According to Tourism Research Australia**, we’re some of the world’s biggest overseas holiday makers taking 7.1 million overseas trips in 2010 and splashing out around $5000 per trip. Depending on the travel money option you choose when holidaying, Mozo estimates you can pay as much as $315 in fees, commissions and other charges when spending $5000 abroad.***
So before you set off on your next holiday, be sure to head over to Mozo’s new travel money section and compare your options by following a few simple rules:
1. Pre-order foreign currency. It is no surprise that rates at the airport are some of the worst around. You can now pre-order foreign currency online so do this a few days before you leave and you’ll likely to get a much better rate. Also, don’t forget to factor in exchange fees. Some banks will have higher (more favourable) exchange rates but will slug you with a big fee. Use Mozo’s foreign exchange converter to compare between banks.
2. Be wary of ‘Commission free’. Many ‘commission free’ foreign exchange outlets build a profit margin into their buy and sell rates so shop around before you exchange.
3. Not all cards are created equal. Credit cards, debit cards and ATM cards are great when you’re travelling but before you whip out the plastic, you should know how much you are getting charged for the privilege. ATM withdrawal fees can be as high as $5 per transaction and currency conversion fees as much as 3%. Some cards charge no fees such as the Citibank Plus Transaction account and the 28 Degrees Mastercard.
4. Set a travel budget. Prepaid travel cards are gaining in popularity as they allow you to lock in an exchange rate before you leave. This means that you to stick to a budget and know exactly how much you will pay for items. There are some quirks to these travel cards so check out their features carefully. Some cards charge high cross currency conversion fees and have fees for recovering any cash you didn’t spend.
5. Avoid credit card cash advances. This is hands down the worst travel money mistake you can make. There are a handful of travel credit cards which will allow you to put the card into credit to make fee-free withdrawals but most cards will set you back with overseas cash advance fees, foreign exchange fees, and high interest from day one.
* Calculation based on 7.1 million trips and $195 in foreign currency fees, commissions and other charges
** Tourism Research Australia, “State of the Industry 2011”, October 2011. Average Australian spends $5,183 per overseas trip
*** Calculation based on the difference between the most cost effective and the most expensive method of spending money overseas. Analysis completed using exchange rates and fees as at 18 November 2011 and a $5000 per trip spend. Assumed spend of $3,000 on a typical credit card and 10 ATM withdrawals totalling $2,000 using a typical debit card. ATM operator fees have been excluded from this analysis.