Travel, especially abroad, can become very expensive, very quickly. Many of us give up the opportunity to travel because of the financial burden it may cause. Whether it’s solo travel, a honeymoon holiday, or a family vacation, overseas travel requires a lot of planning, and that includes planning your travel money. Knowing how you will manage your money is essential to safe travel and will save you plenty of trouble.
Being in a foreign place can be eye-opening and invigorating, but when it comes to finding quality and luxury in travel, it all comes down to a matter of money. Wherever you are, and wherever you’re going, travel money is what gets you from point A to point B, gets you the food on your plate, the room view you want, and the experiences you can’t justify missing.
Handling foreign currency can get complicated: money is not worth the same amount in every country, and because your home currency is often not accepted, currency exchange is unavoidable.
With the right planning and research, TopTravelGuidance can help break down the rules so you don’t get hit paying unnecessary fees.
1. Create a Travel Budget
Budgeting can be one of the most important parts of your travel plan after you’ve decided where to go. By taking time to make your spending plan, you’ll be able to see where your money is going. This helps you avoid overspending which may result in running out of money halfway and having to turn to friends and family or even returning home with a huge credit card bill.
Consider how long you’ll be away and how much you’ll spend each day. This includes accommodations, activities, meals, transportation, gratuities, souvenirs, etc. While you should stick to your budget most of the time, make it flexible and allow yourself to have occasional splurges so that you can enjoy your trip as much as possible.
To take much of the stress out of working out a travel budget, think about booking an inclusive vacation with a trustworthy tour operator which offers stress-free, tailor-made tours and can include almost everything from lodging to guiding. The good thing about an inclusive tour package is that it’s typically cheaper and you’ll know how much your trip cost before you leave as long as you stick to the inclusive services.
Proper planning, having the right resources on hand, and avoiding common currency exchange pitfalls are key to changing from U.S. dollars to Japanese yen, UK pound sterling, and Euros without worrying that you’re losing 10 percent or more on the transactions.
2. Get Some Foreign Cash Before You Leave
As soon as you step off your airplane, you’ll probably need some cash in the local currency for a cab, a meal, or public transportation. Having some local cash beforehand saves you time to seek out an ATM in the airport. If you’re visiting some developing countries, chances are that there are no ATMs at the airport, or even if there are, there’s no guarantee that they will be working.
Before you leave, you can get some foreign cash by ordering from your own local bank with a few days’ notice. You can also exchange some foreign money at the exchange bureau of international airports or large banks in your home country.
Keep in mind that you should:
- Compare bank exchange rates to get the best currency conversion.
- Watch out for fees and make sure to inquire about extra charges before agreeing to a conversion rate.
- Convert just the right amount. Get enough cash to comfortably cover your initial expenses but not more than you feel comfortable carrying.
3. Get the Best Exchange Rate
There are three ways to exchange currency: converting cash at a bank before your trip, using a currency exchange service like the ones in airports, or simply using a credit card, in which case your money is converted automatically with a purchase.
According to an exchange rate study conducted by Card Hub, international travelers can save up to 15 percent by using a credit card. More specifically, major worldwide credit networks automatically provide the best exchange rates possible — currently 14.7 percent better than the currency exchange companies that operate out of airports and 7.9 percent better than the average major bank.
The best way to exchange currency is to find out if your bank has an affiliate abroad (such as Barclays and Bank of America), which offers the best exchange rates. Hotel and airport counters, in contrast, typically offer poorer rates and high commission fees for the service, while out-of-network ATMs can charge you up to three percent for withdrawing cash. To avoid this, use a credit card that waives all transaction fees, such as Chase Sapphire Preferred.
Download Currency Conversation App
Among the currency exchange tips, you could leverage, a smart one is to track the exchange rates via an app and set an alert for significant currency movement. This will be useful not only while shopping for rates before you travel but also while you are at your destination.
4. Always Take Travel Insurance
There’s no doubt that travel insurance is indispensable for international travel. I can’t agree more with the saying that if you can’t afford travel insurance, you can’t afford to travel. Unexpected incidents can occur during your trip: sickness, injuries, lost luggage, a stolen wallet, canceled flights, etc. sometimes you may also need to cancel or interrupt the trip before or during your travel. You’ll find travel insurance invaluable when any of these things happen. Even if everything goes right, getting travel insurance gives you peace of mind.
