Prepare for your next adventure with a travel credit card. Look forward to no foreign currency conversion fees or ATM withdrawal fees and the convenience of complimentary insurances.
Australia’s love for travelling is well-known. However, organising your travel money options is crucial for a stress-free holiday. Expenses such as foreign currency conversion fees, ATM withdrawal fees or emergency credit card replacements can be an unexpected strain on your budget. Comparing credit cards designed for overseas purchases can be a wise way to avoid some of these charges.
Here we will compare the travel credit cards available in the market to help you determine which is the right option for your next overseas trip.
What features do I need when choosing a travel credit card?
Some of the features you can expect from a travel credit card include:
- Worldwide acceptance. Most overseas credit cards are provided by Visa, MasterCard or American Express. These types of cards are accepted worldwide, so this will ensure that you can access your cash no matter where you are.
- No or low currency conversion fees. If you try to use Australian dollars to make a purchase in a foreign currency, you’re likely to incur a currency conversion fee. Most credit cards charge as much as 3% on currency conversion fees, though some offer low or no fees on foreign transactions. If you’re planning on travelling overseas, this type of card could be of interest.
- Complimentary insurance. If you’re travelling overseas, travel insurance is a necessary precaution. As the Australian Government doesn’t pay for medical treatment overseas or medical evacuation, so it’s good to organise comprehensive medical cover before travelling aboard. If you secure a card with complimentary insurance, this will save you the extra time and cost that comes with searching for extra cover.
- Emergency card replacement. In the case that your card is lost, stolen or damaged, you may need to request an emergency card replacement. Travel credit cards often offer low or zero fees to replace your card, which could come in handy if you find yourself in such a bind.
- ATM withdrawals and balance check. Carrying cash while travelling comes with risks, so storing your funds on a card can be of use. However, using a regular card can come at a cost of up to $5 per ATM withdrawal and balance check - which can add up over time. Travel cards, on the other hand, sometimes offer free ATM withdrawals and balance checks which can cut out these extra costs.
What else should I consider when using a travel credit card?
There are a couple of points you should consider before using a travel credit card. They are:
- Beware of the dynamic currency conversion. Dynamic currency conversion (or DCC) is often used by merchants to their own benefit. Merchants will quote the price of an item in AUD, however the dynamic currency conversion used in these transactions does not give the best exchange rate. You can directly withdraw cash in the local currency and pay in it or you can use one of the conversion apps on your smartphone to find if you are getting good exchange rate.
- Load your credit card with extra funds. While your travel card may not charge currency conversion or ATM withdrawal fees, they usually pose high cash advance fees and interest rates. This fee can be up to 2% of the amount with an interest rate can be as high as 20-21% p.a. As credit cards aren’t designed to be used as debit cards, a good option can be to load your card with extra funds before leaving. This means that you can withdraw your loaded funds without incurring a cash advance fee.
- How can I protect myself? Currency fluctuations can have either a positive or negative impact on your balance. If you’re worried about losing money due to rate changes, you can exchange your funds to the local currency when it is at a beneficial rate to protect yourself.
- What are the relevant fees and charges? Carefully consider the fees and charges associated with the card before applying. You should also consider any terms and conditions or exclusions and limits associated with complimentary insurances before travelling.
- Does your bank know you’re travelling overseas? In case your bank misjudges your overseas transactions as fraudulent activity, you should inform your provider of your travel plans before leaving. Otherwise, you may find that your card is blocked and you no longer have access to your funds while overseas.
- Is my card restricted by geographical sanctions? Some providers place financial sanctions on certain regions. If you’re unsure, contact your provider or read the relevant Product Disclosure Statement to confirm whether you can use your card on your next holiday.
Prepare more than one option: What else can I use in addition to my credit card?
It’s never wise to put all of your eggs in one basket. Therefore, it’s best to organise more than one travel money option when planning your overseas trip. Some other options you can consider include:
- Prepaid currency cards. If you need to spend in an overseas currency, a prepaid travel card can be a good way to transfer your Australian dollars into the local currency and access it with convenience. Some benefits you can expect include fixed exchange rate, easy access, multiple currencies and reduced risk of overspending than if you were to use a line of credit.
- Debit cards. A debit card can also curb the temptation to overspend, as you’re spending your own cash rather than credit. These cards usually don’t charge a cash advance or heavy interest rates, which could also lower your costs. However, make sure to confirm whether currency conversion or foreign transaction fees are in place if you’re planning to use it overseas.
