Foreign Perspectives

Archive for the ‘Travel Money’ Category

Not so long ago there were all kinds of restrictions on transferring money abroad due to currency controls that lots of countries had in place. They’re almost all gone now and it has become more of a natural thing for “ordinary people” to need to transfer money abroad.

Most of the time it’s due to holidays, of course, but an increasing number of us are becoming small scale international jet setters with homes in more than one country and with both of those come a need to transfer money abroad.

Holidays usually involve a different category of currency conversion in that you are on the spot when you need the money, the amounts involved are smaller and you probably don’t have a local bank account. However, whilst the amounts may be smaller individually, added up over the years they will come to quite a hefty sum. Also, many of those who holiday in the same country each year may be considering the purchase of a property there and so have that local account too.

Most people ignore the costs of all those international transactions to their detriment. One friend of mine found that almost 10% of his entire salary was going in such bank charges simply because he was living abroad and using his “home” account in exactly the same way that he always had ie lifting small amounts frequently.

Saving money on those transactions is usually fairly easy. If you don’t want to change your bank, check out exactly how they charge for use of credit, debit and cash cards abroad. You will usually find that debit and cash cards are more economic ways of getting cash than credit cards are in that you won’t be paying interest on the money. However, that’s not to say that they are cheap. Typically a withdrawal of £100 in the local currency will cost you £4 to £5 but note that this includes a fixed transaction charge so withdrawing £20 will cost you around £2 ie 10% whereas £200 would be about £7 ie 3.5%. You can eliminate these charges altogether with some travel money cards.

It’s slightly better if you buy things, usually. Using a typical Mastercard or Visa card will only incur the foreign exchange charge ie buying £100 of goods will cost you £2.75 and that £20 item would be 70p. Therefore you should buy things with the card directly rather than lifting the cash to pay for them.

What about larger amounts ie if you’re living abroad or have a holiday home abroad? Well, if you follow our advice and get one of the better travel money cards you can lift £500 per day which means that it’s quite viable to use that card in conjunction with a local bank account to transfer amounts equivalent to several thousand pounds. You certainly couldn’t buy a house in that way but it’s enough to fund the payments for electicity bills and the like.

If you are talking thousands, then the usual way is to ask your bank to do a SWIFT transfer. This will cost around £25 plus there’s a currency exchange charge (which isn’t widely known). However, that too can be eliminated in some circumstances. For example, if you bank with HSBC then you can do free transfers to an HSBC account elsewhere in the world but the HSBC Premier account that you need to avail of this costs £20/month (unless you have £50,000 or more on deposit with them) so it’s not as useful as it first appears. However, if you are buying in Spain, the Halifax run to a free account which offers free transfers from Halifax UK accounts to Halifax Spain ones. What’s less obvious is that this route gives you a pretty much free way from pounds sterling to euros anywhere in Europe as banks are required to transfer euros at the same level of charges in other European countries as they do domestically ie to get euros in an account in France, you could transfer from the Halifax UK to Halifax Spain and from there to a French bank.

Other options include the use of the specialised money transfer services such as HiFX (there are lots of similar services around).

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• cirrus card

Cash cards are much more limited in function than credit and debit cards but they have one really big advantage abroad: without the PIN, they’re useless and therefore they’re of much less interest to thieves.

Cash cards for international use come in only two versions which are Cirrus and Plus. Both are linked to your bank account although you can also get prepaid versions of both.

These cards can’t be used in shops to make purchases and are limited to withdrawing cash from ATMs. Some banks put these symbols on their cards without considering that it means the cards can be used overseas so the charging for overseas transactions is sometimes less than clear. Once or twice I’ve found banks who were so sure that their card couldn’t be used abroad that they had no provision for making additional charges in their terms and conditions (and didn’t in my case, but don’t rely on that).

Although it’s not always clear, you can use Cirrus cards in all Mastercard branded ATMs and Plus cards in all Visa branded ones. You need to check that the country you’re going to has ATMs (not all do!) as these cards can’t be used over the counter in banks. Also, check that it will be practical to use them eg in India I found that ATMs were not widely available and Rarotonga didn’t have any ATMs until quite recently.

Charges on these are made up of a transaction charge of around 2% with a minimum of £2/$2 plus a foreign currency conversion fee of around 3%. It’s therefore best to make withdrawals of £100/$100 at a time to minimise these charges.

