Holidaymakers should consider five things when selecting travel money options in order to get the best deal.
These include looking for the cheapest exchange rates and fees, prioritising their budget, considering the local currency and selecting more than one option says Canstar’s group executive financial services Steve Mickenbecker.
Travel money options from debit cards, cash, credit cards have an exchange rate that changes each day. The only exception is a pre-paid travel card.
The Australian Consumer Competition Commission (ACCC) latest inquiry into foreign currency conversion services reveals that the big four banks are consistently more expensive than other suppliers for foreign cash.
ACCC chair Rod Sims says: “Shopping around could save Australian consumers hundreds of millions of dollars each year.”
For most travellers, the best options would be to have three options – a mix of cash, debit card, credit card or prepaid travel card.
Mickenbecker says: “Take multiple cards just in case one of them is compromised. If you’re travelling and the bank stops the card, that’s terrifying. Take the three, a regular credit card, debit card and cash.”
When selecting a card for travel purposes, Mickenbecker recommends choosing a card that has the most favourable exchange rate on the day of looking.
Prepaid travel money cards offer more certainty about the exchange rate as it is locked in when the card is loaded with funds and are a tool for travellers wanting to stick to a budget.
Mickenbecker says: “Consumers can transfer their money in early into the currency so they can lock it in and budget their spending money and don’t want to risk a fall in currency value.”
Consumers need to check that the currency they are wanting to use is accepted on their prepaid travel card to avoid doubling the fees.
The ACCC inquiry says: “If a travel cardholder with one of the big four banks withdrew the equivalent of A$100 in pounds from an overseas ATM in May 2019, and pounds were not pre-loaded onto the travel card, they would have been charged an ATM fee of around £2 (about A$3.70) plus a 5.25 per cent currency conversion fee.”
The ACCC recommends using debit or credit cards when travelling and international online shopping as they are usually the cheapest option particularly if they do not have foreign transaction fees.
For example, if a customer of the big four banks uses a debit or credit card without international transaction fees instead of a travel money card, they could save up to A$13 on a US$200 purchase.
When using a regular debit card, big four bank customers could save up to A$5 on a US$200 purchase instead of using a travel money card.
Mickenbecker warns that the exchange rate is not locked in when using a debit or credit card and may end up being more expensive.
“When you do a transaction, you don’t know what the exchange rate will be and it’s potentially not going to be processed on the same day, so you don’t know what you’re going to get.”
In addition, the ACCC discourages Australians from getting foreign cash at airport locations as it is far more expensive than anywhere else.
The report says: “When buying US$200 in February 2019, consumers could have saved A$40 by purchasing from the cheapest supplier at a non-airport location, compared with the most expensive supplier at the airport.”
Holidaymakers often overlook the several hundred dollar hold that hotels put on a room in case of damages. Mickenbecker advises against paying that on a debit card in order to free up budgeted cash for the holiday.
“You shouldn’t put that on a debit card or prepaid travel card because it can take up to a week for the hold to be removed.”
Canstar recommends the following cards based on its ratings methodology that compares both cost and features across both credit cards and debit cards, with a particular focus on the features and fees related to overseas travel.
Occasional traveller credit cards
Canstar recently rated the following credit cards five stars for consumers looking for a low-cost credit card to take on an overseas trip, perhaps as a once-off or once a year.
Latitude 28° Global Platinum Mastercard has no currency conversion fees, transaction fees, ATM fees or annual fees. The cash advance fee is 3 per cent or $4, whichever is greater.
Bankwest Breeze Platinum Mastercard has no foreign transaction fees or currency conversion fees, offers free travel insurance, no annual fee in the first year (reverting to $99). The overseas cash advance fee is 2 per cent or $4, whichever is greater. The purchase rate is 9.9 per cent and the cash advance rate is 21.99 per cent.
Commonwealth Bank Low Fee Gold Mastercard has no international transaction fees, included international travel insurance, cash advance of $3 or 3 per cent of the transaction amount, whichever is greater. The purchase rate is 19.74 per cent and $0 annual fee in the first year, reverting to $89.
