Best way to travel with money overseas – for safety and less fees

by Lisa  |  30 March 2018

travel with money

A question every traveller asks is whats the best way to travel with money overseas? In particular, which is more safe and what will incur less fees. This applies whether you are an experienced holiday maker or a travelling novice.

So let’s look at the pros and cons of all the different ways to travel with money.

Cash


It's the simplest way to travel with money. Just place all the cash you want to spend for the holiday into your purse/wallet. But this can prove to be the most riskiest way too.

Pros

  • Instant access. You have instant access to your spending money. 
  • Easy to budget. Know exactly how much money you have left so there is no danger of going crazy and over-spending!

Cons

  • Be cautious. You have to remain constantly vigilant on your bags and wallets. And be aware of possible muggers and pick-pockets when carrying large sums of cash. Once your cash is gone, its gone. You can’t claim it on travel insurance. My mother decided to keep her cash in her handbag but didn’t zip it up - there are twice as many hands as people in China!
  • Where to stash your cash. Ensure that your accommodation has a reliable safe where you can store the cash you don’t need immediately. I remember when I was travelling in Chile, I placed my excess US dollars inside my walking boots (under the insole) when I was touring around for the day. This was because the hostels in Chile didn’t have lockers or safes.
  • No replacement. Stolen cash usually cannot be claim on travel insurance.

So what I recommend, and do myself, is carry about AU$100 worth of the destination currency before I arrive. Sometimes airport money changers may not exist or have restricted opening hours.

Plus I carry about AU$300 in Australian cash, just in case ATMs close down for some reason. This habit has stemmed from when I was travelling in Argentina in 2002. The government closed down all banks due to a financial crises. I was so thankful that I had USD100 cash hidden in my walking shoes to enable me to buy a bus ticket back into Chile where I could withdraw money from their ATMs.

Credit Cards


My favourite and most preferred way to travel with money is with credit cards. Main reason being is that I can collect frequent flyer points/air miles on all purchases made. It helps me fly free once a year! I’m aware that not all banks offer such a benefit but it is quite common with Australian banks.

Pros

  • Convenience. The card fits into a small purse. 
  • Select withdrawal amounts. You can withdraw small amounts of local currency as and when required.
  • Order replacement card. If your card is lost or stolen, you can cancel the card with your bank and order a replacement. This is when it comes in handy to have a little bit of cash stashed away
  • Carry less cash in your purse by making purchases on the cardm such as hotels, restaurants, tours, shopping!
  • Extra card benefits. Some credit cards come with added benefits. For example in Australia, some platinum cards offer free travel insurance. It saved me from purchasing a $900 travel insurance policy for a 6 month holiday.
  • Better exchange rates. Cash withdrawals from your credit card seem to attract a much better exchange rate than from the local money exchangers. I discovered in my research that credit card companies (Visa, Mastercard, Amex etc) exchange rates are based on the wholesale market rates reserved for large interbank exchanges. 
    I confirmed this on my recent 6 month holiday around the world (2017). After each cash withdrawal I checked how much was deducted from my account via online banking. I then calculated the conversion rate and it was always higher than the local exchange rates. Even after including all the fees my bank charged (up to 4%). I ended up with more local currency to spend!
  • Flexible exchange rates. You are not locked into one exchange rate. So if the exchange rate improves while you travel, your expenses get a little cheaper . You get more bang for your buck but remember it can work in reverse too.

Cons

  • Unauthorised use. A thief can max out your credit limit before you even notice your credit card is missing. Then you need to go through the long process with your bank to identify which charges are not yours. Then the bank has to get the money back for you.
  • Overseas ATM withdrawal fees. Your bank charges fees for cash withdrawal at overseas ATMs. The amount varies from bank to bank. Unless you’re lucky enough that your bank is part of global network of banks offering free ATM withdrawals.
  • Foreign transaction fee. Every purchase and cash withdrawal is subject to a foreign transaction fee. For example, most Australian banks charge 2-3% of the value, depending upon type of card.
  • Card skimming. ATM and Eftpos machine skimming is a risk. My credit card was skimmed by a shop at Kuala Lumpur airport. Then two weeks later someone in Thailand tried to make a purchase with my card number. Luckily my bank was onto that and stopped the purchase immediately.
  • Daily fluctuating exchange rates. If the exchange rate moves in the unfavourable direction for you, your purchases will cost you more that if you had fixed at a higher exchange rate with a travel money card.

Some handy pointers I would like to share with you.

