Foreign Perspectives

Archive for the ‘Travel’ Category

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, a Nationwide debit card eliminates 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.

It’s actually fairly doable these days although it’s a very, very long day and you need to pace yourself.

Just a few years ago there was really only the one viable route which was by way of Lyon and ended up in the Cote d’Azur which goes some way to explain the extremely high property prices over there. However, there are now two more routes that are quite doable.

The simplest is by way of the A75 which runs right down the middle of France and is tollfree apart from one bridge. The level of traffic on this route is almost always relatively light.

However, the advent of GPS creates an entirely new route or rather series of routes as the various GPS devices don’t produce the same route. One major downside with this is that the routes recommended are generally along minor roads and on peak days those roads just aren’t up to the volume of traffic that they get these days.

How long does it take? Well, our latest guests started at 3am and arrived at 8pm which wasn’t too bad really.

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 Nationwide 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.

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 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 week or so in this series on travel money which’ll cover travellers cheques (travelers checks), credit/charge cards, debit cards, cash cards and prepaid cards.

I could understand if people forgot a few things if they were in for a week or more. After all, you settle into a place when you stay that long so you’ve the cases unpacked and the drawers and wardrobes full of stuff.

But, usually, it’s not the long stayers who forget things: it’s almost always those who’ve only stayed for a night. Why they bother unpacking for an overnight stay confuses me but they do leave behind a surprisingly large amount of stuff.

Just in the last week, we’ve had glasses, clothes and even a computer. What was most confusing was the time when one family left behind what seemed almost a suitcase full of clothes. How on earth could they not miss that?