Travel is something that a lot of us spend a long time saving up and setting money aside for. We research the best value accommodations for hours on end. We plan complex travel routes to ensure we take advantage of the low cost flights, or cheap bus offers. We spend a lot of time mapping out our trips to fit within our specified budget. But when we land abroad, our brain goes into holiday mode and we forget about being sensible with our money.
Here are a few things you can do while planning your trip, that will protect your finances while you travel. Next time you go away, you will be able to relax and switch into holiday mode, knowing that your cash is looked after.
Get a credit or debit card with no forex fees
The golden rule for protecting your money while away is to limit the amount of cash you carry. In the past, this could be prevented by carrying Travellers Cheques. Most of you will be too young to remember them, but these bits of paper were accepted in most retailers as payment. The benefit of them was they were replaceable if lost of stolen. These days they are effectively worthless as they are no longer accepted as payment.
The best way to avoid carrying a lot of cash now is to use a credit card or debit card while abroad. ATM’s are widespread and most banks now support foreign transactions. However, those same banks will also charge you high fees for this privilege. So before you go, check what charges apply for using your every-day debit or credit card abroad. Chances are it will be somewhere in the region of £3 per transaction or 3% of the whole transaction amount. If you think about how often you use your card in one day at home, you can see how the extra cost can really add up. For your daily coffee. For your train ticket or bus pass. For your dinner at a restaurant.
Generally it makes sense to apply for a new debit card before travelling, unless your bank is one of the few that do not charge you. If you are a European resident, check out the new “challenger banks” Revolut, N64 or Monzo*. They can be a great alternative as they do not interfere with your every day current account. They do not charge for foreign card transactions and they offer good exchange rates.
If you prefer to spend with a credit card, because of the increased security then there are a lot of options. For UK citizens, your best source of information for travel credit cards is on price comparison websites, such as moneysavingexpert.com or Uswitch. Some credit cards offer supplementary insurance for incidents such as flight cancellations and car collisions. This can be very beneficial when travelling. Yet, remember this insurance is supplementary and does not completely replace your need for insurance (we will touch on this later). Check out your credit card terms and conditions before you take off.
Check the ATM charges
Now we need to address the best way to get foreign cash, for all those instances where card payment is not accepted.
Most ATM’s in the world will charge a fee for using a foreign card. This is how they make their money. You may have a debit card that allows you to withdraw cash for free but that only covers your bank’s end of the deal. So if you know you need to get access to cash when you’re abroad, you should prepare in advance.
Try these few steps.
1. Research which cash machines in your chosen country will not charge you for withdrawals.
Here are some examples.
- Spain – Caixa Bank
- Portugal – Multibanco
- Croatia – IKB (Istarska Kreditna Banka)
- Greece – Piraeus Bank
- Italy – BNL
Whatever you do, avoid Euronet machines everywhere. They charge extortionate fees and offer poor exchange rates.
2. Take out a lump sum of cash rather than smaller amounts
If you cannot find a fee free ATM, limit the number of withdrawals you make. Take out all the money you will need to cover you for a couple of weeks. However, remember out golden rule, do not carry too much on you at one time. Carry only what you need for the day and leave the rest in a safe place at home.
One warning on this, be aware of the limits your home bank puts on cash withdrawals. New challenger banks such as Revolut and Monzo only allow £200 a month in cash withdrawals. After this point they charge a percentage fee which can be quite painful if you are not expecting it.
3. Exchange money before you leave
A simple option if you are heading on vacation is to buy foreign currency before you leave. You can shop around for the best exchange rate and you will avoid any card charges. This option is, however, less suitable for long-term travellers, and may not be available for all currencies. For example, you cannot get Moroccan dirhams anywhere outside of Morocco.
4. Remember to tell your bank you are going
To avoid your account or card from being frozen while you are away, make sure you tell your bank where you are going. The last thing you want is to be caught overseas without cash and your only bank card swallowed by the nearest ATM machine.
Select local currency for everything!
In each foreign transaction, each item you buy, each ATM withdrawal you make, you will have a decision to make. You will be asked whether you wish to pay in local currency, or in your home currency.
If you select your home currency you relinquish control over the exchange rate you receive. All that prep work you did researching the best cards becomes pointless. The payment machine or ATM will select an exchange rate for you and you can bet it will not be a good one (for you that is).
So your decision is an easy one. Always select the local currency. This way your transaction exchange rate will be decided by your card provider and you will not lose money through a bad exchange rate.
Safeguard your stuff
In the interests of safety, let’s repeat our golden rule – limit the amount of cash you carry. The importance of the rule depends on your choice of travel country. But if we are honest, it makes sense to follow the same security measures no matter how safe the country is deemed to be. You never know when the worst will happen.
- Make sure your hostel or hotel has a safe or locker where you can put your valuables.
- Separate out your cards and cash. Spread them between your bag/wallet and your pocket.
- Only withdraw large amounts of cash if you are heading straight back to your accommodation.
- Carry a few small value coins in an easy accessible pocket or wallet (not your main wallet). This way if a beggar asks you for money, or a mugger demands it, they may not see the rest of your cash. Of course, if there is ever a weapon involved, just hand over your riches. Money can be replaced. Your life cannot.
Travel with insurance
We seem to need insurance for everything these days, for our house, our car, our dog. So it may not be that surprising that around 25% of UK travellers decide to travel without insurance. However this can really harm your finances, especially if you are one of the following types of traveller.
- You travel with high value possessions such as camera equipment or designer clothes
- Your travels are planned far in advance, increasing the likelihood of cancellations
- You are travelling to a country with high medical fees where you will not be covered
The last type of traveller is at the highest financial risk. Most people that grow up in a country that offers universal health care (such as the UK), do not give too much thought to getting sick or having an accident. They know that usually care will be provided, no questions asked. However, this is not the case in every country, especially if you are not a resident there. In an emergency situation, you will be treated regardless of your ability to pay, even in the U.S. However you will also be billed for whatever medical treatment they deemed fit, and the costs could be high. This could leave you with a signifiant debt.
The best value for money insurance policies are annual multi-trip policies, if you travel more than three times a year. The cost for a policy is on average £23 for Europe* and £45 for one that covers worldwide travel*.
Remember to be open and honest about any pre-existing conditions. Your insurance premium may be higher, but you will be spending money for an actual service. If you are not honest, your insurance policy will be as effective as a blank piece of paper. If anything happens on your travels, the insurance company will use this as a way not to pay out.
For long-term travellers, multi-trip policies are unlikely to cover you. They normally only cover trips of upto 30-days. However, you can get multi-trip policies that include trips up to 62 days outside of your country, try Puffin insurance Gold policy. If you travel for months on end without returning home, you are better to opt for backpacker insurance. World nomads is the company I hear recommended the most for this.
Overall, plan in advance
If you manage to take only a couple of these steps before you go away, your cash will be better protected. So, make some plans and don’t let your travels bankrupt you.
*For UK residents only