  1. Use cash with your own money and not the banks credit. If you plan to withdraw cash from your credit card, ensure that you transfer YOUR money into the credit card account so that it has credit balance. You will avoid paying interest charges by withdrawing your OWN money instead of the BANKS money.
  2. Check with your bank on their overseas ATM withdrawal fee. For Australian banks, this can range from AU$2.00 - $5.00 per transaction.
    Often you will find this fee is not as bad as it looks. Converting cash at money changers can sometimes charge commission of up to 10% (it was 19% in Rome in 2017). If I withdraw AU$500 cash from my own money in the credit card, I will be charged a $5.00 overseas withdrawal fee, which equates to 1%. Then I add my banks 3% foreign transaction fee, to give me a total of 4% in fees. For this reason, I’m always happy to withdraw $400-$500 worth of local currency at a time.
  3. Check if your bank offers free ATM withdrawals from international banks that are a part of their global alliance network. For example, I was able to withdraw cash for free at Barclays Bank in London and Bank of America in USA.  
  4. Always use ATMs that are attached to a bank or located inside the bank.

    Travelgroove Tip: In Europe, don’t use the Euronet ATMs that sit randomly in kiosks, shops and sometimes in a building right next to a bank. These ATMs don’t belong to a bank and therefore will charge you extra hidden fees.
  5. Amex cards restrictions. I don’t travel with American Express simply because there are lot of businesses that don’t accept those cards. Therefore I don’t want the hassle of travelling with two credit cards.
  6. Let your bank know. Always let your credit card bank know your dates of travel and destinations so they can monitor the security of your account while you’re travelling.

Finding International ATMs

To be able to withdraw cash from virtually any country in the world, ensure your credit card is linked to either PLUS, Cirrus or Maestro networks. Just check the back of your credit card. Each of these networks has more than a million ATMs.

Before you leave home, you can check the availability of ATMs at your destination on the following online locators:

Visacards – PLUS ATM locator

MasterCards – Cirrus/Maestro locator

Alternatively, you can look for the following logos on the actual ATM machines.

travel with money at ATMs showing the stickers such as Visa, Mastercard Cirrus.

Visa and MasterCard logos highlighted in an extensive range of ATM logos.


Debit Card


Sometimes banks offer Debit Cards connected to Visa or MasterCard as an alternative to credit cards. It acts the same as a credit card but you are using your own money to withdraw cash or make purchases domestically or overseas. It must be attached to a savings account so you can easily transfer money between the accounts.

The pros and cons are the same as for credit cards but with the additional points below:

Pros

  • Use your money. You are using your own ‘saved up’ cash only, not the banks ‘credit’ money. Thereby avoiding the temptation to overspend what you haven’t got! 

Cons

  • Can’t pre lock high exchange rates for foreign currency, as you can with travel money cards. The exchange rates fluctuate daily, just like credit card use.
  • There is no provision for credit. Once you’ve spent all your money, you will have to transfer more cash into it.
  • No added benefits like accumulating airline frequent flyer points or free travel insurance as with some credit card..

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Travel Money Card

a collage of different banks credit cards

{For this section I will only refer to travel cards that are available in Australia – as that’s where I live and therefore is easier for me to research.}

Travel money cards operate in a similar way to a debit card. The only difference being is that you can pre-load with your own cash in multiple currencies. You can still withdraw cash from ATMs and make purchases like a credit/debit card. It is the same as using a debit card in that you are not using credit, meaning the banks money! Think of them simply as pre-paid cards.

Travel money cards can be issued by a bank, post office, airline or other currency providers, such as Travelex. They are re-loadable prepaid Visa or MasterCard cards. Therefore, you can use the same ATM locator links in the Credit Card section above, to check if  ATMs exist at your destination.

Pros

  • No credit limit. As you are using your own ‘saved up’ holiday money, you avoid the temptation of overspending and then taking months paying off your credit card debt! 
  • Easy to budget by pre-loading up to 10 major currencies and the amounts you need.
  • Lock in exchange rate. You can lock in the local currency exchange rate when it suits you, especially when the exchange rate looks favourable. By watching the exchange rates, you could lock in a much better exchange rate, giving you more spending money! Also you don’t have to worry about exchange rates going up and down while on holiday. Therefore you know exactly how much money you have to spend. Be aware though, it could also work in reverse when the exchange rate lowers.
  • ATM withdrawals. You can still withdraw cash from ATMs. Do check with the travel money card provider for withdrawal fees. Some offer free withdrawals with their partnered international banks.
  • Insufficient funds covered by other loaded currencies. When making a purchase and you don’t have sufficient funds in that particular currency, it will automatically use a Drawdown Sequence to transfer money from your other loaded currencies on your travel money card. Be aware though, refer to Cons below.
  • Opportunity to save fees. There are two major ways to save fees such as foreign transaction and overseas ATM withdrawal fees. However, only if you are able to follow their rules. Firstly, you can spend in the supported 10 major currencies only. This includes USD, GBP, AUD, CAD, EUR and so on. Secondly, you can withdraw cash from global alliance partners ATMs.
  • Safer. Travel money cards are more secure than carrying cash. Plus no risk of thieves spending your credit limit.

