Thursday, 27 September 2012

Avoid Bank Fees when Travelling Overseas

by Rob d'Apice
When travelling overseas, it's easy to cop a bunch of unnecessary bank fees when trying to access your money. And it can be substantial - depending on how you managing it, you could be paying more than $10 in fees for every $50 dollar you withdraw. Not cool!

Today, we look at 4 different methods for getting access to your cash overseas - from worst to best.

The worst: Exchange at an airport

Avoid exchanging cash at the airport altogether. Generally the exchange rates you receive are particularly bad. They can do this because they have a stranglehold on a captive market - once you're at an airport and you want money changed, you don't really have another option!

Another downside to exchanging all your cash in advance is that you're then carrying around a lot of currency, and you're putting yourself at risk of losing it or getting it stolen.

The bad: Using your ATM Card

A.K.A. the I-forgot-to-do-anything-about-my-money method.

So, you chuck your ATM card into a foreign bank and pull out some money? You'll generally cop a ~$5 fee from your Ausralian bank, plus a 3-4% currency conversion fee with each withdrawal. You may also pay a small fee to the foreign bank for using their ATM.

If this is your only option, you're best bet is to take out as much money as possible with each transaction to minimise the fees. If you're in a group, considering taking out a large amount in turns and splitting it between the group. Make sure you store any excess cash you've withdrawn somewhere safe - like back at your hostel or hotel.

The good: Use a preloaded cash card

Many of the banks now offer a preloaded travel cards. Before you leave, go to your bank to get a card, and transfer in some of your balance. You can transfer in your spending money and convert it to the necessary currency you'll need for your trip (meaning you 'lock in' an exchange rate when you load the card). The card itself can hold a bunch of different currencies at the same time.

You'll (generally) still get charged a fee for ATM withdrawals by your Australian bank, but you will avoid a large currency conversion fee with each transaction.

Note that there is sometimes a setup fee for the card, depending on the bank. If you're a student, you may be able to get this fee waived.

The best: Use a zero international transaction fee credit card

The 28 Degrees Travel Card, offered by GE Money, has no annual fee and no international transaction fees. It also doesn't charge anything for cash withdrawals (although you won't get an interest free period, so you'll start accruing interest on this withdrawal straight away). Note that you may be charged a fee by a foreign bank for using their ATMs - but this is hard to avoid.

I suggest you 'pre-load' the card with money - transfer some of your holiday spending money to the card so that your credit card is in the black. That means that when you withdraw cash from a foreign ATM, you won't be 'borrowing' on the card and you won't pay any interest.

2 comments:

  1. Great tips, especially the 28 degree mastercard. Just some other FYIs with the 28 degrees though.

    1. They don't always appear to start charging interest straight away (I've pulled out cash on "credit" and paid it off a few days later with no extra charges).
    2. To pre-load the card you just BPAY the card as though you were paying a bill.
    3. Be careful with how much you try to pre-load, as there are anti-money-laundering laws/protections that get triggered if your card gets too far into the black and then your card stops working (I haven't had this happen to my 28 degrees but it did happen to my AMEX).
    4. The 28 degrees is also great for people addicted to buying stuff on the internets from places that use weak currencies like GBP, USD and EUR ;-)

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  2. Good tips. Another option is the CitiBank Plus Transaction Account, which I recently used on a trip to China. Within Australia, it's a regular everyday bank account that comes with a Visa Debit Card to use as normal.

    But, overseas:
    *There are no international transaction fees for use of the card in-store
    *No international ATM fees charged by Citibank - either percentage-based or amount (e.g. $5 + a %)
    *You will be charged ATM fees by the bank owning the ATM you use (e.g. Bank of China), but if you can find a Citibank ATM - there were a few of these in Beijing - there will be no fees at all.

    Certainly not the solution for everyone but a good one to have a look at!

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