Travel money piggybank on holiday

Student Guide: Travel money and Travel Insurance

If you've decided to enjoy a spot of travelling either during schoolies week or are taking a gap year to see the world, then you're going to need to consider travel money.

It's imperative to compare your travel money options because travelling overseas can incur some serious charges and fees, which is why you need to find a card that will save you money.

Read more about Travel money and Travel Insurance

Travel money

Travelling is expensive enough as it is without having pay exorbitant fees to access your money from overseas. This is why it's usually a good idea to avoid using your day-to-day credit card when travelling, because you're going to find yourself paying huge fees when making a purchase or withdrawing cash abroad.

This is generally because of the foreign currency conversion fee, which is also known as a foreign transaction fee. You will be charged this fee when your bank converts Australian dollars into a foreign currency, allowing the transaction to be processed in the local country.

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In most cases, the lender will take two to three per cent of the total value of the transaction simply for performing the currency exchange. One of the easiest ways to avoid this charge is with a travel friendly card, like one that doesn't charge conversion fees.

Also, some cards feature complimentary overseas travel insurance, which can save you even more money. The eligibility criteria for these cards tend to be more strict, so you may want to opt for a cheap travel insurance policy instead.

Some of the fees you can expect to pay when travelling include local ATM fees, international ATM fees, cash advance fees, cross currency conversion fees and the interest costs relevant to your credit card.

You will find that cash advance fees are seriously high because you have to pay the cash advance fee, the fee for using the local ATM, an international ATM fee, as well as interest, which you start to incur the day you withdraw the cash. A good way to overcome this problem is to deposit additional funds onto your credit card so your account has a surplus and you don't have to pay interest. However, the other fees still apply.

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Travel money credit cards

Generally, a credit card is not really a good option when travelling but, if you have no other option, then try to use your own money as often as you can rather than credit from your bank, as this will save you money on interest charges.

Another option is the travel money card, which allows you to convert your money into a foreign currency and load it onto the card before you leave. You can reload the card online, so it can be done while overseas.

This is usually a good option because you no longer have to pay currency conversion fees as long as you use the currency loaded on the card. However, there may be reload fees that apply and some cards will charge you transaction fees for purchases, so it's a good idea to check this feature prior to leaving. Despite this, they are still a good option and may be better than a lot of credit cards.

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You can also use a general transaction account to access your funds while you're overseas but you have to be careful because it can also be an expensive way of accessing your own money, just like a credit card. You will have to pay a foreign currency transaction fee as well as an ATM owner fee. However, if you plan in advance, you could avoid paying some or even all these fees.

When you withdraw cash from your transaction account via an ATM, you can expect to pay a foreign ATM fee of approximately $5, which is charged by the Australian financial institution. Then, you might have to pay a local ATM operator fee, which varies but you will be notified of the cost when you are performing the transaction. The foreign currency transaction fee is usually three per cent.

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One area you can save money is on local ATM operator fees by using ATMs that are part of your bank's global ATM alliance. Many of the large Australian banks have agreements with major banks overseas, which enable them to provide free ATM services to their customers. For example, Westpac has an agreement with Deutsche and Barclay's Bank.

While you shouldn't change your travel plans to save $5 on an ATM transaction, if you plan a little, you can time your withdrawals so you can use ATMs in your bank's alliance and save quite a bit of money.

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Travel insurance

Some people think that there's no point to having insurance when travelling but the statistics from Smartraveller say otherwise. This is why travel insurance is so important, because it covers you for a variety of situations, including medical expenses and emergency medical assistance, flight delays or cancellations, lost baggage, trip cancellations and much more.

There are two ways you can gain access to this type of insurance. You can purchase a travel insurance policy outright and since there are plenty of providers offering different options depending on your needs, you will have where to choose from.

Certain credit cards also offer complimentary insurance policies. Some credit cards offer more insurance than others and you will find that as the prestige of the card increases, so too do the number of benefits and the amount of coverage you get.

You can't really choose your credit card perks, but you can make sure to focus on a credit card that does offer the type of complimentary insurance you are looking for. Once you have the card, you need to see what you have coverage for and then purchase a policy to cover the other situations that might arise.

Types of travel insurance and coverage

When it comes to travel insurance, you will find a few different policies offering various levels of coverage. Generally, the two main policies are for overseas travel and domestic travel. The difference is in the level of coverage they each offer and, of course, the premiums charged. The more coverage you require, the more expensive the policy will be.

Overseas travel insurance

When it comes to international travel insurance, you can find various types of policies, which differ in terms of the situations you are insured for as well as the coverage limits. The more expensive the policy, the more events you are covered for and the more money you can get. A comprehensive policy that basically covers all possible events insures you for the following events:

