Money Travel Guide
From Wikitravel
This article is a travel topic.
Virtually all travellers will need to spend money on their trips. There are a number of ways to do this. You are always trading off expense, risk and convenience.
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Automatic teller machines
Automatic teller machines (ATMs) are, overall, probably the most convenient way of obtaining cash worldwide. All you need do is memorize your Personal Identification Number (PIN) code and carry around your ATM card. The biggest disadvantage of using ATM's is the fees involved. In addition to the fees that your bank charges you for the withdrawal, they will probably charge you an additional "Network Fee" for using the Cirrus, or Plus networks, and the bank that owns the ATM often charges "convenience fees" for using their ATM. The "White Label" ATM's (ATM's not associated with a bank, usually located in convenience stores and hotels) often charge even higher convenience fees. These fees are almost always fixed amounts, so it is usually better to do fewer withdrawals that are large amounts rather than a number of small withdrawals. Your bank also usually charges a higher currency exchange than you could get elsewhere. If you withdraw small amounts it is not uncommon to pay as much as 5-10% in fees.
There are two major international ATM networks, namely Cirrus (affiliated with MasterCard) and Plus (affiliated with Visa). Nearly all international-enabled ATMs support both and nearly all bank cards can use both, although you may want to confirm with your bank — in particular, you may have to get international ATM support specifically activated for your bank account.
There are some catches to beware of:
- PIN code lengths vary from country to country. 4-digit PINs are more or less universal, but longer codes may be rejected. Ask your bank to issue you a 4-digit PIN for travel.
- Many Third World countries either have no ATMs, very limited ATMs or are not connected to the international networks. At time of writing, this includes eg. Cambodia, Laos and Myanmar in South-East Asia, as well as much of Africa.
- Some countries have extensive national ATM networks but very limited international support. The most notable example is Japan, where you will often be limited to Citibank and post office ATMs (which are fortunately quite common).
- Many ATMs also support credit card advances in addition to cash withdrawals, but this service can be considerably more expensive as you will usually also have to pay interest.
For longer trips or stays in any country, it's worth considering opening a local bank account and obtaining a local ATM card. Procedures vary widely though, you will usually need at least a local mailing address and many countries will also insist on a valid residence permit.
Reducing risk
Memorise Personal Identification Numbers (PINs) for credit cards and ATM Cards, never carry written PINs in the same place as your cards. Writing your PINs down could invalidate your insurance or the bank's cover if your written PINs and cards are stolen. Some alternatives for storing PINs, from most to least safe:
- learn them by heart and destroy any written record of your PINs; or
- record your PIN on your mobile/cell phone under a non-obvious name (ie not "Bank", "PIN" or "ATM") and disguise the numbers in part (eg change the first or last few digits).
- list them on a web page accessible only to you (eg. your email account or a hidden, password-protected page under your home page)
Credit cards
The acceptance of credit cards varies by country. Rarely can you buy everything by credit card, but in most of the developed world you will be able to buy most of your major purchases (hotels, air travel, car rentals, expensive purchases and expensive restaurant meals) on credit card. In less developed locations your credit card may be totally useless. In all cases there will be some expenses that cannot go on a credit card so you cannot rely on a credit card exclusively.
The best-accepted cards worldwide are VISA and MasterCard. American Express comes in a good third, but acceptance for any other card (Diners' Club, Discover, JCB, etc) is spotty at best.
The biggest advantage of a credit card is convenience. You do not need to know exactly how much money to bring with you. You also don't need to deal with the inconvenience of money exchange.
The next biggest advantage is the low risk. In most countries you are not responsible for any expenses made on your credit card that occur after you report it lost or stolen. Credit card companies will also protect you if you are charged more than you agreed to pay, or if you pay for something and never receive it. However, be careful where you use your card in some countries, as your card can be cloned (duplicated) without your knowledge and then used for fraud without being physically stolen.
Many credit cards also include some forms of insurance protection for all expenses made with the card. This can include cancellation insurance for flights (usually only in the case of serious sickness), theft or loss insurance for goods, Collision insurance for rental cars and even travel health insurance when you are travelling. You should look over you credit cards insurance carefully before you start to travel to see what it provides. It may even be worth getting a travel credit card, if you don't have one, just for these coverages. Also note that you can often tie in a credit card to a frequent flyer program, so you get more miles and free trips faster.
