Financial Tips for Travel Abroad
Overseas travel is an expensive proposition and difficult for many families to afford. Still, there are ways to lessen the financial burden of an international trip so you can see the world without breaking the bank. Here are a few:
Get the best exchange rate. There are essentially three ways to exchange currency: converting cash at a bank before your trip, using a currency exchange service like the ones found in airports, or simply using a credit card, in which case your money is converted automatically upon making a purchase. So, which is the best option?
According to an exchange rate study conducted by Card Hub, international travelers can save up to 15% by using a credit card. More specifically, major worldwide credit networks automatically provide the best exchange rates possible–currently 14.7% better than the currency exchange companies that operate out of airports and 7.9% better than the average major bank. Yet you can't just open a major credit card account and expect those savings.
Get a no-foreign-fee credit card.
Over 90% of all credit card issuers charge foreign usage fees, which inflate the cost of any transaction processed outside the United States. No foreign transaction fee credit cards don't have these fees, however, making them perfectly suited for overseas spending. In order to use one of these cards to your full advantage, you should adhere to the following guidelines:
- Get your card before booking flights, hotels and activities. Foreign fees apply to purchases made through foreign-based companies whether you are outside of the U.S. or not. Make sure your credit card issuer does not charge these types of international fees before booking your trip to avoid surprises on your statement.
- Use a worldwide payment network. Your payment network dictates the number of merchant locations and countries in which you can use your credit card. Given that most payment networks do not provide worldwide coverage, you should check to see how much coverage your credit card affords.
Consider cash and debit cards.
Though the majority of your purchases abroad should be made with a credit card, you'll need some cash for cab fare and the few stores that inevitably don't accept plastic. Opening a low-foreign-fee debit card and making ATM withdrawals during your trip is the least expensive way to access cash, as the low exchange rate that applies to credit cards also applies to debit card transactions. If you'd rather not worry about finding an ATM as soon as you arrive in a foreign country, convert a small amount of cash at a local bank before you leave. In doing so, keep in mind the following tips:
- Compare bank exchange rates. Currently, an 11.9% disparity exists between the exchange rates offered by the best and worst banks for currency conversion, according to Card Hub's study.
- Watch out for fees. Some banks might charge shipping or processing fees, so make sure to inquire about extra charges before agreeing to a conversion.
- Convert just the right amount. Convert enough cash to comfortably cover your initial expenses but not more than you feel comfortable carrying with you.
Consider these final tips.
Regardless of which debit or credit card you use while traveling overseas, it's important to:
- Call your issuer before leaving. Make sure to notify your bank of the exact countries and territories where you'll be traveling. If you don't, your cards may be suspended for suspicion of fraud.
- Avoid dynamic currency conversion. Merchants may offer to convert the price of a purchase from the local currency into U.S. dollars. While in most cases, this may be meant to help customers who aren't familiar with the exchange rate, some merchants offer dynamic currency conversion in order to apply an unfavorable exchange rate to a transaction and increase their profits. Luckily, avoiding this money-waster is as simple as declining any merchant overtures and making sure to only sign bills or receipts expressed in the local coin. And if you want to quickly translate a price into U.S. dollars, why not use your cell phone or any other device with a calculator?
Overseas travel is expensive, but it doesn't have to be unaffordable. As long as you make sure to carry a credit card without foreign fees, get the best possible exchange rate when converting cash, and avoid costly merchant tricks, a post-trip look at your bank account shouldn't result in any surprises.
Odysseas Papadimitriou is the CEO of Card Hub, a website that helps consumers compare credit card offers.
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