How to manage your money when you travel overseas

Failing to consider certain financial matters before you travel overseas could result in the trip costing a whole lot more than you budgeted for.

Some advance planning before you travel overseas trip can make a world of difference to help you manage your money and stay within your budget.

By Jessica Mudditt

It’s easy to get caught up in the impending thrill of overseas travel but failing to consider certain financial matters could result in the trip costing a whole lot more than you budgeted for. 

The unwary overseas traveller can be hit by transaction and ATM fees when using an Australian bank card overseas, as well unfavourable exchange rates. 

“If you must use your card overseas, avoid the dynamic currency conversion trap and always pay in the local currency when presented with the option,” says TransferWise country manager Nicholas Lembo. 

“Merchants can sometimes charge you up to 10 per cent per transaction if you choose to pay in your home currency.”

Travel card pros and cons

While some travellers consider travel money cards a better deal than bank cards, others dismiss them as a rip-off. Weighing up which to use is complex and the choice will likely come down to individual circumstances.

Bessie Hassan, money expert at finder.com.au, says that travel cards do have benefits worth considering. One is being able to lock in exchange rates. This is an advantage when the Australian dollar is strong. You will get an exact, unwavering amount to spend rather than being at the whim of currency fluctuations. Another plus for travel cards is security. Because the card isn’t connected to your transaction account, the most scammers could steal is the amount stored on the card. Further, a backup card can be provided, so that you have a spare in case of loss or theft.

"If you must use your card overseas, avoid the dynamic currency conversion trap and always pay in the local currency...'" Nichocas Lembo, TransferWise

However, there are also considerable cons. Travel cards come with a variety of charges, including card establishment fees, reload fees and set-up costs. Another downside is that adding extra funds isn’t instantaneous. You’ll need to plan to avoid being caught short.

“If you decide you really want to buy that expensive handbag while travelling, for example, you can’t just add more money to your card,” Hassan says. “Extra funds can take up to three days to be processed.”

If you opt for a travel card, don’t let it sit in your wallet once you return home. It will incur monthly inactivity fees until there’s nothing left. According to a recent survey by finder.com.au, one in four Australians returned with funds left on their travel cards, and the average amount left unspent was A$267. Close your travel card account and transfer the remainder back to your bank account as soon as you get home.

Regular bank cards

Want to use your regular debit and credit cards instead? It pays to use a card that waives currency conversion fees, or to ask your bank to waive them. 

“Don’t be afraid to say to your bank, ‘I’ve had this card for X number of years – surely you can waive the fees for me?’ You never know – if you don’t ask, you don’t get,” Hassan says. 

Do tell your bank that you’re heading overseas. This can be done online in a matter of minutes and it will prevent the major inconvenience of your card being cancelled due to what might be interpreted as suspicious activity.

If your bank won’t waive the fees, or you want to track your overseas spending more easily, it may make sense to open a new bank account specifically with a bank that doesn’t charge overseas ATM withdrawal fees and currency conversion fees. According to Mozo.com.au, HBSC and Bankwest offer the most competitive debit and credit cards for travellers.

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Borderless banking

There are also disruptors to consider, as a third alternative. One is TransferWise’s borderless debit card, which gives you bank details in the UK, US, Europe and Australia, and allows users to hold 28 currencies on one card. It uses mid-market exchange rates without margins, mark-ups or monthly fees.

Clearly, travellers have more options that ever. As always, read the fine print before signing up and heading off.

Travel insurance traps

Taking out travel insurance before travelling overseas is wise, as the costs of needing medical treatment or an evacuation during a natural disaster can run into hundreds of thousands of dollars. However, many who pay for coverage don’t realise that they’ve inadvertently voided their policy. The most common travel insurance traps to avoid are:

Ignoring exclusions for an activity.
According to consumer advocacy group CHOICE, a third of Australians simply buy the cheapest travel insurance policy and don’t read the fine print. Take the time to go through your policy and note any relevant exclusions for the activities you’ve planned.

For example, if you will be travelling by motorcycle there may be exclusions, such as no liability cover for third-party injuries nor for theft or criminal damage.

Failing to understand that the excess is charged per claim.
Most travellers are unaware that insurers tend to charge excesses by the claim and not by the area of cover. A claim for stolen belongings involves paying an excess on every lost item claimed, whether it’s cash, luggage or travel documents. 

To avoid this, pay a small fee to remove the excess altogether, which is an option under most policies. Note that the travel insurance that comes with credit cards tends to offer higher coverage for baggage loss and damage, but there is also a higher excess.

Not disclosing pre-existing medical conditions.
While some preexisting medical conditions are automatically covered, a medical condition or the symptoms of one need to be disclosed. You also need to tell your insurer about a condition for which you’ve been treated in the past, or one for which you are using prescribed medication. Obtaining a doctor’s certificate for travel isn’t enough – disclosure is a must.

Read next: Travel insurance: Why you should always read the fine print


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