Next month I’m planning a trip to Los Angeles. I’ve bought my flights, taken out travel insurance and have even started packing my bags but there’s one last thing on my travel to-do list – organise my travel money.
Apart from looking for some plastic that will allow me to make over the counter payments and ATM withdrawals, without high currency conversion and overseas withdrawal fees, I’m also considering one other aspect that is extremely important to any savvy traveller – my exchange rate.
Should I wing it and hope for the best or should I lock in my dollar now on a prepaid travel card? Well one recent change in the market has made the latter a tempting proposition – the Aussie dollar surging above the US 72 cent mark, which Boris Schlossberg from FX strategy described as a “short squeeze”.
I’m going to run some numbers to see if it’s the way to go:
Scenario 1: Locking in my exchange rate now
While I’ve already prepaid my flights and hotels, I still need some spending money for hitting up everything from Rodeo Drive to Universal Studios, so I’m thinking of taking about $4,000AUD. If I locked in USD now I’d get around $2873.
Scenario 2: Taking the risk of an exchange rate drop
Now if I don’t lock that $4k in on a prepaid card and the dollar drops to US 69 cents, which it is tipped to do, I will only get $2760 – a difference of $113.
As you can see locking in my dollar now, before the Aussie dollar drops could mean I’d get significantly more bang for my buck. But of course it’s a gamble either way, as the dollar could also rise – although this is not what economists predict will happen.
Other benefits of locking in your exchange rate:
Apart from having the peace of mind that you’ve locked in your exchange rate while the dollar has surged, it will also help you stick to a budget as you’ll load a set amount on to the card before you jetset.
Whereas if you pay for things on a travel credit or debit card, it will be harder to keep track of the amount you spend, meaning it will be easier for you to go over your budget. Topping things off, you won’t know what your exchange rate is at the time of purchase so it could also end up being more expensive, if the dollar drops while you’re away.
Where to now?
If you’re like me and are thinking about locking in your exchange rate to take advantage of the sudden surge in the Aussie dollar, then Mozo’s prepaid travel card comparison hub should be your next stop. You’ll be able to compare deals side by side, from the purchase rate to the reload fees to ensure you’re not only locking in a great exchange rate but also scoring a competitive travel money deal too.
Quick travel tips:
Before I wrap up this blog, I couldn’t help but share some of the things I’ve learnt while preparing for my trip to the US…
- Take more than one form of travel money with you: While I plan to pay for most of my expenses with the prepaid travel card, I’m also going to take my credit card with me, so that I always have a backup in case my card is lost or stolen.
- Only spend what you’ve loaded onto the prepaid card. There’s a trap when it comes to prepaid cards and it’s called a cross currency conversion fee. This is charged when you try to withdraw or pay with a currency that isn’t loaded into the card. That’s why I’ll need to ensure when I’m stopping over in Bangkok on the way back home I’ve organised some local Baht before hand.
- Avoid cash withdrawals with your credit card. If you decide to also take a credit card with you, it’s important to keep in mind that credit cards aren’t made for ATM withdrawals and you’ll be charged the cash advance rate for doing so, which is commonly up to (or even over) 20%.
- Find a travel insurance policy that suits your trip. For me the most important aspect when it came to taking out a travel insurance policy was finding one with unlimited medical cover, as medical bills in the US are notorious for running into the thousands. So have a think about the country you’re visiting and the activities you’ll be taking on (e.g bungee jumping, jet skiing, snow sports) to ensure your policy will provide sufficient cover for your trip if a mishap occurs.
For more money saving tips for your overseas travels, head to Mozo’s travel hub.