Mozo guides

How to avoid fees when spending overseas

Is the countdown finally on until your next getaway? Have you been stuffing every spare banknote into your piggy bank until it could burst at any moment? 

Well, before you jet set off on the trip of a lifetime, it’s important to sort out your travel money method for your holiday. To make sure that your hard earned cash doesn’t become the banks’, it’s crucial that you know exactly how to avoid paying unnecessary fees while you spend overseas. 

It’s true, some fees may seem too small to even worry about, but Mozo’s travel report found that some Aussie travellers are paying up to $385 in unnecessary banking fees when choosing a travel money option. 

Whether you decide to use a travel credit card, travel debit card or prepaid travel money card you’re likely to come across fees at some point. To make things a little easier, we’ve compiled a list of ways to dodge travel money fees you could run into while travelling, so you can spend your money on things you actually enjoy. Did someone say another round of mojitos? 

Travel money fees to avoid - debit, credit and prepaid travel cards 

Bad exchange rates 

Exchange rates are constantly changing as the Australian dollar goes up or down, and vary from currency to currency. Unfortunately, there is no way to control exchange rates, or have complete certainty on what they’ll do from day to day. 

Ultimately, at your time of travel you want to try and get the highest rate possible so you can receive the most money back when you convert from Aussie dollars to a foreign currency.
How to dodge them  
To avoid the stress of exchange fluctuation, you can convert and load your money onto a prepaid travel card before you go. This way you’ll only use one exchange rate (and possibly one conversion and/or loading fee). The only downside is that you may miss out if the Aussie dollar spikes in value.  

Using a debit or credit card overseas gives you access to the interbank exchange rate, which is usually the best rate across the banks. Just keep in mind this won’t totally save you from day to day changes in exchange rates. 

Avoid converting funds at the airport or while overseas because often the rates are worse and there may be commission charges added by the convertor.

Currency conversion fees 

When you use your debit, credit or travel card overseas, your bank may charge you if it has to convert your funds from AUD to a foreign currency when you make a purchase. 

These fees can typically be up to 3% of the total cost of the amount you spend when you use the card, which can really add up over the duration of your holiday
How to dodge them
Choose a prepaid travel money card that holds the local currency you need and load enough funds in that currency to last you while you’re there. This way there is no conversion happening when you spend overseas so no fee!

Some debit and credit cards don’t charge currency conversion fees, so if that’s your preferred travel money option, opt for those to avoid being charged every time you use your card overseas.

Overseas ATM withdrawal fees

Just like here at home, some ATMs overseas have withdrawal fees, but the catch is that your Aussie bank could charge you as well, meaning you’re paying double the amount of ATM fees on a single transaction. 

When travelling, these fees can really add up, especially in places that operate mostly in cash (yes, they exist).
How to dodge them
Choose a debit or prepaid travel card that won’t charge you when you withdraw from international ATMs. While this doesn’t cover the ATM fee charged by the overseas bank or company, it eliminates the charge coming from your Australian bank.

Some Australian banks have partnerships with overseas banks which allows cardholders to withdraw from ATMs without being charged. Do some research to see if there are any partnership banks at your overseas location. 

Avoid using your credit card when taking money out overseas. Not only could you be charged with an ATM fee, you’ll also start paying interest on the withdrawal straight away.  This can really sting your travel savings especially if you make multiple withdrawals.

Annual fees 

Annual fees are a common charge on both travel and regular credit cards, but they aren’t all the same, some banks charge you nothing to own the card while others charge you hundreds. 

Banks will charge you this fee when you first receive the card, and every year that the card remains active (meaning you haven’t cancelled it). It’s unlikely you'll be charged an annual fee on debit or prepaid travel cards
How to dodge them
Depending on how you use your card, and for how long you intend to after your holiday is over, you may want to opt for a card with a low or no annual fee. 

Also look out for cards that waive or have a reduced annual fee in the first year, this could save you if you plan to stop using the credit card once you’ve returned home. 

Keep in mind, often cards that charge more have more features that may be beneficial to your travel needs, like complimentary travel insurance or the opportunity to pay for flights with points. It may be worth the fee because it’ll save you on other travel expenses.

