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Money and travel: what are your options?

The weeks and months leading up to a holiday are peppered with plans for activities, drenched in destination ideas and lightly salted with tasks like sorting travel insurance.

Speaking of which, check out Virgin Travel Insurance if you need a policy for your next trip!

The days and hours leading up to estimated time of departure can be drowned in panic around how you’ll be managing your money while overseas. Aussies are spending about $66 billion on their holidays, according to research company Roy Morgan, and are heading to destinations as far flung as the US, the UK and Indonesia in droves (ABS).

Here are many of the options you have for spending while overseas, and the pros, cons and fees associated with each of them.

Credit cards

Pros: Your credit card is the only form of spending that could see you earn Points for every dollar you spend, which means even if you do regret buying that to-scale Big Ben statue, you still might have something more to show for it. Credit cards come with added security, as they require pins or signatures to purchase, and your bank can help identify if someone is using your card who shouldn’t be.

Cons: Relying solely on a credit card for all your travel purchases isn’t always ideal – think about when all you want is a quick coffee and you have to pay for a couple of dollars/euros/baht with a credit card. There’s also the possibility that you could lose or leave your card behind somewhere (hey, it happens to the best of us), and until your bank has a chance to sort you out, you may be without buying power for a time. Also be sure to check your credit limit – you wouldn’t want to hit this without knowing – and make sure you can pay back any debt you rack up on your adventures by the due date.

Fees: Credit card providers may charge you fees, including international transaction fees, as a fixed dollar amount or a percentage of the purchase amount. Virgin Money credit cards charge a fixed 3.3% of the transaction amount for purchases, and a $5 cash advance fee if you want to withdraw money from an ATM. The exchange rates applied are determined by VISA.

When asked by a merchant if you want to pay in local currency, please be aware that the currency conversion rate is provided by the merchant’s financial institution and not by the card issuer. Please also check with the merchant what additional fees may be charged by the merchant, currency conversion provider and the merchant’s financial institution for paying in the local currency.

It’s a great idea to check the exchange rate on a daily basis, so you keep on top of any fluctuations in your holiday budget.

Cash

Pros: Not only do you get to feel like a moneyed-up billionaire, carrying cash is a fast and convenient way to pay for purchases. Having your entire budget in your hand may also help limit overspending, as you have a physical reminder of how much you have left.

Cons: The main let down of carrying so much cash is security – if you were to lose your wad of dosh, that could be the end of your travel kitty. It can also be hard to judge just how much cash you will actually need.

Fees: You will pay to exchange cash by way of a commission, a set fee, a reduced exchange rate, or any combination of the above! A general rule of thumb is that currency exchange in airports have the least favourable exchange rates, but offer more convenience and potentially greater security. Once again, make sure you know the official exchange rates each day and shop around for a good deal.

Debit cards

Pros: Debit cards work like credit cards, but use your own money (rather than credit). They carry many of the same benefits of credit cards, such as security features and ease of use. The main benefit of using this option is that you won’t return home to a credit card bill. Even though you may have spent your savings while on holiday, you can come home knowing you won’t be paying it off for the next few months.

Cons: Again, it can be overkill to use a card for small purchases such as a bottle of water, but the main downside to travelling with a debit card is that you will have a set budget of however much you managed to save for your trip. One way to get around this is to see if you can arrange (or already have) an overdraft limit on your account, just in case you really can’t come home without that Big Ben statue.

Fees: The use of debit cards overseas will often come with similar conditions to credit card transactions but it’s a good idea to check specific fees and charges with the credit card provider.

Traveller cards

Pros: Traveller cards can vary, but in general you can load foreign currencies on to a card in one go to avoid transaction fees every time you want to get money out or make a purchase. You can reload them with cash if you run out, you can load multiple currencies onto the cards if you’re travelling to multiple countries, and you can check your account at any time to see how much you have left. Generally speaking, these will let you take cash out at participating ATM machines around the world, essentially working like an EFTPOS card once you’re abroad.

Cons: These cards can take a little more organising to set up before you leave, and you’ll need to ensure you don’t run out of cash on them as there’s no overdraft option.

Fees: Traveller cards will often include similar transaction fees to credit cards and debit cards, and will use the provider’s exchange rate. There may also be establishment and closing fees which you need to consider.

Every option comes with its pros and cons, and sometimes a mixture of more than one will be the best route to take on your adventure. As you can see, reviewing the various fees to compare apples with apples is a bit fiddly, as it relies on daily exchange rate fluctuations between a vast array of vendors. Review the fees and weigh up the pros and cons to make a decision that best suits your needs and circumstances.

How do you manage money and travel?

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