Downsides are basically those charges and the fact that you can only use these cards in an ATM. For those living in the UK, some pre-paid cards eliminate all charges and if you’re in the American military a USAA card works in much the same way. If your bank is a member of the Global Alliance (Bank of America, Bank of Nova Scotia, Barclays, BNP, Deutschebank and Westpac) then you can withdraw cash from one of the other member banks ATMs without the transaction charge (you still get charged the foreign exchange fee).

I’m going to work my way through the various ways you can take money abroad over the next week or two in the travel money series. I’ve already covered cash, travellers cheques, credit cards/charge cards and debit cards and will be covering prepaid cards in the next episode.

Incoming search terms:

• Plus cirrus

Aren’t debit cards the same as credit cards? No, they are very different and have different characteristics when you’re trying to use them overseas which aren’t always apparent.

The first key difference is that they are directly linked to your bank account and this makes them a little more risky to take abroad (it’s much safer to take credit cards and a cash card).

Debit cards for international use come in four versions although not all are available in every country. These are Visa, Visa Electon, Mastercard and Maestro.

Cards branded Visa and Mastercard can be used where-ever the equivalent credit card can be used and, aside from the link to your bank account, are processed in the same manner as a credit card (press the “credit” button if prompted on an ATM or till).

Cards branded Visa Electron and Maestro are supposed to be electronic use only which means that you cannot use them in one of the old-style carbon copy type machines. In practical terms, almost all “civilised” countries use online terminals these days but this does not apply everywhere so it’s best to have a credit card as a backup. Maestro is a little more limited in that it can’t be used when you’re not at the point of sale therefore you can’t use it to guarantee hotel reservations. You can’t use either of these cards to hire a car.

Note that acceptance of cards is neither universal nor universally practical. If you are travelling to countries off the tourist routes you can find that cards aren’t accepted or are only accepted in widely dispersed locations. For example, in India I found that using cards simply wasn’t practical. Cards branded Visa Electon and Maestro are much less widely accepted than those branded Mastercard and Visa.

Bank charges on debit cards come in several basic forms. First, they charge transaction fees when you use the card to get cash. Typically these fees are around 2% with a minimum charge of £2/$2 per transaction therefore it’s best to withdraw amounts of £100/$100 to minimise this charge. In most cases, there is no transaction charge when you buy things using the card so it’s better to do that instead of withdrawing cash. Second, they usually apply a foreign currency charge which is typically around 3% (no minimum). And, of course, there may be an annual fee for having the card. Some card issuers charge a transaction fee on overseas purchases too: if this applies to your bank, use a credit card to make purchases instead or if you can’t do that, withdraw cash and use that for purchases.

Despite all that, it’s still usually cheaper to get cash on a card than to buy travellers cheques as your cost will typically be around 5% max compared to the 7% or so for travellers cheques.

Downsides are basically those charges but, if you’re careful, you can minimise them. For those living in the UK, some pre-paid cards eliminate all charges and if you’re in the American military a USAA card works in much the same way as do some American issued CapitalOne cards. If your bank is a member of the Global Alliance (Bank of America, Bank of Nova Scotia, Barclays, BNP, Deutschebank and Westpac) then you can withdraw cash from one of the other member banks ATMs without the transaction charge (you still get charged the foreign exchange fee).

I’m going to work my way through the various ways you can take money abroad over the next few weeks or so in the travel money series. I’ve already covered cash, travellers cheques and credit cards and will be covering cash cards and prepaid cards in future episodes.

Everyone will tell you that credit cards are the thing to use on holiday and they are, most of the time.

The problems with credit cards are that they’re not always accepted, how you get charged depends on how you use them and you can end up with unexpected shocks when you return home and find all the charges you’ve racked up. That said, you’d be very unwise to go on holiday without one.

Credit and charge cards operate in much the same way and the only practical differences are that charge card bills are supposed to be repaid in full at the end of the month and that, usually, they don’t tell you what your credit limit is with a charge card. Don’t believe those stories of charge cards coming with no limit: there is one, it’s just that usually they don’t tell you what it is.

