With the Australian dollar still strong, Australians are travelling abroad more than ever. They’re also going further afield, with Europe and the US increasingly popular. But the further you go, the more you’ll want your holiday budget to stretch. Travel money can be a bit of a minefield, so here are some of the top things to watch out for.
1. Check the rates
You’ll never get the exchange rate you see in the news as that’s the interbank rate, just for banks. Instead you’ll get a lower rate, but how much – as well as what fees you pay – depends greatly on when and where you choose to exchange. Shop around and compare fees and charges from different providers.
2. Don’t leave it too late
Even if you suspect the dollar is going to strengthen again, don’t leave it until the last minute to buy your foreign currency. Airport exchange bureaus offer some of the worst value going as you’re a captive customer. Plan early, so you have more time to pick a good rate.
3. Watch out for fees
Exchanging money can involve a host of hidden fees and charges. Credit cards can be one of the worst offenders, with hefty cash withdrawal fees and conversion fees.
4. Beware “dynamic currency exchange”
This tourist trap is where a foreign retailer offers to charge your credit card directly in Australian dollars. It sounds convenient, but it usually includes a high profit margin on the exchange rate they use, and you can still be charged a cross-border fee by your credit card provider.
5. Try a travel card
Pre-paid travel cards can be a smarter way to take money with you as you can “lock in” rates at a favourable exchange. Many cards also have cheaper fees and conversion charges, and allow you to hold multiple currencies. They’re also safer than carrying cash around, if your wallet and cards are lost or stolen, you can cancel the card and hold onto your balance.
6. Caution with cash
You probably won’t be able to do your entire trip on plastic, as you’ll want some money for smaller purchases and tips. But bear in mind that cash can be more expensive to withdraw once you’re over there (due to ATM charges) so consider getting some local currency before you fly.
As a final tip: avoid coming back with too much spare foreign currency. Unless you plan to travel to the same destination again it can be hard to re-use, as banks often won’t convert coins back. Instead, spend your cash during your last days there and leave any spare balance on your Travel Money card, as that’s easy to convert back should you wish to.
Jim Vrondas is Chief Currency strategist, Asia-Pacific at OzForex, a global supplier of online international payment services and a key provider of Forex news. OzForex Group Limited is a publicly listed entity with shares traded on the Australian Securities Exchange under the code “OFX”.