur Dianne, 55, never leaves home without US dollars to save time looking for ATMs, enjoy a better exchange rate and negotiate a competitive deal at smaller hotels.

"When we buy big we use the credit cards, but if we're in smaller places without such facilities we have our cash to fall back on."

Her daughter, Ainslie, 29, has just returned from a trip to Canada and the US. She, too, travels with a mix of cash and credit cards, but uses the credit card mainly for purchases.

"I spent six months backpacking in 1999 using a cashed-up credit card," she says. "But each time I made a withdrawal from an ATM, I was charged $4.50. I was taking out money twice a week because I didn't want to carry around large amounts. Now when I travel I like to arrive with some foreign currency. I keep any spare cash in the hotel safe or if I am in a hostel, I sleep with it in the bottom of my sleeping bag."

© 2004 Sun Herald

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