Foreign Perspectives

Archive for the ‘Finance’ Category

Most of the time it’s fine to take a few cards and maybe a travellers cheque with you on holiday, but what do you do if you run out of money when you’re abroad or if your cards/cheques are stolen?

It’s safest to work on the assumption that your cards and/or cheques will be stolen and prepare for that. The way to do this is to keep a note of the card numbers, expiry dates and cancellation phone numbers for each card that you are taking with you. For the travellers cheques you need to note down the cheque numbers and the date & place that you bought them. Take one copy of the note of these details with you (separate from the cards, of course) and leave one behind with a friend or family member. It’s best to cut down on the number of cards too and go with the minimum which is three: one Visa, one Mastercard and one more for when the other two are stolen (keep the third one separate from the other two).

When they are stolen, you just go through the details and call to cancel the cards and cheques. The cancellation numbers are usually reverse charge numbers ie you won’t have to pay to call the banks. It’s useful to look up the number of the international operator and/or AT&T direct number for the countries in which you’ll be on vacation in advance.

In theory, cards can be replaced abroad within 24 hours but this depends on your card, your card company and the banking system in the country in which you’re on holiday. The best cards for replacement are gold/platinum ones but unfortunately they’re also the most attractive to thieves.

However, some countries just aren’t up to replacing cards quite so easily though a combination of language problems and primitive banking systems. Nobody who has stayed with us and had a card stolen in Prague has ever managed to get it replaced whilst they were there.

So what do you do if the card company can’t manage to replace the card? That’s when you need to look into how to get money to yourself from home and there are several ways of doing that which I’ll be covering next.

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.

The Daily Star probably summed up most clearly the public opinion of the Irish government in its headline the other day.

However, it’s not the doing of a single government that has driven Ireland to bankruptcy: it has taken years of nonsensical decisions to get them here and it will take years if not decades to get them out of this mess.

For many years now the key skill in Ireland seems to have been to screw as much as possible out of Europe (ie everyone else) to finance a massive growth in the Irish economy. Until recently signs were everywhere announcing that one project or another was 85% financed by one EU fund or another.

That worked well in the case of infrastructure projects like the Dublin to Belfast motorway which replaced a truly naff road from Dublin to the Irish border that existed before. The problem is that it was only those European financed projects that went ahead and at almost every other point on the border you notice that you’ve crossed the border when the quality of the road goes down dramatically. The snag with these projects is that 1) only the capital costs are financed so Ireland now has a whole lot of motorway that it needs to pay to maintain and 2) now that Ireland has been replaced as Region 1 country by all the new eastern bloc countries it is not only not getting finance for its own infrastructure projects but needs to pay for those elsewhere.

Then there was the fiasco of untold numbers of “tax breaks” (ie bribes) for, mainly, American multinationals to establish themselves in Ireland. When the restrictions on those “tax breaks” ran out, Dell relocated almost immediately to Poland. In effect this bribe money (for there is no other way to describe it) was used by those companies to pay the salaries of the employees ie the Irish governments were simply borrowing to pay themselves. Quite why they didn’t realise at the time that this was never going to be a workable long term strategy is beyond me.

And, of course, all the above stoking of the economy meant that salaries rose and so therefore did house prices. Massively. Thus the banks were drawn into this Ponzi scheme. Like all such schemes, it looked like a no-lose situation. Like all such schemes, the money ran out. And like all such schemes, it collapsed in quite a spectacular manner, the full extent of which has yet to be seen. With increasing house prices comes increasing confidence and that surely led to increased personal borrowing in Ireland.

Sadly, this is going to be a very, very hard time for the Irish. Cuts and asset sales will be the order of the day for many years. The banks will probably be the highest profile casualties with the breakup of the non-Irish empires of AIB and Bank of Ireland looking like the first of many sales to come (already Bank of Ireland (UK) has been separated out). Cuts in a range of social security benefits and of civil service salaries are certain as are the inevitable protests against them. Gone too is any semblance of sovereignty over their own affairs. Not only are Europe and the IMF taking control of key aspects of life in Ireland but so too is the British government.

Much as I wouldn’t want to live in a united Ireland, I do feel for our friends in Ireland on this last point and even though Britain is doing it for selfish reasons (no way could it cope with a mass exodus of Irish to the UK), I’m sure that there will be a feeling that depending on Britain is a massive step backwards.

In many ways this is, for once, an improvement for the customers of the former Halifax but it comes with downsides too.

The range of products on offer is significantly improved with the addition of both a proper Visa card in addition to the existing Visa Electron (which remains the default card issued) and a multi-currency sterling account and a lot more branches in Spain. It’s as clear as mud but the need to keep a balance of 600€ for free banking seems to have disappeared albeit with the downside that there’s now a charge of 9€ per year for the Electron card regardless of balance (replacing the previous 18€ for balances under 600€); it’s 15€ a year for the full Visa debit card.

Probably the biggest downside is that the free transfers from Halifax UK to Halifax Hispania have disappeared so it’s probably a good time to get yourself one of the free FairFX cards and thereby get back your free currency conversions. For free cash withdrawals you can get the CaxtonFX card though their exchange rates aren’t so good therefore it’s probably best to get both cards if you’re living in Spain.

One big difference is in the list of charges. Replacing the Halifax’s previously very clear and short list is a massive 60 page document from Lloyds that throws clarity out the window. It’s certainly complete but I question whether they couldn’t have produced a much simpler and shorter document for normal customers instead of the monster which seems to cover all possibilities from normal people through to major corporate banking.

Overall, I suspect that, for a change, this amalgamation of the Halifax and Lloyds TSB in Spain is probably a good thing for their customers. You can get the freebie currency transfers elsewhere and it frees up the 600€ that was tied up previously to get the free banking, albeit with the downside that you need to fork out 9€ a year.

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.