The Travel Money Miniseries: Part One
I’m regularly asked how we manage our money while travelling. There are so many products and services available now that it can be overwhelming when trying to decide what will work best for you and your trip.
In this two part travel money miniseries, we will explain the best ways to organise your money for travel, describe what to look for in travel accounts, reveal what we believe is the best travel account for Aussies, and suggest some other great alternatives.
Today in part one, we will explain our strategy for managing our savings and everyday cash while travelling, outline what to look for in great travel accounts, and share some general hints and tips for managing money while travelling.
In part two we will reveal the best travel account for Australian’s (and also some close runners-up).
Disclaimer: all the information in the guide is from our (mainly Ashlea’s) many hours researching, and while these strategies and systems work for us,
every situation is different and obviously this guide shouldn’t replace professional financial advice.
How We Manage Our Money While Travelling
Before talking specific accounts, we need to explain the general approach we use in managing and accessing our money while travelling.
We use a tiered (or pyramid) approach to managing our money.
As you can see in the infograph (right), our core savings is at the top, then our regularly accessed savings account, and finally our everyday spending accounts and credit card.
The idea being the further down the pyramid, the easier it is to access that money.
You want to make sure you have different levels of accessibility to keep your money safe, minimise your risk of theft or loss, and ensure you always have access to enough money to get yourself out of a tight spot (or buy that round of drinks you promised).
The core of our savings: A high interest savings account
The first thing you need to manage your travel money and savings well on the road is a high interest savings account.
This will be where you transfer all that hard earned cash while saving for your trip. It will also serve as your main ‘income’ while travelling, as you will be regularly transferring your savings from this account to your everyday accounts for day-to-day use.
Ideally your high interest savings account will be completely separate from your other accounts. The easiest way to manage this is to use a different bank.
Out of sight, out of mind!
You’re less likely to be tempted to spend money that you’re not looking at every day. By having a totally separate savings account, you’ll be less able to access the money on a whim, and are therefore less likely to go on that shopping spree or night out.
This is always useful when saving, but it’s particularly important when trying to save for a trip that may have a set timeframe or deadline.
High Interest Rates
Often the highest earning savings accounts aren’t with your current bank. Make sure to shop around for the best deals to make the most of that hard earned money.
Extra security while travelling
Serious crime is a very unusual experience when travelling, but that doesn’t mean you shouldn’t take precautions to protect yourself.
If you’re physically unable access your savings on the spot it’s much more difficult for someone to take it from you, and generally they will not even know you have it.
You also need to protect yourself from, well, yourself! Ever had one of those nights out? The kind where you wake up the next morning with no memory and an empty wallet… don’t let that be your bank account!
If your main savings are separate from your everyday accounts you can still wake up with a bad hangover and no memory, but hopefully you’ve only lost a few hundred dollars rather than your entire savings.
(mum, this has never happened to me, I promise!).
The Middle Tier: An Accessible Savings Account
The second tier for travel money management is a second savings account that is directly linked with your everyday account. Generally a savings account that is with the same bank as your everyday account will offer instant transfers between accounts.
This second savings account is for money that you plan to spend soon, usually in the next week or two.
Budget and plan your spending
Transferring a set amount or budget into your linked savings account can help you stick to you travel budget.
We usually transfer our planned travel budget for each country (or region) into our accessible savings account, and then regularly funnel money into our everyday account as needed.
As the accessible savings account is not directly linked to your debit card, you will need to plan a little to transfer between your accounts as required, but this will be no different to accessing your bank accounts at home.
The easiest way to have instant access to your savings is to open an account with same bank as your everyday access account. This will make your life much simpler, as you can see both your account balances within the same app.
Protect from theft
While having instantaneous access to your money is awesome, you don’t want to give other people (or drunk you- see above) the privilege. You are adding an extra layer of security by separating your week’s, or perhaps even month’s, travel budget from your everyday account.
You will still be able to quickly transfer and access the money, but you can also limit the potential effect of fraud if there was unauthorised access to your account (unfortunately this doesn’t apply to overspending spouses!).
Your Main Source of Money: An Everyday Account
The everyday account is your main source of daily spending, and should function as both your ATM cash card and debit card for purchases.
Set yourself a daily or weekly budget
One way to manage money in your everyday account is by setting yourself a budget. By limiting the amount of money in the account you can help yourself stick to a daily or weekly budget. This obviously depends on whether you will have regular access to internet to check you balance and transfer money when needed.
Weekly budgets are a great way to keep yourself in check without penny-pinching on everything. You can set your travel budget for the week, transfer the money into your account and then monitor your spending. If you notice you’re burning through your money too quickly, perhaps you can forego that fancy meal but still do an activity (or vice-versa, no judgement).
Personally, we use the Trail Wallet app to monitor our budget while travelling. It is a dedicated travel budgeting app with the ability to create multiple trips or destinations, set daily or whole trip budgets, add multiple currencies for each trip, and has customisable categories for your different expenses.
Check out our list of the best apps for travel for more details.
Have a buffer
You should always have a buffer amount in your everyday account to ensure any direct debits or charges aren’t rejected (or cause you to be overdrawn), and in case of emergency. This could be a genuine emergency, or a great tour, hot air balloon ride, or music festival that you absolutely can’t miss- we won’t judge.
