“Why should they have it?” says my partner, Clive. They = those who charge outrageous currency fees. It = our money.
Clive taught me a simple method, which I think is quite clever, for saving currency fees at both ends of a trip. When we were planning our first overseas journey together a few years ago, he said, “I have to get travellers cheques.” Travellers cheques?!? I thought they were a thing of the (distant) past.
The Fee Approach
My financial approach to travel used to be: 1) use mileage-award credit cards as much as possible, to both get the miles and have an automatic record of expenditures; 2) get just enough foreign currency at the departure airport to have as backup at the destination, if needed for initial ground transportation or incidentals; and 3) have an ATM card on hand for emergency cash. And it’s easy to do wire transfers before a trip.
Depending on which cards are used in which country, my approach involved paying often-exorbitant currency exchange fees. These are charged by credit card companies on each purchase, exchange agencies who have a captive market (and offer horrendous rates) at the airport, and banks, who always know how to maximise their take. Wire transfers are convenient, but invoke fees at both the sending and receiving ends.
The Free Approach
Clive’s approach, on the other hand, is to largely pay in cash as he goes. He keeps a basic record of expenses, not relying on credit card statements, and when he gets home, he has no bills to pay. He doesn’t have any foreign credit cards, and only uses his local credit card overseas when there’s absolutely no choice. This means he avoids both fees and poor credit card exchange rates.
There are two design points for saving fees at both ends:
- Many banks and credit card companies offer, or include as an automatic benefit, commission-free travellers cheques. I had always ignored this, since I hadn’t seen or used travellers cheques since a family trip to the U.S. west in 1994. Clive gets commission-free travellers cheques, in euros, pounds, or American dollars, as part of a standard credit card plan with one of Australia’s major banks.
- Having a bank account and ATM card in the destination country, which many ex-pats do; the ideal is for the overseas bank to have a good network and ATMs where you’ll be travelling
Then simply do the following:
1) Estimate amount of foreign currency needed
2) Get that amount in commission-free travellers cheques, at the bank – which usually has the best exchange rate, too
3) When you arrive at your destination, deposit travellers cheques — fee-free — into your account there
4) Use foreign ATM card as needed to withdraw cash – also fee free based on bank limits (unlimited in England)
I’ve been amazed at how easy and cost-effective this approach is. After years of putting everything on a mileage-award credit card, it seemed strange and almost wrong to me to pay cash for so much – we weren’t getting any miles! – and it had been years since I’d paid cash at restaurants and hotels.
But I learned quickly that it worked fine: we don’t carry large amounts of cash on hand, we’re not constantly looking for somewhere to exchange travellers cheques, and we just get what we need from an ATM and pay as we go.
Giving Ourselves More
Like most people, we try to work within a travel budget. I’ve also learned we don’t have to be fanatics, but with a little foresight, we make worthwhile savings (which we can spend on us!). We also get better exchange rates at the bank; on our last trip we noticed the rate at Sydney Airport was almost ten per cent worse than at the bank. It’s become a no-brainer to trade last-minute convenience for saving money and avoiding rip-off rates and fees. And Clive has shown me there’s an over-emphasis on using credit cards to get miles, when sometimes it’s simply not cost-effective.
Initially I thought this approach was more work, but it was only a matter of changing my routine. If you’re interested in saving money and avoiding currency exchange fees, it might be worth looking into commission-free travellers cheques and deposits into your foreign account.
This has become a key item on our travel planning checklist.
When it comes to your money, why should they have it?