Merchant fees 

A merchant fee refers to the added charge that some overseas merchants may put on transactions where you used an Australian credit card. 

In some instances, using AUD to make a purchase overseas could open you up to being charged by the merchant, being charged a conversion fee by your bank and receiving a lower exchange rate, which could be a big blow to your travel savings stash every time you spend on your credit card.
How to dodge them
Not all merchants add a foreign credit card surcharge, but it’s always worth asking or having a look on the bill. 

Avoid using Australian dollars when making purchases overseas, instead of a credit card maybe opt for a prepaid travel money card where the foreign currency is ready to be used. You could even use any local cash you have in your wallet, that way you know it’s completely merchant fee free!

Credit card interest

While credit card interest may not be at the forefront of your mind when you spend overseas, it’s likely something you’ll have to face once you get home or while you’re still away. If you ignore your credit card balance, and don’t regularly make repayments, you could end up paying a significant chunk of your travel savings on interest.
How to dodge it
Choose an interest-free credit card, and take advantage of the interest free period by paying back your balance in full on time. Bear in mind though, these credit cards usually don’t have any extra features and may not be the most travel-friendly option.  

Debit cards and prepaid travel money cards don’t charge interest because the money you’re using is your own and not the banks. So, if you have the money you need to make a purchase, it may be beneficial to use your own funds on regular transactions and reserve your credit card for emergencies when overseas.

Card issue fees 

Some banks charge a one off card issue fee when you order a prepaid travel money card.
How to dodge them
Weigh up your options when it comes to cards that charge you for card issue. 
You can either simply opt for a card that’s free of charge in the first instance, or consider whether the card issue fee is less than what you’d be charged on other fees, like loading or account fees.

Loading and reloading 

Every time you load funds onto your prepaid travel card into a foreign currency, some banks might charge you for it. In some cases it’s a flat rate, say $10 or $15, but in others it’s a percentage of the amount you load on to the card.
How to dodge them
Opt for a prepaid card without this extra fee, this way you can freely move money whenever you need to without losing out every time you do. 

Load larger sums onto the card to minimise the amount of times you are hit with this fee. Keep in mind, if your bank charges a percentage of the transfer amount, this might still be a big fee.  

Alternatively, you could use a debit card without international transaction, ATM or conversion fees. This way you’re still using your own money but won’t be charged for loading funds onto the card because you don’t have to.

Prepaid travel card account fees 

Once you come back from an overseas getaway, it’s easy to let your travel money card sit in the back of your wallet and collect dust. But this can actually end up costing you money as some cards charge customers monthly inactivity fees, usually after 12 months of no use.
Similarly, if you decide to cancel the card, in some cases banks charge cardholders account closure fees as well.
How to dodge them
If you intend to use the same travel money card for two trips that are more than a year apart, check the fine print before you order your card. You may have to shop around a bit to find a card that doesn’t charge you for inactivity.
You could load a small amount onto the card, to ensure it remains active and to keep your bank happy. In this case make sure you aren’t being charged a reloading fee. 
It may be worth just cancelling the card if you are unsure when you’ll need to use it next. Remember some cards charge closure fees so when you are first choosing your card try to find one without this charge.

Before you approach your bank demanding a travel money option that’s completely fee free (wouldn’t that be ideal), remember that in some cases higher fees means more features which might actually save you more overall. 

Yes, it can be a little bit of a juggling act, and requires some serious thinking time, but consider which option best suits your specific travel needs, and which one travel money strategy will save you money on along the way. 

RELATED ARTICLE: Australia’s top travel money cards for 2019

Need to compare your travel money options to ensure you save for your next trip? Head over to our travel money hub to check out product reviews, comparison tables and useful guides.

Polly Fleeting
Polly Fleeting
Money writer

Polly Fleeting is a personal finance writer here at Mozo, specialising in loans and credit cards. Her work is aimed at helping people find ways to make smart product choices, reduce debt and get more for their hard-earned dollars. Polly has a degree in Journalism from the University of Technology, Sydney. She is also ASIC RG146 (Tier 2) certified for general advice.