Regular Traveller credit cards
Canstar rated the below cards five stars for consumers looking for a credit card to use while travelling on a regular basis or a few times a year.
ANZ Rewards Travel Adventures Visa has no foreign currency conversion fees, no international transaction fee on purchases. Complimentary domestic return flight each year and two lounge passes when $500 on eligible purchases are made in the first 3 months. Complimentary international travel and medical insurance. The card has an annual fee of $225 and cash advance rate of 20.24 per cent.
Bankwest More Platinum Mastercard has no foreign transaction fees on online and overseas purchases. The cash advance fee is 2 per cent or $4, whichever is greater. The annual fee is $270 and the purchase rate is 19.99 per cent. The card comes with 10 airport lounge access passes each year and complimentary travel insurance.
Macquarie Black Card is a Visa card with no foreign currency conversion fees and complimentary travel insurance. The card offers a concierge service and discounts on limousine travel. The purchase rate and cash advance rate are 20.70 per cent and the annual fee is $99 for the first year then reverts to $249. The cash advance fee is $5 or 3 per cent of the transaction value.
Canstar rated these five stars for consumers wanting to spend their own money on a debit card overseas both via point of sale and ATM.
ING Everyday is a Visa card with no monthly fees. The ATM withdrawal fees in Australia and overseas and international transaction fees are rebated if $1000 is deposited per month and five transactions are made. It has a $0 opening amount and a minimum balance of $0.
Citi Global Currency Account holds up to 10 different currencies such as Canadian Dollar, Euro, Hong Kong Dollar, Japanese Yen and Pound Sterling. This avoids international transaction fees and ATM fees. The account allows for currency exchange instantly and the ability to send and receive foreign currency. It has no monthly fees or a minimum opening deposit.
NAB Platinum Visa Classic Banking has no foreign transaction fees on international purchases and complimentary travel insurance. The card has a $10 monthly card fee which can be earnt back when contactless purchases totalling $1000 are made each month. An added feature of this account is complimentary travel insurance and a concierge services for travel and lifestyle.
Prepaid travel cards
Prepaid travel cards differ from debit cards as consumers are able to load the card with funds in different currencies and can use it to make purchases online, in stores and to withdraw money at ATMs.
It is important to note that if there are insufficient funds in the wallet for a particular currency, or if the foreign currency is not supported, it will draw on the next currency in the wallet and exchange fees will be charged at the applicable exchange rate.
Travelex Money Card is a prepaid Mastercard that can be loaded with up to 10 currencies and has no international ATM fees. The currency conversion fee is 5.95 per cent and the initial load fee is 1.1 per cent or $15, whichever is greater. The BPAY reload fee is 1 per cent of the amount and the minimum top up is $100 and maximum is $100,000. The foreign exchange fees are charged at a rate determined by Travelex. This card’s purpose is purely for international travel as there is a 2.95 per cent fee for purchases and ATM usage in Australia.
Westpac Travel Money Card and its subsidiaries Bank of Melbourne, BankSA and St George have prepaid Visas that can be loaded with funds from 5 out of 11 different currencies at any time. Along with no initial load fee or reload fees, there are no ATM withdrawal fees at Westpac Group ATMs and over 50,000 ATMs overseas. The minimum initial amount is $100, followed by a minimum of $50 thereafter. The maximum available balance is $50,000 and the currency conversion fee is 3 per cent.
At the time of publishing, the big four banks had the worst foreign exchange conversion rate when converting $100 AUD.
The wholesale rate released by the Reserve Bank of Australia is currently 0.6714 cents to $1 USD.
Travelex came out on top at $65.20. The fees range from 0.77 per cent to 1 per cent for Mastercard or Visa debit/credit.
Travel Money Oz’s rate is $65.17 plus a 1 per cent surcharge when paid on card.
ANZ is $65.05 plus a 1 per cent of the transaction amount with a minimum of $8 per order.
NAB has partnered with Travelex for its foreign exchange and has the same fees but comes in at $64.18
CBA offered 63.56 with fees of 1 per cent of the transaction amount or a minimum of $10 per currency.
Westpac offered $63.49 with a $4 fee per order plus a card surcharge of 1 per cent.