Archive for the ‘Travel Money’ Category

Taking your holiday money: are travellers cheques (travelers checks) worth considering these days?

Although many people would tell you that travellers cheques (or travelers checks) are past their sell-by date, that’s not the case.

Their major plus point is that even if they’re lost or stolen, you can still get the money back which is not the case if you were carrying around the same amount in cash, their closest equivalent. In both American and Canada they can be used as though they were cash even in places that say “no checks accepted” and you can also treat them this way to some extent in the UK.

As with cash, it’s useful to have some travellers cheques in either US$ or Euro. If you’re going to America go with US$, Europe or Africa Euro are generally best. One key difference is that because you may be charged to cash them, it’s best to stick to 100 denominations rather than 20’s as we recommended with cash. Banks cashing them usually charge some combination of a per cheque fee and/or a percentage with, of course, a foreign currency conversion charge if the cheques aren’t in their local currency. You can avoid these charges by cashing them at an office of the issuing bank. Again, if you’re going to a civilised country it’s best to consider these as a backup and just get cash in an ATM when you get there.

Since there’s no expiry date on the cheques, you should keep any uncashed cheques for future holidays if they’re in a mainstream currency which’ll save you on charges and commissions.

Unlike cash, travellers cheques come with a brand and it’s best to stick to the more common ones which are American Express, Mastercard, Visa and Thomas Cook. Normally your bank will issue cheques with one of these brands plus their own. You can’t use American Express or any American issued cheques in either Cuba or Vietnam.

Charges are similar for cash at around 7% (even in “commission free” places). Sometimes it’s cheaper to get cash, sometimes travellers cheques. Check at your bank if they’ve any special offers for customers but otherwise shop around.

Take them in the currency of the country you’re going to if it’s a mainstream one, otherwise dollars or euros. If you have any left over after your holiday, keep them rather than cash them in your bank as you can use them later (there is no expiry date) and this will save you paying the commission again. If you buy travellers cheques on a card, it counts as a cash advance with all the charges that implies. Make sure that your travellers cheques come with the Visa or Mastercard or American Express brands as others may not be accepted. You can’t use American Express travellers cheques in Cuba or Vietnam nor any issued by American banks.

Downsides are that you will have to pay to cash them at foreign banks which will involve an additional exchange rate charge if they’re not denominated in the local currency. Worth noting is that not all banks cash travellers cheques and, bizarrely, some require you to have an account with them before they’ll cash them.

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

Copyright © 2004-2014 by Foreign Perspectives. All rights reserved.

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Taking your holiday money: should you take some cash?

lots of different currencies

Whilst most people will tell you that cards are the way to go, there’s something to be said for having some cash with you too.

As far as cash goes, it’s sometimes handy to take around $100 in US dollars or perhaps 100€ in euro as both currencies are accepted in a lot of places outside their home country. Don’t take anything larger than a 20 as you will, of course, receive change in the local currency and may not want to be stuck with lots of it.

If you’re going to a country which doesn’t use those currencies the best one depends on where you’re going eg US$ are more useful in South America than Euro, but in many former European colonies in Africa the reverse applies.

What about the local currency? If you’re going to a civilised country, it’s usually best to wait ’til you get there and withdraw it from an ATM in the airport. In most other cases you can find that you either can’t get it or there are severe limitations on how much you can get. For example, when I went to India the maximum you were allowed to take in local currency was £5 ($10) which simply wasn’t worth bothering about.

The cost to you is around 7% for amounts of around the $100/€100 if neither are the currency in your own country (don’t believe those “no commission” signs: the actual charge even in those places is around 7%). If you’re going to a fairly civilised country, it’s best to wait ’til you get there as it’s almost always cheaper to withdraw cash in local currency from an ATM than it is to get foreign currency abroad.

If you’ve some foreign currency left over at the end of your trip many places these days advertise that they’ll buy it back off you commission free. That does NOT mean that they won’t be charging you and in fact it usually costs around 3% to 5% to do this. Therefore, if you’re intending to go back to the same country the following year, just keep the cash and definitely do that if you’ve picked up the $100/100€ that we recommended earlier.

Downsides? well, travel insurance rarely covers cash so if it’s stolen, it’s gone. Also, if the country you’re going to doesn’t use the currency you’ve taken then you can pay considerable amounts in commission and other charges to change your money into the local currency. Worth noting is that not all banks offer foreign exchange services.

I’m going to work my way through the various ways you can take money abroad over the next couple of weeks or so which’ll cover travellers cheques (travelers checks), credit/charge cards, debit cards, cash cards and prepaid cards.

Copyright © 2004-2014 by Foreign Perspectives. All rights reserved.

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Which travel money card is the best?

Prepaid cards seem to be breeding like rabbits around the world and every single one is different from the others in terms of charges, features and general usability.

Rather than trawl through all the cards that would pay me to recommend them to you as the majority of card comparison sites do, I’m just going to go through those that are “best” here and tell you why that they’re the best so that you’ll be able to choose which is best for your circumstances.