  • Cancellation of travel. This insures you for cancellation fees and any deposits you have lost for pre-paid travel plans when those plans were cancelled due to unexpected reasons that were beyond your control such as sickness, accidents, collisions, natural disasters, strikes, etc.
  • Overseas emergency medical assistance. This benefit covers you for expenses related to any emergency medical help you might need while travelling overseas and includes such things as ambulance service, medical evacuation, hospital guarantees and more.
  • Overseas emergency medical and hospital costs. If you are injured or fall ill while travelling overseas, this aspect of the policy insures you for the costs related to any medical treatment you might require, including medical, hospital, surgical, nursing and dental costs.
  • Additional expenses and hospital allowance. This benefit ensures you have coverage for any extra lodging and travel costs related to your health issues or someone else caused by an illness, accidental injury or death. If you require a companion to stay with you or escort you, their travel and lodging expenses will be covered. The hospital allowance is designed to cover any incidental expenses you incur while you are hospitalised, including TV rental, phone calls and more.
  • Accidental death. If you pass away due to injuries sustained in an accident and your death occurs within 12 months of the accident, a death benefit is payable under this section of the policy.
  • Permanent disability. If you sustain certain injuries during your overseas journey that lead to some form of disability, such as complete loss of sight in one or both of your eyes, the loss of a hand or foot, within 12 months of you suffering the injuries in question, you will receive a permanent disability benefit.
  • Loss of income. If you can't work for more than 30 days upon returning to Australia due to an injury suffered while on your trip, you can receive a loss of income benefit, which is payable on a weekly, biweekly or monthly basis in arrears, depending on the insurance company.
  • Replacement of travel documents, credit cards and travellers cheques. This aspect of the policy ensures you are covered for the expense of replacing any travel documents, credit cards and traveller's cheques you lost or had stolen while on your overseas trip.
  • Theft of cash. If any items such as cash, bank notes, currency notes, postal orders or money orders are stolen, you are covered up to a certain level, which differs from one insurance company to the next.
  • Luggage delays or loss. If your luggage is delayed by more than 12 hours, you may receive an allowance to replace the items of clothing and toiletries. However, if your luggage is stolen or other personal items, such as cameras, computers, personal valuables and more, are stolen or lost, you will be covered up to a certain level for the expense of replacing those items.
  • Travel delays. If your mode of transportation is delayed by more than six hours due to circumstances beyond your control, you are covered for the cost of additional meals and lodging.
  • Alternative transport costs. If your mode of transportation is delayed and you have to reach a special event that cannot be rescheduled, such as a wedding, funeral, conference, sporting event and more, you are covered for any additional transport costs you incur to ensure you reach the event on time.
  • Personal liability. This section covers you for legal liability and legal costs if your negligence led to the injury of another person or damage to their property.
  • Rental vehicle excess. If your rental vehicle is stolen or damaged and you find yourself in the situation in which you have to pay an excess on Motor Vehicle Insurance for a claim you file, this aspect of the policy covers this expense for you. These are some of the events you can expect to be covered for. However, note that some policies don't include quite so much coverage or offer you a lower level of benefits, depending on how much you can afford to spend on your overseas travel insurance policy.

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Domestic travel insurance

A domestic travel insurance policy doesn't provide you with coverage in quite so many situations as an overseas travel insurance policy but it's still definitely worth getting. A domestic policy will generally cover the following events; cancelled trip arrangements, additional expenses for accommodation and travel due to health issues, accidental death, loss, theft or damaged luggage or personal items, travel delay costs, personal liability, rental vehicle excess.

Again, it's worth noting that the types of coverage can differ from one insurance company to the next, so it's really worth taking the time to do your research. Not only could you get a better deal on the cost of the policy but you might also get better coverage.

Insurance for the budget traveller

Comprehensive insurance policies can be quite expensive and if you are travelling on a budget, the idea of paying so much for a policy might not be that appealing. In fact, you might be tempted to avoid purchasing insurance altogether, thinking that you'll be saving some money. Unfortunately, travelling without insurance can end up costing you a fortune, especially if you are involved in an accident or fall seriously ill.

One option is to get a budget friendly insurance policy. This type of policy covers the bare minimum but at least it insures you for those situations that would cost you the most. Most budget policies cover your medical and hospital expenses as well as personal liability.

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Complimentary insurance on your credit card

The insurance policies listed above can all be purchased from any insurance company, though it does pay to do some research and compare offers to make sure you are getting the best possible deal. However, there is another way you can get travel insurance and that is through your credit card.

Many lenders offer complimentary insurance to their customers for select credit cards. If you hold a particular card, you can access complimentary overseas travel insurance, domestic travel insurance and more. Seeing as these policies are offered as a perk to customers, it shouldn't come as a surprise that the type of policies you have access to as well as the coverage all depend on the type of card you hold.

Learn more about credit cards with complimentary travel insurance

A Gold cardholder, for example, will receive more perks than a standard cardholder, just as a Platinum cardholder will be offered greater advantages than a Gold cardholder. Generally, Platinum and Gold cards offer coverage for the same events but they differ in terms of the level of coverage offered. Of course, this depends on the issuer of the card so reading the accompanying documentation is essential to determine what you are covered for.

You could save a lot of money with this form of complimentary insurance, especially if you plan on travelling overseas because that means you no longer have to purchase a separate policy. Usually, all you have to do is charge your prepaid travel expenses, like your air ticket and accommodation, to your credit card and the policy automatically becomes active.

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Keep in mind that it is essential for you to read the documentation on the insurance policy that comes with your card because there are certain eligibility conditions and steps you need to take if you have to file a claim. If you don't abide by the terms and conditions set out by the policy, you stand little chance of getting your claim approved.

Furthermore, there are also a variety of exclusions you are not covered for and it's essential that you know what they are, either to avoid them or to purchase additional insurance to protect you in some of the events you feel are likely to take place.

Gold or Platinum credit cards are harder to obtain from students. However, even standard cards offer a certain degree of protection. Some standard credit cards feature purchase security insurance and some debit cards offer protection too.

Purchase security insurance is a policy that covers your purchases for 90 days against loss, theft or accidental damage. So, regardless of where in the world you buy the items, as long as you pay for them using your credit card, you will be reimbursed for the cost of replacing or repairing them in the event of them getting stolen, lost or accidentally damaged.

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Shirley Liu

Shirley is finder.com.au's publisher for banking and investments. She is currently studying a Masters in Commerce (Finance) and is the author of hundreds of articles. She is passionate about helping Aussies make an informed decision, save money and find the best deal for their needs.

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