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Travelers Cheques

Travelers wuh?  Ok, maybe the time for travelers cheques has come and almost gone, but they still can come in handy.  The biggest name in travelers cheques is still American Express, Thomas Cook and Visa/Mastercard.  American Express travelers cheques are available at any American Express Travel Office, banks, your local AAA office or online directly from American Express.  Thomas Cook cheques are available online and some banks, while Visa/Mastercard cheques are available online, at some banks or your local Citicorp branch.

The Advantage

The big advantage with travelers cheques is that if they are lost or stolen, you can get them replaced quickly.  While it is a pain to keep track of each one as you spend them, it’s still safer than cash.

IAH TIP:  Make sure to leave a list of your travelers cheque numbers at home with someone you can reach.  That way if they’re lost or stolen, you can have the information handy to have them replaced.

Fees, Fees, Fees

Travelers cheques certainly aren’t free.  Usually you’ll pay a percentage fee based upon the dollar value of the cheques you purchase.  You may qualify for reduced or fee free travelers cheques if you’re an American Express card member or member of AAA Motor Clubs.

Exchange Rates

When you take cheques overseas that have are in US Dollars, you’ll be at the mercy of the place where you use them to give you a fair exchange rate.  And, you can almost bet it will not be “fair” or near the true exchange rate.  The good news is cheques are also available in popular foreign currencies as well, such as British Pounds or Euro.  While you want be at the mercy of the merchant cashing your cheque when it’s in the local currency,  you will pay the issuing companies exchange rate, which will probably be more than the real exchange rate, but less than what a merchant may charge you.

The Cheque, Please

Many places will charge you to cash your cheque, if you’re not using it for merchandise or a hotel stay. With American Express or Thomas Cook, you can go to one of their local offices and cash your cheques with no additional fees.  If they are in the local currency, you also won’t be jilted by an unfair exchange rate.  You’ll find Thomas Cook or American Express Travel offices in most major US and foreign cities.  Banks will also usually cash travelers cheques and may or may not charge a fee.

IAH TIP:  Remember foreign banks have much different hours than most US banks.  There are many different bank holidays when banks are closed and banks in some countries have very short daily business hours or may be closed in the middle of the day.

ATM

ATM cards are a godsend.  You don’t need travelers cheques.  You don’t need to carry cash.  But using your ATM card in a foreign country is a whole new ball game that you have to be prepared for.

Foreign ATMs 101

  1. Don’t expect an ATM on every corner in some foreign countries.
     Based upon where you’re traveling to, they can be a challenge to find.  A good thing to do is check for ATMs in your destination country/city before you leave home.  Plus, don’t forget they’ll need to be on your “network”.  You can find the network on the back of your ATM card.  Two of the most popular are “PLUS” or “CIRRUS”.
  2. Don’t expect an ATM to always work.
    Even if you find an ATM that’s on your network, don’t necessarily expect it to work.  In order for ATMs in foreign countries to give you cash, they need to connect to your network to make sure you have available funds.  We can tell you from experience, that it’s amazing how many ATMs have been “offline” or are having “network difficulties”.  If they can’t connect, you don’t get cash.
  3. Use ATMs in a bank if possible.
    ATM’s located in major banks outside of your home country are probably the safest ATMs to use.  ATMs on streets, in bodegas or small shops may charge large fees or worse yet, supposedly “not be able to connect to your network”, but capture your card information and PIN.
  4. Don’t overuse ATMs.
    Every time you use an ATM overseas, you could be charged a fee by not only your bank, but the bank’s ATM that you’re using.  In addition, you’re withdrawal will be converted at the “bank’s exchange rate”, which is almost always higher than the “base exchange rate”.  By taking small withdrawals out often, you’ll be racking up fees on each transaction.  It’s better take a bit more money out (as much as you feel comfortable carrying) than making multiple withdrawals over a day or two.
  5. Make sure your PIN will work overseas.
    Many foreign ATMs now use 6 digit vs 4 digit PINs.  It’s best to check with your financial institution to make sure your ATM card will work overseas.
  6. Call your bank.
    With card theft on the rise, many banks will automatically decline transactions that originate in foreign countries.  To make sure you don’t have any issues using your card when traveling out of the country, you should call a few days before you leave and let them know where you’ll be traveling to and how long you’ll be gone.  That way, you won’t have a rude surprise waiting for you when you need money.
  7. Don’t expect ATM’s to use English.
     In many countries who don’t use English as a primary language, you can’t expect ATM’s to serve up prompts in English.  While most airports will have prompts in various languages including English, as you move into suburban or remote areas, they may be harder to find.  It’s a good idea to look up basic ATM terms (i.e. withdrawal, checking, savings, deposit, etc) in the native language before you leave.