The biggest disadvantage is cost. At one time credit card companies used to apply the exchange rate they got to your exchanges. However, most credit card companies now incorporate a exchange fee into the exchange rate that they offer. This is generally in the 2-3% range. You can call your credit card company and ask what the fee is as well as asking what the current exchange rate is for the currency that you would like to find out about. One thing that should be noted is that the exchange rate is applied at the date the expense was posted to the account, not the date the charge was made. Therefore if you are dealing with a fluctuating currency it is impossible to know exactly what exchange rate will be applied for an expense until a few days after you make the expense. Hotels in some countries (notably Ireland) will perform the currency exchange at the time of the transaction. This removes the uncertainty about what you will pay, but the downside is that the exchange rate fee (about 2-3%) that is incorporated into the transaction may well mean that this is not in your favor.
If you have multiple credit cards it is often a good idea to only carry around the one you will usually be using and keep others in a safe location. Then if your main one gets lost or stolen you will not be left without a credit card, or have to go through the hassle of replacing a credit card in a foreign country.
Banks in some countries will stop your card if they notice unusual activity such as sudden transactions in a foreign country. So, it is best to enquire with the bank beforehand and get a note added to your account so it does not get passed through their fraud section.
Note that withdrawing cash from ATMs using a credit card will often count as a cash advance with your bank, causing you to pay higher interest. There's no point saving 2%, only to pay 19.9% interest on the money you withdraw!
Travellers' cheques
Travellers' cheques were at one time the primary method of taking money with you when you travelled. These days they are not as common, but they are still widely available and relatively widely accepted. Generally these are not accepted as widely as credit cards and they are usually not as convenient to use. In general, only the largest stores and hotels will accept cheques for payment as is.
Travellers' cheques are issued in a specific currency. The American Dollar is the most common currency, but many different currencies are available. American Express credit card holders can get emergency cash in the form of its travellers' cheques at foreign American Express offices, and designated affiliates (often a travel agency or bank). If the location is not a bank, you will have to go to one or a foreign money exchange to cash the cheques. Be sure to bring a blank cheque from your checking account back home or at least know the account number. There is a one percent fee for issuing the travellers' cheques, and the total sum is NOT a cash advance on your American Express card. Also, there's no requirement that you're destitute, as the service is available for whatever reason.
The main advantage of travellers' cheques is complete protection against loss or theft. Once you report them as missing, the issuing company will replace them. However, you must also keep a record of your unused cheque numbers, and the replacement process can take time and be inconvenient.
With travellers' cheques, you will typically have to pay fees both to buy them and to cash or use them. This may be a straight fee, or it may be hidden in the exchange rate if you are buying them in a foreign currency. If you are buying them in a foreign currency, it may be worth it to find out if you can buy them with cash in that foreign currency.
When cashing your checks, pay close attention to commissions and fees: if the fee is per cheque, cashing many small checks can be very uneconomic. Be suspicious of claims of "no fees", as this usually means that the exchange rate is terrible.
Cash
Cash is the most versatile method there is. Virtually everywhere takes cash. The one exception is that some car rentals may not rent you a car or ask for a very large deposit if you don't have a credit card.
In some countries you may be able to get by entirely with American money or another currency. However, this will often be at a huge expense as the exchange rate offered by merchants and hotels is usually not very good. Merchants in border communities may be more accepting of neighboring currencies. For example, northern border areas in the United States may accept Canadian coins on par with corresponding U.S. coins, but not Canadian dollars, and in the U.S. South a Canadian quarter is worthless. Be sure to bring only paper notes in good condition and only the most recent redesign (unless it's really new). Banks cannot easily or cheaply exchange worn-out foreign currency for replacement as they can with their country's own currency. Worn paper currency may be devalued if it is accepted at all. Even if in good condition, previous designs of your currency may not be accepted due to counterfeiting concerns.
This biggest disadvantage to cash is the risk. If you lose it you can't get it back, and if someone finds out you have a large wad of cash you become a potential mark. Some defenses are discussed in the pickpockets article, but there is no complete defense — carrying cash always involves a risk.