At the moment there are basically three types of card available:

  1. Maestro cards;
  2. Visa Electron cards; and
  3. Mastercard debit cards.

All of the Maestro cards seem to charge you for the card and a number of them charge you an annual fee too for a card which is very limited in functionality. Therefore, it isn’t worth considering these any further.

At the moment there seem to be only two Visa Electron cards available aimed at the holiday market which is a shame as it’s a very useable card. The Post Office card is free to get, £5 to renew and costs £1.50 per UK withdrawal, £2 overseas; if you get the Euro or Dollar cards their “0% commission” works out at around 3.5% otherwise it’s 2.75% when you use, say, the dollar card in Europe. There’s a 1.5% charge to add money to the sterling card. The LloydsTSB costs £7.50, £5 to renew and costs £1.50 per withdrawal with a 2.75% currency exchange fee when used abroad; on the Euro or Dollar cards their “0% commission” should work out at a similar charge to the Post Office card (they don’t offer a sterling card). That £7.50 initial charge (waived if you have a LloydsTSB Silver account) and much wider availability means that the Post Office card will be best for most people.

The range of Mastercard debit cards is vast. The majority of these cards have a monthly or annual fee which makes those ones very expensive which is a shame as this is the most useful of the three types of prepaid card currently available. However, the FairFX card is free if you load £500 or more onto either their Euro or dollar cards or alternately via this link for £10 upwards (it’s £9.95 for a three year card otherwise) and costs £1/€1.50/$2 to withdraw cash (there’s no transaction charge for purchases). The card is renewed free if you top it up at least twice over the three year validity of the card, otherwise it’s £6/€9/$12. The ICE card is free to issue from £100/€100/$100, £1.75/€3/$3 to withdraw cash and charges 4% for all currency conversions. It’s renewed free if your balance on the card is at least £50 when renewal time comes up otherwise it’s £3/€5/$5. They charge £1.75 per purchase transaction when you use the sterling card in the UK but the euro/dollar cards are free to use for purchases everywhere and the sterling card is free to use everywhere except the UK for purchases. Purely on the published charges this makes the FairFX card the one to go for but it’s even better than that as they only charge about 1% for currency exchange.

So, which of all of these cards should you get?

  1. The very clear winner is the FairFX card which is free to issue via this link, £1 per cash withdrawal and about 1% to convert the money to euros/dollars. If you load your card at least twice every three years (the topup when you get the card to begin with counts), renewals are free otherwise they’ll charge you £6. Topups are via debit card or bank transfer; in theory you can topup via credit card but FairFX charge you 1.5% to do this and you could get hit by cash advance fees from your bank too if you do this.
  2. In second place comes the ICE card which is free to issue and renewed free if you have at least £50 on the card at renewal time, £1.75 per cash withdrawal and 4% to convert the money to euros/dollars. You can top-up online by credit/debit card or in their branches with cash, cheque or credit/debit card.
  3. In third place comes the Post Office card because it’s free to issue, £5 every two years free to renew, £2 per cash withdrawal and about 3.5% to convert the money to euros/dollars. You can top-up the card with cash or credit/debit card in a Post Office branch or by phone or online with a credit/debit card. The big plus point of this one is that you can get it immediately from a Post Office branch so if you’re looking for a last minute card before you head off on holiday, this is the one to go for although do bear in mind that the card needs to be activated before use ie you can’t get one in the Post Office in the aiport, get on the plane and use it immediately in the resort.

What would I get myself? The FairFX card in that the charges are so low. This is a truly excellent card and if you remember to top-up twice every three years it’ll not cost you anything to operate. I’d also consider the Post Office card in that it’s useful to have both Visa and Mastercards as not everywhere takes both and you could come unstuck if you only took one.

For true emergency use the Post Office card comes into its own as you could get someone to get one for you in the Post Office and post/courrier it to you whilst you were on holiday.

You should consider these cards only as backup to your normal credit/debit cards. For use abroad, the best bet remains the Nationwide Building Society‘s Flexaccount (Visa debit or Cirrus) which has no charges at all for withdrawing cash or converting from sterling to any currency [sadly as of November 2010 it’s no longer free]. Alternatives to this are Abbey’s Zero Card (Visa or Mastercard) which appears to be even better than the Nationwide offer. Other credit cards with no foreign exchange fee include Thomas Cook (Mastercard), the Post Office (Mastercard) which charge nothing where-ever you are and Saga which charges nothing in Europe and 1% outside. Finally there’s the Egg Money card (Mastercard) which charges 2.75% for currency conversion but has no transaction charges for cash withdrawals and pays a quite respectable rate of interest when the account is in credit; it’s an excellent choice if you like to budget your holiday spending as you can use it like a savings account [sadly now one of the very worst cards to have after Citibank “improved” it].

Copyright © 2004-2014 by Foreign Perspectives. All rights reserved.

When should you change your holiday money?

In theory the answer is simple: when the exchange rate is the best. The only problem with that is that nobody knows when the “best” rate will be reached.