Cons

  • Restricted currencies: You can only pre-load from  a select group of the 10 major currencies, which are AUD, USD, CAD, NZD, GBP, EUR, SGD, THB, JPY, HKD. You can still make purchases in other currencies, but will be subjected to standard foreign exchange fees, similar to credit card fees.
  • There is no provision for credit should you run out. However, if you have online banking, you can transfer/re-load money into the travel money card.
  • ATM withdrawal fees. If your bank or travel money card provider does not have international agreements with overseas ATMs, then you still pay for overseas ATM withdrawal fees.
  • Foreign transaction fees. You still pay for foreign transaction fees (3 - 5.95%) if making purchases or withdrawals in unsupported currencies. Basically this means, if you are travelling to countries that don’t use the banks major 5-11 currencies for travel money cards, then you are subjected to the same transaction fees as with credit cards.
  • Rejection of pre-paid cards. Some merchant machines may choose not accept pre-paid travel money cards (pre-paid Visa and MasterCard’s).
  • Lose money on currency to currency conversions. There is a slight catch to the Drawdown Sequence. A drawdown Sequence is when other stored currencies on your travel money card are used to complete a transaction in a currency for which you don’t have sufficient funds. You can lose money based on the number of exchange rate conversions used, depending upon how many stored currencies on your card are required to complete the transaction. Therefore, you need to continually monitor your stored currency balance.
  • ATM balance enquiry. Not all overseas ATMs allow the card balance be viewed on the screen or printed on a receipt. Plus some travel money cards or the ATM owner can still charge a fee for this service.
  • No credit-hold ability. In particular, hotels and car rental companies don’t like travel money cards because there is no credit function on the card. Therefore, it cant be used to charge any additional expenses that you may rack up.

Are Travel Money Cards really fee-free?

There could possibly be one more disadvantage to using travel money cards. It is a theory only at this stage. The fact that travel money cards don’t charge fees ( load/reload fees, foreign exchange fees etc) it makes me wonder how else do they recoup their expenses. One way I can think of is that the exchange rate is lower than the exchange rate used for credit cards.

There is no way of knowing for sure without further investigative research. I contacted my bank and was advised that they can’t tell me what exchange rate is used for credit card transactions because it is determined by Visa/MasterCard/Amex at the time of transaction. The bank has no control over the rates used, nor do they see the conversion rates. I guess, how does one access wholesale exchange rates by large interbank exchanges! However, for travel money cards, most banks display the rates on their website because you need to know the rates before you lock it in.

My scepticism on exchange rates was reinforced when I was reading the T&C’s of Qantas Cash travel money card. Even though they state there is “no currency conversion fee”, however further down the fine print I read that a margin is added to exchange rates. Therefore we’re not getting the best exchange rate for our money.

an excerpt of the fine print from Qantas Travel Money.

Investigating further

I’m continuing with my investigations. However, if the exchange rates are the same for both credit cards and travel money cards, then it makes sense to use a travel money card, but only if the following is satisfied:

  1. They have free ATM withdrawals with global alliance banks.
  2. These global alliance ATMs exist in the countries and cities you will be visiting.
  3. You will only be using any of the major 11 currencies they offer on the travel money card.
  4. When pre-loading foreign currency, you manage to lock in at the best exchange rate for maximum spending power!

Remember, be sure to read all the Terms & Conditions of the travel money card before you sign up.

One final note, during my investigations of the T&Cs of the various travel money cards, I noticed that the banks travel money cards had less fees and rules when compared to other providers such as other currency providers, post office and airlines.

Travellers Cheques


Travellers cheques were useful in the days when ATMs and credit cards were not yet popular and were not accepted everywhere.

I have not seen travellers cheques for years, decades even. But can you believe they still exist!

Pros

  • Convenience. Useful when travelling to countries where ATMs hardly exist.
  • Alternative back-up to carrying cash. For example, for those times where you can’t get access to ATMs, like government shutdowns on banks, the ATMs are not accepting your card or pin, or worse still the ATM has just eaten your card!
  • Security. Useful if you need to carry large amounts of cash and still want to be insured for it.
  • Easy replacement. It may be useful if travelling to dangerous places where muggings are highly probable!
  • Safe. Travellers cheques can only be cashed by you because only you must sign for them in the presence of a bank teller.