For holiday purposes there are really only five international-use versions that you could reasonably expect to be able to use abroad. By far the most common are Mastercard and Visa which are accepted pretty much everywhere that accepts any card. One thing to watch is that acceptance of both is not universal nor are both equally accepted in all countries: usually Visa is the best to go with if you’re only taking one but in some countries Mastercard is much more widely accepted and shops that accept one do not always accept the other.

Next up is American Express which is widely accepted in America, Canada and the United Kingdom. Outside those three you would be very unwise to try to use it as your only card. The one big advantage it has is that you can get the card replaced if it’s stolen abroad although you may need to trek quite a bit to find the nearest American Express office where they can do that for you.

Finally there are Diners’ Club and JCB. On the whole, it’s not worth considering Diners Club as the acceptance rate is just far too low. JCB is widely accepted in places where you find Japanese tourists but you’d be better going with Mastercard or Visa as anywhere that accepts JCB will accept them too.

Discover isn’t accepted outside North America. Also worth noting is that cards issued in America or by an American owned bank anywhere are not accepted in Cuba or Vietnam. This obviously includes MBNA (owned by Bank of America) who issue a wide range of affinity cards from their various subsidiaries around the world: check your card agreement to see who is really behind it as it doesn’t always say on the card.

Note that acceptance of cards is neither universal nor universally practical. If you are travelling to countries off the tourist routes you can find that cards aren’t accepted or are only accepted in widely dispersed locations. For example, in India I found that using cards simply wasn’t practical and one family that stayed with us found extreme difficulty in using their American Express card in France (the only card they’d brought) as it’s accepted by less than 10% of the banks and few hotels. The easiest way to check coverage is to look at the Visa or Mastercard sites.

Where these cards really come into their own is in booking hotels and renting cars. You usually can’t guarantee a hotel reservation without having a credit card and you can’t rent a car without one either. Outside of those they can be amongst the cheapest means of getting foreign currency available to you. I say “can be” because you need to know how the banks charge you for using them first.

Bank charges on credit cards come in several basic forms. First, there is the interest that they charge on the credit; if you pay your balance in full each month the majority of cards don’t charge any interest. Some very low rate cards charge from the time of purchase even if you pay in full so check if your rate seems unusually low. Second, they charge transaction fees when you use the card to get cash and will usually charge interest from the date of withdrawal. Typically these fees are around 2% with a minimum charge of £2/$2 per transaction therefore it’s best to withdraw amounts of £100/$100 to minimise this charge. In most cases, there is no transaction charge when you buy things using the card so it’s better to do that instead of withdrawing cash. Thirdly, they usually apply a foreign currency charge which is typically around 3% (no minimum). And, of course, there may be an annual fee for having the card.

Despite all that, it’s still usually cheaper to get cash on a card than to buy travellers cheques as your cost will typically be around 5% max compared to the 7% or so for travellers cheques.

Downsides are basically those charges but, if you’re careful, you can minimise them. For those living in the UK, a Post Office credit card eliminates all but the cash withdrawal charges and if you’re in the American military a USAA card works in much the same way and CapitalOne in America also issues cards with no foreign exchange charge.

This is part of a little series on travel money which has already covered taking cash and will be covering debit cards, cash cards, prepaid cards and what to do when (and it will be when) your cards are stolen.

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• holiday charge cards

Less than clear on almost all of the pre-paid travel cash cards sites is what happens when the card expires. In the case of the Post Office card it’s even worse as there’s a customer services line which doesn’t offer any option even remotely like “press X to renew” and Post Office branches have no idea what happens either.

In fact, nothing happens. Your card expires and you’re left unable to access the money. No replacement card comes out, there’s no notification or letter asking what you’d like them to do with the money.

What you need to do is to call the customer services number (on 0845 850 0077 or  +44 207 490 9717) and select the “change my details” option. That puts you through to a real person who can renew your card after you’ve gone through a number of security questions. Well, a LOT of security questions, for most of which your answer will probably “I don’t know”. Things like “what amount did you first load your card with?”, “what date did you last use your card?” and various other questions along those lines which I’m sure few people will be able to answer.

Once you get through that they block your existing card so you’ve no access to the money for, in theory, up to a couple of weeks but in my case for three days. The replacement card has your name printed on it but is otherwise identical to those issued in the Post Office branches; the expiry date on mine is only 18 months on rather than the 2 years that you’re supposed to get but since it’s free that shorter period doesn’t really matter.

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• post office travel money card