5. Don’t be Fooled by Dynamic Currency Conversion
Dynamic currency conversion (DCC) is basically when a store, hotel, tour operator, restaurant, or other overseas establishment offers to charge your card in Aussie dollars instead of the local currency (which is the norm). Sounds great, right?
Not so fast, world traveller. Do you know what exchange rate you’re being charged for this privilege? There is likely to be an extra profit margin factored in for the proprietor as well. The exchange rate could be worse than what your card provider offers without this ‘extra service’.
When in doubt, always pay in the local currency when travelling.
6. Currency Conversion Pitfalls to Avoid
Remember that each time you complete a currency exchange, you’re losing something in the transaction. By following the advice below, you can keep this around 5 or 6 percent – or less. But by following for some common currency conversion traps, you could end up paying upward of 10 percent of the money you’re exchanging on the mere transaction itself.
Here Are Some Currency Exchange Pitfalls to Avoid
- Avoid the change bureaus popular in airport terminals and other popular tourist spots. Even if they appear to be offering attractive rates, there are often hidden fees baked into their transactions.
- Travelers checks may be good to keep for an emergency, but you’ll find that a number of restaurants and retail shops no longer even accept this once rampantly traded tourist currency. Banks are still a good option for cashing these.
- Resist the urge to transact in your native currency. If you’re in Paris, and the shopkeeper is fine taking American dollars, this is a red flag that you’re not going to get a favorable exchange rate.
- Change money in your destination country, rather than at home. You’ll get the best rates. And don’t take out too much out just to be safe; remember, you’re going to need to pay to exchange your currency back to U.S. dollars or whatever your native currency is, again.
- Merchants may offer to convert the price of a purchase from the local currency into U.S. dollars, but some merchants push dynamic currency conversion in order to apply an unfavorable exchange rate to a transaction and increase their profits. Avoid that by only signing bills and receipts expressed in the local currency. Use a smartphone for currency conversion on the go.
Let’s say, hypothetically, that the difference between solid and poor currency exchange preparation and execution is averaging 5 percent for your transactions vs. 10 percent. If you’re spending – and thus, converting – $5,000 at an exotic destination somewhere on the other side of the globe, the costs add up quickly. That loss alone would be $250 vs. $500.
Enjoy your trip and safe travels; just don’t say goodbye to your money unnecessarily because of inefficient currency exchange practices.
7. If You’re Using Your Own Card, Let Your Bank Know
Before travelling overseas, let your card providers know where you’re going. The last thing you want is to have your card cancelled for a ‘suspicious transaction’ in Bhutan or Romania because your bank thinks you’re still in Australia.
If it’s possible, also try and have a back-up card with you, whether that’s attached to the same bank account back home, or a separate account. That way if one is lost, you won’t be scrambling for a solution.
With all that said, if it’s peace of mind you’re after, consider taking out Budget Direct’s travel insurance, which offers cover for the replacement of lost or stolen travel documents, credit cards, travel money cards, and travellers’ cheques for up to $5,000*. Always read the Product Disclosure Statement for Terms, Conditions, Limits and Benefits when considering insurance.
8. Use Credit Cards for Purchases
While you should always keep some cash on hand while traveling, you should use credit card for the majority of your spending. This is because it makes international payments much easier, you don’t have to deal with the hassle of converting currency, and it will help you get the lowest exchange fees possible (some cards don’t charge any fee at all).
Moreover, you’ll be much less likely to be the target of pickpockets as credit cards are easier to hide. Even if your card is stolen, you will not lose a cent. Simply report it right away and your card issuer will remove any unauthorized charges on your account.
More UseFul Tips
- Most countries have a limit on the amount of cash a visitor can carry. It’s best to consult with an expert before you leave and make sure you are not carrying an amount that could create an issue at the customs checkpoint.
- Some countries will confiscate money over the limit. Personal security measures are also important. Cash should be carried in a money belt or a hidden pocket, which is out of sight and hotel safes and other security systems should be used when you reach your destination. Common sense and alertness are the best tools to use when traveling; they always work regardless of the situation.
- try and use up all the foreign bills and coins on you before leaving said country. Often, exchanging these bills back into your home currency can cost you—an extra fee you can avoid completely if you’re mindful.
For more tips and tricks on cards and currency, be sure to check back here for the most up-to-date information.