Budgeting: Financial Tips for Travel Abroad
Provided by Visa, Content Partner for the SME Toolkit
Overseas travel is an expensive proposition and difficult for many families to afford. Still, there are ways to lessen the financial burden of an international trip so you can see the world without breaking the bank. Here are a few:
Get the best exchange rate. There are essentially three ways to exchange currency: converting cash at a bank before your trip, using a currency exchange service like the ones found in airports, or simply using a credit card, in which case your money is converted automatically upon making a purchase. So, which is the best option?
According to an exchange rate study, international travelers can save up to 15% by using a credit card. More specifically, major worldwide credit networks automatically provide the best exchange rates possible–currently 14.7% better than the currency exchange companies that operate out of airports and 7.9% better than the average major bank. Yet you can't just open a major credit card account and expect those savings.
Get a no-foreign-fee credit card.
Over 90% of all credit card issuers charge foreign usage fees, which inflate the cost of any transaction. "No foreign transaction fee credit cards" don't have these fees, however, making them perfectly suited for overseas spending. In order to use one of these cards to your full advantage, you should adhere to the following guidelines:
- Get your card before booking flights, hotels and activities. Foreign fees apply to purchases made through foreign-based companies whether you're in your home country or overseas. Make sure your credit card issuer does not charge these types of international fees before booking your trip to avoid surprises on your statement.
- Use a worldwide payment network. Your payment network dictates the number of merchant locations and countries in which you can use your credit card. Given that most payment networks do not provide worldwide coverage, you should check to see how much coverage your credit card affords.
- Compare bank exchange rates. Currently, an 11.9% disparity exists between the exchange rates offered by the best and worst banks for currency conversion, according to some studies.
- Watch out for fees. Some banks might charge shipping or processing fees, so make sure to inquire about extra charges before agreeing to a conversion.
- Convert just the right amount. Convert enough cash to comfortably cover your initial expenses but not more than you feel comfortable carrying with you.
- Call your issuer before leaving. Make sure to notify your bank of the exact countries and territories where you'll be traveling. If you don't, your cards may be suspended for suspicion of fraud.
- Avoid dynamic currency conversion. Some merchants offer dynamic currency conversion in order to apply an unfavorable exchange rate to a transaction and increase their profits. Luckily, avoiding this money-waster is as simple as declining any merchant overtures and making sure to only sign bills or receipts expressed in the local coin. And if you want to quickly translate a price into your home country currency, why not use your cell phone or any other device with a calculator?
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