Travel Smart By Planning How You'll Pay
The spread of globalization has transformed worldwide travel from a rare luxury into a frequent norm. Travel expenses can range from hotel rooms to street-side souvenirs, but regardless of the destination, travelers need to be well funded. Read on for some tips on how to finance your adventures - and avoid unnecessary surcharges along the way.
Navigate the Mysteries of Currency
Cash may be the bread and butter of travel, but exorbitant fees related to currency exchange can leave a bitter aftertaste. The good news is that travelers can easily save a few extra dollars by conducting a pre-trip investigation.
You'll generally find the best currency conversion rates in the country to which you're traveling. But don't whip out your wallet at the airport because exchanges are pricey. Instead, head for automated teller machines (ATMs) affiliated with major banks. In the event that banks are closed or ATMs are not immediately accessible, you can avoid a sticky situation by exchanging the equivalent of at least US$100 before leaving home.
Will That Be Cash or Credit?
One of the most confusing money-related issues for travelers is whether to use cash or credit. Here's a breakdown of your options:
Cash - The local currency is a necessity in many places because you'll need it for tips and for shopping at local bazaars, as many retailers only accept hard currency. Before purchasing foreign funds, keep in mind that local merchants in some areas may accept your U.S. dollars; in this case, it might not be wise to use your American bills, rather than exchanging them for the local currency. While this is convenient, keep in mind that the merchant may be using a conversion rate that is in his or her favor, so you may be losing out compared to paying in local currency. It's also possible that the merchant's exchange rate will provide better value. To compare the strength of foreign currency with the U.S. dollar, and to ensure you're getting the best conversion deal, stay informed about the latest exchange rates by checking financial websites.
The downside to carrying cash is that while paper money may be the most globally accepted form of currency, there's no recourse if you lose it. In addition, concealing a wad of bills or a pocketful of coins is much more difficult than hiding a plastic card.
Credit Cards - Credit company exchange rates tend to be the most competitive, but be sure to confirm your credit service's rates before leaving home. You may be charged a standard 1% for the currency conversion, as well as an additional 1-2% service fee. Consider that this is still less than what you would pay if you were exchanging cash or traveler's checks. If you pay off your monthly credit balance and can control your spending, plastic might be a good currency option. Many travelers find it best to save credit cards for hefty purchases, such as hotel rooms. Avoid cash advances if you don't want to get slapped with extra fees.
If you used your credit card while, carefully read your statement when you get home to ensure you haven't been overcharged or charged twice for the same purchase -unscrupulous vendors may take advantage of confused tourists. You should also let your credit card company know you'll be overseas before you start racking up purchases in a foreign country; if you don't, the company might put your card on fraud alert and freeze your funds. Although some credit companies offer cards with basic travel insurance attached, the insurance rarely covers the full extent of trip cancellation, medical coverage and personal belongings. (To learn more about travel insurance, see Ensure Your Vacation Is Insured).
Traveler's checks - Traveler's checks have become far less common than credit and debit cards. They just aren't conducive to today's fast-paced lifestyle because exchanging them often turns into a lengthy, time-consuming process. Additionally, many retailers and kiosks might not accept traveler's checks at all, especially in less popular tourist destinations, and those that do often charge massive service fees. Although traveler's checks provide a certain amount of security because your countersignature must match the signature on the checks, it can become tedious if only one person in your party is able to sign for and cash the checks.
Despite their drawbacks, however, traveler's checks do offer a few advantages. First, it's easier to keep track of your expenditures when you have to surrender each check, as opposed to the blind spending effect that credit cards can produce. Furthermore, by retaining the serial number that comes with your checks, you can acquire replacements or reimbursement if the checks are lost or stolen. Finally, checks can be purchased in a variety of foreign funds. If you do opt for traveler's checks, order them through your bank because most don't charge commission.
Debit Cards - Debit cards are relatively easy to carry and use while traveling. Like credit cards, they're less conspicuous than cash and, as long as you protect your PIN, no one else can access your funds. It's also easier to stick to your budget when you're limited by the amount in your account. However, there are a few disadvantages to using debit. ATM machines might be scarce, depending on your destination, so it could be several days before you're able to access your account, and even then, there's no guarantee that the money machine will accept your card. To avoid this unhappy scenario, look for machines that display the PLUS or Cirrus network logos and be sure that your card is connected to the system as well. These global networks have agreements with ATMs worldwide, and many also provide credit card cash advance options.
Using your debt card isn't free of charge: the host country's ATM and your own bank may charge you for each withdrawal. Although fees are generally nominal, banks often charge around 2% for every transaction, plus an additional fixed $1.50-$2.50 surcharge. Minimize the financial damage by infrequently withdrawing large amounts and call your bank before you leave home so you have a clear idea of the service charges you can expect to pay while traveling. In addition, as with your credit card company, be sure to tell your bank where you're going and how long you'll be away.
Protection in Case of Loss
Regardless of which currency format you choose, keep photocopies of all cards and traveler's checks both on your person and with someone at home. This way, if you lose anything you'll have a record with which to claim replacements.
Above all, don't rely on just one form of currency: ATM problems or a stolen wallet can leave you card- or cashless faster than you can say "charge it." Protect yourself by diversifying your currency hoard. A good strategy is to exchange just enough cash before you leave to get you safely to your hotel. Bring both a debit and credit card, but reserve the credit card for more expensive purchases. Use ATMs sparsely, withdrawing enough cash to get you through the next week or two. You might also wish to carry a few traveler's checks in case of emergencies. Make sure your currency is safely tucked away, preferably in a money belt that can be concealed under clothing, but don't keep it all in one place: that way, if you lose your money belt or it's stolen, you'll still have backup funds available. Keep photocopies of all cards in a location separate from the currency itself, and make sure you know the serial numbers of your traveler's checks.
If you are robbed, the first thing you need to do is cancel your credit and debit cards so the thief can't access your money. If possible, ask for emergency funds to be wired to you. If you're going to be away for a long stretch of time, you might consider appointing a close friend or family member as power of attorney over your account, which will allow him or her to conduct banking transactions on your behalf.
If you purchased travel insurance before you left, call the 24-hour help line that is provided by most insurance carriers and they will assist you in replacing your funds. If your insurance covers personal belongings, you will be reimbursed (up to a predetermined amount) for the items that were stolen. Make sure you know exactly what your insurance covers before you sign up. (To learn more about travel related precautions, see Travel Tips For Keeping You And Your Money Safe).
No matter where you travel or for how long, money will inevitably be the backbone of your trip. Although the various forms of currency, and their individual pros and cons, might be confusing to navigate at first, a little pre-trip research and planning will turn you into a savvy traveler. The extra time and effort is well worth it because there's no better way to spend your hard-earned cash than to finance the trip of a lifetime.