- Cash. This is simple and easy to use alternative. There are no extra fees, exchange rates or restricted acceptance. However, carrying cash does come with risks. You should always keep some cash on you and some in a secure place (such as your luggage or hotel safe) to ensure that you’re not left without cash in case of an emergency.
- Travellers cheques. While these aren’t as widely used today, they are still a popular option among some travellers. If you’re looking to lock in exchange rates and have an easy replacement if your funds, a travellers cheque could be a good idea. Make sure you’ll be able to cash your cheques along the way though.
How to prepare before you leave
You can look at the following aspects of a travel card before leaving on your trip:
- Upgrade your card. Many countries like Britain, France, China and New Zealand have shifted to chip technology. If your card does not have this, you may need to upgrade your card before leaving.
- Have your provider’s emergency contact details on hand. Note your provider’s emergency contact number in your wallet, on your phone and anywhere else secure in the case of an emergency.
- Bring more than one card with you. It is always better to have a buffer card which can be used if the main card is stolen or gets lost. This card should be carried in a different wallet or bag which will reduce the chance of losing both cards.
- Are there restrictions for withdrawals or purchases? You need to look at the limits on withdrawals or purchases on your card. Using the card prudently will prevent exceeding these limits and also avoid any unnecessary penalties.
How to protect yourself when you arrive
Following these precautions should help ensure your trip runs smoothly:
- Don’t carry a lot of cash. Travellers should avoid carrying a lot of cash or wearing expensive jewellery. This might attract negative attention and can lead to unpleasant experiences.
- Safely store your cards, cash or cheques in various secure areas. Carrying all your cards and cash in a single location or wallet is not advisable. You should distribute these items among your secure belongings. It is better to carry an alternative wallet which can store excess cash and other important items. It is also better not carry the main wallet in your back pocket, but rather somewhere secure that you can see.
- Keep your passport safe. It’s also important to store your passport securely. If you have a secure place to store it, keeping your passport with you is a good idea as this is your primary legal document as a traveller.
- Report any emergency situations immediately. As mentioned, make sure that you have all of your necessary contact numbers on you. This should include those of your personal emergency contacts, your credit card providers and your insurance provider. This will ensure that you can get in contact with the relevant people in the chance of an emergency.
Travelling can be an unforgettable experience. However, some of these memories may be less pleasant than others if you fail to organise your travel money options. There’s no one ideal travel money option, so it’s best to compare your options while considering your travel plans, spending habits and financial situation to choose the right combination for you.
Frequently asked questions
Will I need to meet a criteria to take advantage of travel benefits like complimentary overseas insurance, free currency conversion, etc.?
This will depend on the card. Make sure to read the terms and conditions before applying to understand how you can take advantage of these features. For example, you may only be able to access the complimentary travel insurance if you pay a certain minimum of your travel costs with the card.
Is the complimentary insurance provided on the card sufficient for an overseas trip?
Generally the complimentary insurance cover is quite comprehensive and provides decent coverage for any eventuality. In case you are planning to undertake some special activities like skiing in the Alps or base jumping or other adventurous sports, you might need to get additional coverage. Exclusions, limitations and eligibility requirements will apply - so make sure to review these before applying for the card.
If I’m looking to make a longer trip, how can save on fees and charges with my card?
The savings you can make will depend on how you intend to use the card. Here’s an example for you:
If a family of four wishes to travel to Europe for a three week trip and has a budget of $10,000, the savings on foreign currency conversion would alone come to $300 or 3% of the total budget. Ten visits to an ATM on a regular card will cost $5 multiplied by 10 = $50. Travel cards generally provide free ATM withdrawals and balance check which should save this cost. Complimentary insurance will also vary according to the length of your trip and where you’re visiting, but basic cover often comes around the $200 range. These expenses alone end up costing above $550 which is 5.5% of the total budget. For longer trips, the savings are higher as the price of insurance cover rises. We can say that the savings from a travel card can range from 5% to 10% of the total budget.
There are other benefits like free emergency credit card replacement, easier purchasing options, cover for damage to personal property, cover for unexpected ticket cancellations and more.
What is the length of complimentary travel insurance on travel cards?
The length varies from card to card, but most of the cards provide complimentary insurance cover for a period of three months to six months.