IAH TIP:  Also think about reducing your daily withdrawal limit while you’re away.  That way, if you lose your card while traveling, the chances of having your accounts drained of cash are reduced.  Also, if you’re traveling to higher risk areas like Rio, Sao Paulo, Naples, etc, and be held up and taken to an ATM to withdraw money, you’ll limit the amount of cash that will be stolen.  Don’t think it can’t happen.  It has to people we know.

If You Travel Frequently

We travel to other countries almost 6 times a year, sometimes to remote areas.  We opened an account at HSBC.  HSBC is a large worldwide bank, with locations in just about every country on earth (except for most of the US).  You can do all of your banking online and we’ve never had trouble using our ATM card in any country.  Plus, even if some of the most remotest areas of the world, there’s an HSBC ATM or bank location.  They also offer credit and debit cards as well.  Check them out at www.hsbc.com.

Traveling with Debit/Credit Cards

In addition to having local currency, you should also take at least 1 or 2 credit/debit cards.  That way if you have unexpected travel issues, you’ll have access to money to help get you back on your way.  You don’t need to take a whole raft of other cards.  Why risk them getting lost or stolen?  Take only the cards you absolutely need or intend to use.  Leave everything else at home safe and sound.  Plus, you won’t have that bulky wallet in your pocket just tempting someone to steal it or take it from you.

What “brand” of cards should I take?

Contrary to popular thought, all credit cards are not accepted everywhere.  You’re best best is to carry a Visa, Mastercard or American Express.  Discover, Diners and others are not always universally accepted in foreign countries.  We always carry our American Express card, simply because we’ve never had any issues using it and it seems to be accepted at many more places than any other type of card.  American Express also has excellent customer service and can usually arrange for a replacement card to be delivered in a matter of hours to you while you travel.

Debit vs Debit/Credit

It’s always better to carry a credit/debit card versus a “debit only” card.  Why?  Sometimes “debit only” cards may not work in foreign countries. With a credit card, you’ll have an easier time disputing charges and also zero liability protection, should your card be lost or stolen.  Also, be aware that in foreign countries, you PIN number may not work on your card.  If traveling in Europe, you should take special precaution.  European debit/credit cards are moving to a 6 digit PIN along with a security chip embedded in the card.  Some travelers have reported that they have had difficulty getting some merchants to accept their cards.  As long as your card has a VISA or MASTERCARD logo on the front, the merchant is required to accept your card.

Those pesky fees

Remember that there’s a cost to using your credit and debit cards outside of your home country.  You didn’t think the credit card companies were going to pass up this opportunity to make money did you?

You should check with your credit card company to see what “foreign transaction fees” they charge.  Foreign exchange fees can be up to 3% or more on your transaction.  And that’s in addition to the standard VISA or MasterCard fee of 1%.  Capital One currently does not charge any foreign transaction fees and absorbs the 1% MasterCard fee.  The foreign transaction fee is added to your purchase after it is converted into local currency.  That foreign exchange rate that the credit card company is usually higher than the rate you see on Yahoo or displayed on other rate services. These are fees that are automatically added to your purchase (on your monthly statement), in addition to the “banks” foreign exchange rate to convert the transaction into your local currency.  These fees can add up quickly.

You can see how quickly you can be paying alot more for your purchase.  Take this example on a €100 purchase.  The raw exchange rate may be $1.35, which would make the purchase $135.  But the credit card company marks that up to $1.45, which now adds another $10, to make it $145.  Now, add the 3% foreign currency transaction fee and you’re $135 purchase, just became almost $150.  Now assume with all of the hotel, food and souvenir purchases you make on your credit card and you can end up spending alot more than you planned on your vacation.  The worst thing is you don’t realize until you get home and get your first statement.

Take our advice

There are a few simple things you can do in less than 10 minutes, that will help you ensure that you’ll have access to your cards when you travel.

  1. No matter what cards you take,  call the issuing financial institutions/companies a couple of days prior to leaving.
    That will help prevent your transactions from being blocked, since many banks block foreign transactions to reduce theft. The last thing you want is to be abroad and find out your card has been declined.
  2. Look on the back of the cards you’re taking and make sure they have overseas contact numbers for the card issuer.
    If you don’t see one, call the company and get one.  Then, write them down on a piece of paper and make a copy.  We also put them in our address book in our phone.  Leave one copy behind with someone at home you can easily reach PLUS put one elsewhere in your luggage (not in your wallet.  What if it’s stolen?)  They’re just phone numbers, but at least you’ll have them available if your card(s) are lost or stolen.  The last thing you want is to be spending money calling directory assistance trying to get the number for your institution.
  3. Consider lowering your daily withdrawal or spending limit on your credit or debit card.
     It’s easy to do and can be done by simply calling your financial institution.  First, consider how much you’ll be spending on average each day on your cards.  You certainly don’t want to be caught “short handed”.  The advantage to doing this is if your card is lost or stolen, at least the risk of losing a lot of money is minimized.   Remember, with debit cards, it takes a lot longer to potentially get your money back.  Can you really afford to be without a large amount of money for weeks after you return?  When you get back, call your financial institution and have them raise your limit back to where you’d like.
  4. Keep a list of your credit card numbers.
     You should leave this with a person at home that you trust.  That way, if your cards are lost or stolen, you’ll have access to the numbers so you can quickly report them as lost or stolen.  The quicker you have the information, the less chance you’ll have of major loss.  We also keep these numbers on an encrypted file on our phone, as well on an encrypted website and file on the internet. That way we always have immediate access to our information.
  5. Keep an eye on your card at all times.
     Think twice before sending the waiter away with your card.  It only takes a minute or two to “clone” your card.  You may be a victim of theft and not even know it until you return home.  Worse yet, you may find out while on your trip when you try to check in to your next hotel and your card is declined.  In some foreign countries you’re in luck as they bring the credit card machine directly to your table, so you always have your card in your possession.

