Travel Money Cards vs Credit Cards

The days of carrying large wads of crumpled foreign bills in a wallet or purse while holidaying across the globe are mostly behind us. You can simply tap your bank card, or even your phone, to make purchases worldwide. There’s also temporary travel money cards available. However, deciding on the best way to transact and spend while travelling can be confusing.

Can I use my card abroad? What are the fees and exchange rates? Is it safe and convenient? It may be beneficial to use a combination of credit, debit and travel money cards on your next holiday. We’ll answer all these questions and more to determine the option that’s right for you.

Using a travel money card

Travel money cards, or travel cards, are charge cards that you can load with multiple foreign currencies prior to departure. You can use them to spend or withdraw cash overseas. Pre-loading these cards offers convenience but rates are fixed, meaning that you won’t be subject to fluctuations in the Australian dollar. If the dollar becomes stronger at home you’ll potentially miss out on value increases. Conversely, if it drops you’ll likely be better off.

Fees for travel money cards:

• Initial purchase and loading
• Currency conversion
• Top-ups or inactivity
• Balance refunds
• Replacement card

Some travel money cards take a percentage of the starting balance, approximately 1%, or charge a flat fee, usually up to $15. Many providers waive this cost. Depending on how much you’re considering loading it would be best to compare your options before deciding on a card.

Currency conversion fees range from 2-4%, while some cards offer fee-free services. If you need to pay with a currency that hasn’t been pre-loaded on your card you’ll likely incur a higher conversion cost at the time of purchase.

Spent a little too much on that lavish night out in Paris? You could be charged a fee, up to $15, to reload your card with the necessary currency needed to continue your trip. On the flip-side, if you aren’t spending enough and your card remains inactive for a month or more,you may be charged up to $4 for a dormant account.

Some cards charge a fee, between $10-$15, for returning the balance of your funds after travelling. You can sometimes avoid this cost by linking the card to a bank account or by continuing to use the card for purchases in Australia.

If you lose your card while travelling it may cost you up to $15 to replace it.

Using your credit and debit cards overseas

Credit cards and debit cards are some of the simplest ways to spend money abroad. You can use your existing cards so there’s no upfront fees. Transacting is the same overseas as it is in Australia, aside from the additional international fees that are applied.

Fees for credit cards:

• Currency conversion
• Cash advance

Foreign currency conversion costs can often be overlooked when you’re busy enjoying your holiday. These fees can range from 2-4% and are charged for every individual transaction. It’s important to note that many of the cards on the market currently offer fee-free conversions.

There are also fees associated with taking cash advances overseas. You’ll be stung with a currency conversion fee and interest rate charges - anywhere from 19-22%, sometimes higher.

Fees for debit cards:

• Currency conversion
• Overseas ATM withdrawal
• Overseas purchase

Although debit cards don’t incur the same costly cash advance interest fees as credit cards, you should be aware that the same currency conversion fees apply and there can be ATM withdrawal fees averaging $5 per transaction. Many financial institutions in Australia waive these overseas withdrawal fees so be sure to check with your bank regarding these costs.

Cash

There are still those that prefer their finances to be tangible. Carrying cash can help you to monitor your budget and prevent overspending. However, it may be a risky endeavour as pick-pockets are still prevalent in many countries and if you misplace your bankroll there is no way to recover lost funds. If you’re travelling to different countries on your journey you’ll have to visit currency exchange outlets to convert your money and be subject to potentially exorbitant fees and rates.

A simple solution to go cashless may be to use your banking app or a third-party budgeting tool to track and control your overseas spending. You can set daily spend limits, calculate costs, record expenditure and more.

What’s the best option for you?

There are a number of fee-free credit cards, debit cards and travel money cards available. Each card can incur different charges so it’s worthwhile comparing your options to decide which suits you best for your trip.

Some cards may not allow you to load a particular currency, while others will have costlier cross-currency conversion fees. For example, some credit and debit cards that offer 0% fees for overseas purchases may charge a higher exchange rate. This isn’t necessarily a negative as this premium rate is still generally better than those offered by most travel money cards.

When loading travel money cards with foreign currencies you should attempt to carry out these transactions at the most opportune time when exchange rates are most lucrative. Be sure to check real-time rates with your card provider as these are often different to the mid-market rates you may find online. Bank and foreign exchange service’s rate margins are typically higher, particularly among travel money card providers.

Most credit, debit and travel money cards can be used worldwide as global merchants generally accept Visa, Mastercard and American Express networks. You should check the specific country you’re visiting to ensure that the card you choose will be recognised and accepted.

Credit and debit card’s funds are often protected against fraudulent transactions and you’ll have access to speedy recourse and recovery options. Travel money cards may not offer the same level of dispute resolution so be sure to check out the terms and conditions of individual cards.

Many international accommodation providers and tour operators require a pre-authorisation for bookings and this may not be possible when using debit or travel money cards.

There are a range of credit cards that offer advantageous extras such as rewards programs for spending, travel insurance, airport lounge access and complimentary hotel concierge services.

Compare credit cards