The Courier-Mail, 4 December 2006
By Erica Thompson
AUSTRALIAN travellers are becoming more savvy about fees and charges associated with overseas transactions.
Research from Fujitsu Australia shows that while credit cards have grown in popularity, cash is still king for many holidaymakers. "The reason that people still take quite a lot of cash is because it's the most inexpensive form," says Fujitsu's managing consulting director Martin North. "If you take travellers cheques or you use credit cards, you have to pay fees and charges. "Our research says people are now becoming quite aware of the amount of currency conversion charges and other charges on credit cards.
There used to be a flat fee, but now they tend to be a percentage of the amount and you can never be absolutely sure how much is going to get debited."
While banks rake in millions of dollars this way every year, Cannex financial analyst Garfield Wright says consumers may not necessarily be worse off. "Because Visa and Mastercard transact in such large volumes, they can negotiate much better exchange rates and sometimes you're better off -- even after being charged a conversion fee -- than if you tried to convert cash," he says.
While one player, Wizard home loans, already offers a credit card with no overseas purchase fees, getting the most out of your money will depend on where you travel. "Credit and debit cards have the most flexibility, but if you're going to a place where they don't have the facilities to process credit cards then this is going to be irrelevant," Mr Wright says. "In other countries you can go and convert Australian dollars into the local currency and end up with a wheelbarrow of notes, which can be a security risk."
To avoid being caught out, Mr North says consumers should always research their destination and find out what facilities are available.
Companies like Travelex offer another option for budget-conscious travellers in the form of pre-paid cards, which work like an ATM debit card but are not linked to your bank account. The cards can be loaded with local currency to avoid conversion fees and ATM withdrawals cost $3.75 -- which is less than most banks. "One advantage is if you did lose that card and someone got access to it, they won't have access to your whole credit limit -- only the amount you've put on that card," says Mr Wright. "But because it's pre-paid, you have to pay some sort of fee to charge it up each time."
Mr North says debit cards make up only 5 per cent of overall transactions compared with travellers cheques, which still account for about a third of all money spent. "Travellers cheques are more widely used than credit cards," he says. "They can be replaced if you lose them, whereas if you lose cash, it's gone and a lot of people have security concerns about taking their credit card overseas." However, the experts agree smart travellers should never rely on just one method to access their money. "There is no single perfect mechanism," Mr North says. "You have to think about having the right mix of different types of delivery."
Those planning a permanent move abroad should also consider getting advice about how and when to change their Australian dollars into a new currency. Foreign exchange risk management company HiFX says up to $200 million per year is potentially lost through poor foreign exchange rates and the associated bank charges.
"Effectively, there is a right time and a wrong time to transact a currency exchange as the currency market is volatile," says director Spencer Wilcox. He says HiFX offers ways for Australians living abroad or travelling overseas for long periods to more cost-effectively manage regular payments, such as mortgage payments.
"It means you no longer have to pay expensive bank charges when making regular payments from overseas," he says. Have money, will travel * Always have a mix of money options -- typically a credit or debit card, traveller's cheques and cash
- Always let your bank know you are going overseas or they may cancel your card for security reasons if they see foreign transactions on your account
- Don't exchange money at the airport or a Bureau de Change -- banks tend to have better exchange rates
- Avoid ATM fees by using your bank's overseas partner or subsidiary
- Limit your withdrawals by taking out enough cash to keep you going
- Never let your credit card out of your sight and watch out for illegal skimming machines attached to ATMs