 

Foreign Currency

Foreign Currency.  Funny money, to some.  And yes, believe it or not, the whole world does not run on the US Dollar or the British pound.  It never ceases to amaze us at the number of people in foreign destinations who can’t believe that US dollars are accepted everywhere.  I think those people need to get out more.

An Expensive Proposition

Foreign currency exchange or FOREX as it’s known, is one the biggest scams around, if you aren’t careful.  There a lot of different options to get “destination” currency before you leave and after you land.  Usually, before you leave will be the most expensive alternative.  While it’s certainly a good idea to have at least some local currency with you when you get off the plane, you’re probably better off trying to get to an ATM as soon as you can.  Beware though, even if you plan on using mostly credit cards or your ATM card, you never know when you’ll be able to get to an active ATM that works with your ATM card.  Remember, many ATMs in foreign countries do not connect to international networks.  And, sometimes even if they do, they may not be “online” with your home country bank.  Foreign currency doesn’t need to cost you an arm and a leg, if you plan well.  When we travel, we usually use our ATM card and get local currency once we arrive.

Rates, Rates, Rates


The key to know if you’re paying a fair rate for foreign currency is to check the base exchange rate.  Don’t trust the exchange services themselves, check the true rate.  You can do that easily by going to Yahoo Finance or just about any other financial news site.  XE gives you live, up to the minute conversion rates. Once you know what the “real” rate is, then start looking at the different foreign currency sites, like American Express, Travelex, etc., to see what their exchange rates are.  The difference between the two, or the “spread” is part of the premium your paying for the right to buy the currency (think of that as just one piece of the exchange services profit).  The less the difference, the better off you are.

Fees, fees and more fees

The “spread” in the rate is just one part of the profit companies make on foreign currency.  Next will be the transaction fees.  Make sure that you pay little or no transaction fees on your foreign currency transaction.  Remember, they’re already making money on the spread.  Make sure to add these “transaction fees” in to your total cost.  Also, if you’re having your currency shipped to you, make sure you’re paying reasonable rates for shipping.

IAH TIP: Don’t forget to check foreign exchange rates at your local bank or local American Express travel office (in larger cities).  Sometimes, their rates can be competitive, plus you can pick up the currency yourself, avoiding overnight shipping fees.  Remember though, that these local offices probably only carry the major foreign currencies (British Pound, Euro, Canadian Dollars, etc.).   Other foreign currencies may need to be special ordered, so make sure you allow enough time.

Calculate and Compare

So, now that you have all the ammunition you need to, calculate exactly what that foreign currency is going to cost.

Amount of currency multiplied by “exchange services rate”, plus the fees (transaction and shipping) DIVIDED by Amount of currency

Now compare that result to the “base exchange rate” from the financial services websites (XE, Yahoo, etc.)  That’s what your real rate of exchange is.

IAH TIP: If you’re going to get foreign currency before you leave, it’s probably better to get a reasonable amount.  You certainly don’t want to spend $10 in fees to get $100 in currency at a high rate.  On the rare occasions we get currency before we leave we usually get between $500-$1000.  You should determine how much you feel comfortable carrying, what your willing to lose (pickpockets, stolen from hotel room safe, lost, etc) and what you reasonably need to have for at least the first part of your trip.

Extra, Extra, I Have Extra!

Whether you took too much foreign currency with you on your trip or just come home with some, think twice about exchanging in back to your home currency.  What you learned above works in reverse.  When you “sell” your foreign currency back, you’ll be given a lower rate than what the “real” exchange rate is.  Remember, you probably paid MORE than the exchange rate and now you’re going to get LESS than the exchange rate.  That’s a wide spread.  Plus again, you may be charged a fee in addition to the lower rate.  It’s get’s expensive, fast, even on small amounts.

IAH TIP: If we know we’ll eventually be headed back to a foreign destination eventually, we just keep the extra currency (assuming it’s a reasonable amount).  That way, when we go back, we don’t even worry about getting money before we leave and we’ll already have some in our pockets to get us through the first day or so of our trip without needing to exchange money or find an ATM.