When using local money, familiarize yourself with the basic note designs and their security features (watermarks, holograms etc), and watch out for counterfeits and obsolete currencies. Banks and money changers (operating out of an office, not flashing wads of cash from a coat pocket) are nearly always safe, but taxi drivers, petty traders and such may be tempted to palm off useless bills. When in doubt, reject unfamiliar bills, and be particularly suspicious of large notes.
Where to exchange
Money exchange is a very complicated business. All money exchanges work on the basis of selling a foreign currency at one rate and buying at another, with the difference being the spread. Newspapers usually will quote the average of the two as the daily rate. Where there is more competition, the rates are likely to be better.
Currency exchanges are not all created equal. Where the best rates are available varies tremendously from one country to another and from one currency to another. In some cases it may be better to exchange your money before you leave, in others it may be better to do it in your destination. Rarely is the most convenient location (such as at airports, or major hotels) the best rate available. In some cases it can be significantly higher. Regardless, make sure you know the current exchange rate before you leave home. [1]
As you lose some money on every currency exchange, you should not exchange more than you need. If you have a large chunk of cash left over at the end of your trip and you were planning on paying for your hotel or car rental with credit card, pay for some of it with cash to get rid of the currency.
If you are exchanging very large amounts of money it may be possible to do a certified cheque currency exchange. This is sometimes offered at a cheaper rate at currency exchange. You bring in a certified cheque to a currency exchange and they give you a certified cheque made out to you in the new currency.
Most major currencies are subject to counterfeiting these days. Study the bills of the currency of the foreign country to become familiar with how it is supposed to look and feel. Almost all currencies employ anti-counterfeiting technologies, including colour shifting ink, watermarks, special threads, iridescent inks, raised printing, holograms and other features. Become familiar with them so that you can quickly check them when you get a new bill whether it is as change or from a money exchange. If you are unsure, don't be afraid to say you would rather get a different bill, or just say you would rather get 2 smaller bills for change (As an example if you get a ten in change that you don't like the look of, ask for two fives instead). If you end up with a counterfeit you won't get compensated, and you may end up having to explain it to the police.
Hard currency
In many poorer countries with inflationary, unstable, and/or inconvertible currencies, a foreign hard currency may prove more useful. Although its value fluctuates, the "gold standard" for currencies remains the U.S. dollar. In a pinch, it will be accepted as payment (though not necessarily at a great exchange rate) almost anywhere on the planet. In fact several countries in the Caribbean and the Americas use it is their de facto – or even official – currency. The euro is increasingly well accepted, at least in regions with many European visitors, and small countries with economically powerful neighbors may also accept regional hard currencies (e.g. the Thai baht in Laos and Cambodia, the Australian dollar in much of Oceania).
It is wise to carry an emergency stash of hard currency separated from all your other belongings and valuables.
Black market exchange
In some countries the official exchange rate is fixed at a completely unreasonable or unrealistic rate, eg. Zimbabwe's 55 Zim dollars to 1 US dollar. In these countries the black market will provide much more realistic evaluation of the currency's worth, in Zimbabwe's case around 1500:1 (as of 2005), and is practically unavoidable.
That said, the risks of black market exchange are legion. First and foremost, black market exchange is illegal and both buyer and seller may face severe sanctions if caught: the seller may even be (or work with, or tip off) a police officer out to trap tourists. Second, the risk of fraud is high: you may get obsolete banknotes, fake banknotes, less than the promised amount or nothing at all. Consider carefully whether you need to exchange in the first place, as businesses in countries with basketcase currencies will often be more than happy to accept hard currency directly instead (although this, too, will often be illegal), and you may get all the local currency you need back as change.
The key guideline to successful black market transactions is to receive the money before you hand yours over. Count the bills, inspect the bills carefully, compare them to any you already have, and only then surrender your own money to the vendor. Do not allow them to take back the money they gave you, as this is where various sleight-of-hand tricks can be pulled to replace the legitimate bundle with something entirely different.
In countries where foreign exchange rates are reasonable, it is best to avoid the black market entirely: you risk losing all your money for gain of a few percent at most.
An exception may apply in countries such as Nepal and India where doing a legal exchange at a bank can involve wasting an hour or more but most hotels will change money for you instantly and fairly safely. The rate may not be much better, but the convenience is.