We try to ensure we always have a $500 buffer on our everyday account. This amount will vary depending on what you are comfortable with, how often you can and want to check you balance and whether you have other expenses attached to the card (direct deposits, bookings, etc).
We have multiple direct deposits attached to our everyday card, and are sometimes without reliable or trustworthy internet for a few days, so we feel more comfortable having a larger buffer to ensure we don’t default on payments (ie. Netflix or Spotify!) and are never without access to a little cash.
Just in case: The Backup Account
You always want to have a backup way to access cash in case your main everyday card is lost, stolen, or locked by your bank. This card should also be a debit card (not credit card) so you can take cash out without outrageous fees.
For Reservations and Bookings: The Credit Card
We recommend using a credit card to make all bookings. This includes anything you might pre-book, such as flights, hotels, tours and rental cars, especially if booking online.
Using a credit card adds a layer of security, as you’re not using your own money. This way if deposits are charged ahead of time it won’t affect your everyday budgeting and cash, and there’s less risk of declined transactions for insufficient funds.
Additionally, you haven’t lost any of your spending money if a booking or trip is cancelled (by you or the company), or there are fraudulent transactions.
Keep in mind refunds can take weeks or longer to process, and disputed transactions even longer.
How to Choose Your Perfect Everyday Travel Account
The ‘best’ account or card to choose for your trip depends on many factors. See part two for our recommendations of great travel accounts and credit cards for Australians.
Here are a few questions to ask yourself that will influence what might suit your travel style and plans best.
How long you are travelling for?
The longer your trip, the more international transaction, currency conversion and ATM fees will impact you. Will you be travelling long enough, or often enough, for this to be an important consideration?
What currency do they use at your destination
Consider whether these currencies are stable, or whether they are likely to significantly fluctuate (ie. Iran).
If you are considering prepaid cards (see part two- coming soon), do they actually offer that currency on international currency cards.
Will you be paying with a card often?
In some countries card transactions and Paywave have overtaken cash (we were surprised by this in Poland). Keep in mind, international transaction fees and currency conversion fees will apply for each transaction. If you are making multiple transactions per day this will quickly add up.
How often will you need to take out cash?
If cash is still king in your destination you will need to consider ATM fees, both from your bank and the overseas bank. Some overseas ATM’s charge exorbitant fees for overseas cards to withdraw money. Also keep in mind some countries have very low maximum withdrawals per transaction.
I was charged $5 for each withdrawal in Thailand! And the maximum withdrawal amount per transaction was sometimes less than $100.
It’s much harder to control overseas ATM fees, as you are often unaware they apply until you have completed your transaction.
Will you be travelling again soon?
Consider whether you’re likely to travel overseas again in the future, and how frequently that could be. Perhaps you’ll catch the travel bug (like we did)!
It is even more important to ensure you’re getting the best deal when you’re travelling frequently!
General Money Managing Tips for Travel:
Withdraw money at your destination, rather than exchanging cash
Withdrawing money from an ATM will generally get you a better exchange rate than exchanging cash at an exchange bureau.
Alternatively, can you withdraw cash with purchases using EFTOPS? In some counties- like Australia- this is possible at major supermarkets and retail chains. This would enable you to avoid ATM withdrawal fees by using EFTPOS.
Avoid multiple currency exchanges (where possible)
If you must take cash, find out if you can exchange your home currency at your destination. Each time you convert to a different currency you will lose money in the exchange rate and/or commission fees charged by the exchange bureau or bank.
Always have some backup cash in a major currency
Always carry some cash in an easily exchangeable currency for emergencies. Depending on the destination, USD or EUR is usually best, though in some area’s of South East Asia and the Pacific AUD is also fine.
Exchange foreign currency when leaving the country
This is particularly relevant for smaller currencies, and especially coins. Make sure to exchange or spend as much as you can before leaving the country. It may be difficult or impossible to change later, and you don’t want to be stuck with unusable money.
If you have already arrived home with foreign currency you can’t exchange, and won’t be travelling to somewhere with that currency again soon, consider donating to charity.
CommBank and Bankwest support the UNICEF Coins for Kids program. Simply visit your local branch to donate foreign coins and currency, and know that every cent donated will support UNICEF programs.
NEVER Use Dynamic Currency Conversion (DCC)!
DCC is a process that enables a merchant or bank to charge a transaction in the purchasing card’s ‘home’ currency at the point of sale, charging a high fee for the convenience.
When you’re travelling, you may be asked if you would like the pay in ‘local’ currency or your ‘home’ currency. The ‘local’ currency is whatever currency is used at your destination (or where you’re booking from if online), while ‘home’ currency will be the currency of the card or bank account you’re using to pay.
While it’s tempting to pay in ‘home’ currency, don’t! The exchange rates used in these transactions are shocking, and you won’t avoid that international transaction fee as the purchase is still occurring overseas.
You will generally still get a better rate by paying in the local currency, even when factoring in international transaction fees (however double check the rates with your bank first).
We recently booked flights to Rome for approx. AUD$140 by paying in euro’s, if we were to pay with AUD directly through the airline (using DCC), they would have cost AUD$150.
That’s an almost 8% ‘fee’ to use DCC, which is much higher than most banks charge for international transactions (~3%). Some reports claim the markup can be as high as 18% more than using the local currency.
We hope this information in part one of our Travel Money Miniseries was useful to you in planning your next trip!
Head over to part two, where we will share our favourite bank accounts and cards for Australian travellers.
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