Cons

  • Not so popular. Fewer and fewer places accept them and fewer banks issue them.
  • Search time. Valuable holiday time wasted by trying to find a bank that will accept them.
  • Commission/fees is charged to buy the cheques and then again to cash them in.

If you still want to use travellers cheques, best bet is to use globally recognised brands like American Express or Visa. 

Conclusion - So what is the best way to travel with money?


So many options, what to do? In my opinion, the best way is with a combination of three, as suggested below:

  1. Convert about AU$100 worth of local currency cash before you leave.
    Saves the hassle of looking for money changers at the airport while lugging your bags. Also they may be closed if you have a late arrival. The exchange rates are usually lower at the airport than in city centres.
    Plus it makes life easier to pay for small incidentals upon arrival – food, drinks, taxi etc.
  2. Optional: Bring about AU$300 cash (or your local currency) and store in a safe, secure area in your luggage. This is a backup plan in the event you are left stranded without access to credit/debit money, such as bank closures, no ATMs at destination, card eaten by ATM machine etc.
  3. Choose either a credit card or travel money card, based on what is more important to you as per the reasons discussed above. There is no easy answer because each provider has different fees and rules. Use the comparison table below to give you a quick overview of the differences between each type of card.

Credit/Debit Card

Travel Money Card

Debit or credit money

Credit Card – deposit cash into account and only use your own money and/or use credit limit (banks money).
Tip: don’t use credit (banks money) to withdraw cash as you will pay high interest fees.

Debit card – use your own money only (your cash is linked to a savings account).

Pre-load with your own money only – Australian dollars and up to 10 major foreign currencies.

There is no provision for credit.

Exchange rate locking

Exchange rate used fluctuates daily. Therefore you end up averaging the exchange rate used over the duration of your holiday.

You can pre-load and lock in the exchange rate when it suits you – eg. In times of favourable exchange rates. However, you could also be locking in at a lower rate should the exchange rate improve while you’re on holidays.

Exchange rates used

Conversions are based on wholesale exchange rates reserved for large interbank exchanges. (in my recent experience, the credit card exchange rate was always better than what was being offered locally)

Conversions by a set travel money card exchange rate (which the rate could be better, same or worse than with credit cards – more research is required).  Banks & other travel money card providers websites usually list the daily exchange rate for travel money cards so you can lock in during times of favourable exchange rates.

Overseas ATM withdrawal fees

Some banks have global alliance partners for free overseas ATM withdrawals. Otherwise, there is a set fee (in AUD) applicable to all countries and when using non-alliance banks.

Some banks and travel money card providers have global alliance partners for free overseas ATM withdrawals. Otherwise, there is a set ATM fee for each supported currency when using non-alliance banks.

Foreign exchange fees.

Charge a 3% foreign exchange fee on the total value of ALL purchases and withdrawals.

Don’t charge a foreign exchange fee, when you purchase or withdraw from their 10 supported currencies that you have stored. For other currencies & cross currency exchanges you will be charged between 3 to 5.95% fee – depending upon which travel money card provider you use.

Other fees you may want to check with your bank or travel money card provider

Initial and reload fees

Card issue fee

Card replacement fee

Emergency cash Transfer fees

Online servicing fees

Telephone support fees

ATM balance enquiry fees (via ATM, not online)

Statement fees

SMS alert fees

Monthly inactivity fee

Collecting reward points

If you have an credit card attached to airline reward points – you can still collect airline frequent flyer points on overseas purchases. But not cash withdrawals.

No opportunity to collect airline reward points, except if you use the airlines own travel money cards – eg. Qantas Cash and Velocity Global Wallet.

At the end of the day, there may be not much difference between the two. Credit cards may have better exchange rates but travel money cards offer free foreign exchange fees on 10 major currencies. The benefit of one may offset the cost of the other and so they become almost even in the end!

As mentioned before, credit card is my preferred because I like accumulating airline frequent flyer points but I am also disciplined with my spending. I always transfer my spending cash into the credit card before I depart.

What is your favourite way to travel with money? Let us know in the comments below your experiences, good or bad, with using travel money cards or debit cards and help other travel groovers!

If your credit card or luggage is lost or stolen, read some handy tips in the Travel EmergencyTips page.

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About the author

Lisa is a travel gypsy by heart, having already been to over 70 countries and still counting. Founder of Travel Groove, to share travel tips, tricks and knowledge with other travellers.

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