Fortunately there is another approach which works well no matter what the exchange rates get up to and that’s using what’s technically called pound cost averaging. Sounds complicated but what it involves is you buying your foreign currency regularly throughout the time from now ’til your holiday arrives. That way you avoid the ups and downs of exchange rates.

Those ups and downs can be quite substantial too. Over the past year the euro has swung up and down around 12% whilst the pound seems on a steady rise against the dollar (up around 14% over the last 12 months). You might think that it would be better to leave off buying dollars ’til you get an even better rate but we might be at the peak already and just not know it yet.

So how do you go about it? The simplest and cheapest way is to use something like the FairFX card which is free via that link and offers the best rates around. Minimum top-up is only a tenner and you can top-up via standing order which cuts out a lot of hassle. Alternatives are from CaxtonFX (minimum top-up £100) and the Post Office (minimum top-up £50, charge around 3.5%).

Quite a nice way of saving for that next holiday and it should save you money too.

Copyright © 2004-2014 by Foreign Perspectives. All rights reserved.

Taking your holiday money to America

Payment CardsAlthough you might expect America to be just like a version of England it turns out that it’s very different in a number of areas, notably in terms of financial sophistication.

One very important point to note from the outset is that foreign exchange is not something that American banks generally deal with. Whilst in England you can change foreign currency in any bank, you can only do that in the largest of branches in America. Also worth noting is that ATMs aren’t as common in America as they are in the UK and you won’t be able to use a cash-back facility so it’s worth carrying, say, $100 in cash.

That lack of foreign exchange facilities means that you must take cash in American dollars. These come in $1, $5, $10, $20, $50 and $100 notes (“bills”) with each one being the same shape, size and colour so you need to look at the amount printed on them. You do get used to that lack of difference quite quickly. The dollar is divided into 100 cents and these come in 25c (“quarter”), 10c (“dime”), 5c (“nickel”) and 1c pieces. There are $1 coins but these are very unpopular and hence rare. It’s handy to take about $100 in cash (preferably in a mix of 10s and 20s); this is available commission (but not charge) free at the Post Office. The downside of cash is that if it’s stolen, it’s gone as holiday insurance rarely covers cash to any significant amount so if you are taking it, limit the amount to $100 or so. If you buy foreign currency on a card, it counts as a cash advance with all the charges that implies.

Travellers cheques (or, in America, “travelers checks”) are much better than cash in that they can be replaced fairly easily if stolen (keep a note of the numbers, date bought and where you bought them). However, they are equally expensive to purchase and there is often a charge to cash them too. In America you can use dollar cheques as though they were cash in shops (even where they say “no checks accepted”). If you have any left over after your holiday, keep them rather than cash them in your bank as you can use them later (there is no expiry date) and this will save you paying the commission again. If you buy travellers cheques on a card, it counts as a cash advance with all the charges that implies. Make sure that your travellers cheques come with the Visa or Mastercard or American Express brands as others may not be accepted.

Credit/Charge cards are used nearly everywhere these days. If you don’t have a card already, you should get one (Visa or Mastercard) even if you only plan to use it for emergencies. Bear in mind that not everywhere accepts them though and also that not all places take both Visa and Mastercard. If pushed, you can get cash on these cards either in an ATM or over the counter in a bank but save this for emergencies only as you’ll get charged a cash advance fee, currency conversion fee and interest. The exchange rate used is much better than you’ll get for either cash or travellers cheques. You will need a credit or charge card to hire a car and to reserve hotel rooms.

Debit cards are almost always branded Visa/Electron/Plus or Mastercard/Maestro/Cirrus and work in the corresponding systems however sometimes you may be issued with a card which can only be used in your own country: check that one of the Visa/Electron/Plus or Mastercard/Maestro/Cirrus symbols are on your card as if they aren’t you probably can’t use the card internationally. Charges are as per credit cards except that you don’t get charged interest on cash advances.

Cash cards are often limited to the country in which they are issued but if they have a Plus or Cirrus symbol on them, you can use them abroad too. Charges are usually the same as for debit cards in ATMs. The principle advantage of having a cash card is that they are a lot less attractive for thieves as they can’t be used without the PIN.

Prepaid cards are becoming increasingly popular with CaxtonFX and FairFX offering excellent value. Both offer cards denominated in dollars, euros and sterling. For travel to America take either the dollar or the sterling cards. Charges on both are broadly similar with Caxton taking a £10 charge (refunded) upfront and having a minimum top-up of £100 whilst FairFX charges a non-refundable £9.95 (but free by clicking on the link here) and have a minimum top-up of £10.

As well as the above options you also have a choice of providers of the various methods of payment. Travellers cheques may be offered “commission free” by your bank (and the UK Post Office), although note that this is not the same as “free”.

If you use one of the banks within the Global Alliance banks (BNPParibas, Bank of Nova Scotia, Bank of America, Barclays, Deutsche Bank and Westpac) you can use machines from one of the other Global Alliance banks without transaction charges (currency conversion fees still apply).

This article is part of our series on holiday planning which covers things like how to book your holiday, how to take your holiday money, what to pack, etc.

 

Copyright © 2004-2014 by Foreign Perspectives. All rights reserved.

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