Note: There is an update to this post here.
Foreign transaction fees. ATM withdrawal charges. Credit card commissions. They all add up to chunks of your travel budget mysteriously disappearing from your bank account. Two years ago, an innocent call to my bank to alert them to my travel plans led to the discovery that my bank charged a SIX DOLLAR foreign ATM withdrawal fee, plus whatever fees the ATM charged, plus a 3% foreign transaction fee. I was horrified as I pictured fruity Thai cocktails literally disappearing from my hands on the beach. I vowed to get my act together and find a better way to access and manage my money abroad. Here’s how I do it now:
Credit cards are not widely accepted on the backpacker trail, but they still come in handy for flights, car rentals and other large purchases, especially if you are building frequent flyer miles or other rewards. However, many people are shocked to learn that most credit cards charge a two or three percent fee for foreign transactions, plus an extra percent tacked on from Visa or Mastercard. It might not seem like a lot, but if you have $15,000 saved up for your trip around the world, you can say goodbye to $450 of that! That’s quite a few Thai massages on Koh San Road.
There is one exception to the rule: Capital One. They charge no fees of their own, and they even refund Visa or Mastercard’s 1% charge. I opened a card two years ago with the purpose of building my credit and though I rarely use it, it works as advertised. I recently upgraded to Capital One’s Venture One card, which Creditcards.com named the Top Pick for Travel Rewards Cards and Money Magazine named “Best Rewards Card if you aim to rack up airline miles.” I received a 10,000 mile sign up bonus plus two miles for every dollar I spend, which can be redeemed on any airline, any time. Hopefully this will lessen the physical pain I feel every time I buy a flight and see my bank balance drop!
With traveler’s checks becoming obsolete and credit cards rarely accepted for budget travelers, debit cards are best way for traveler’s to gain access to their money abroad. After my incident with my first bank, I quickly changed to TD Bank, which refunded ATM fees worldwide. I was a loyal customer and their biggest fan for two years until they changed their policies this February. I was devastated as I love their banking, but its a good reminder to check in and make sure your bank’s policies haven’t changed before a major holiday.
For my primary checking account I now use Schwab, famed among travelers for its worldwide ATM fee refunds and no foreign transaction fees! You do have to open a brokerage account at the same time but its minimal hassle and you don’t have to use this. I may have a new banking love affair! It is the perfect travel bank account.
Once you’ve got your bills out of the money machine, there’s still work to do. Personally I am a passionate budgeter; I get an odd thrill out of tracking my every transaction. Cash slips so quickly through your fingers, I think I just like to look back and remember what I spent it on once its gone. I hadn’t yet caught the bug on my first trip to Asia and now I wish I had as it would be helpful for planning purposes to look back on.
Traveling with another person can complicate things. It can be nit-picky and exhausting to split every bill and purchase down the middle, but its also easy to feel that one person is chipping in more than the other if you don’t. During our two week trip to Honduras this summer Mark and I used a simple system. We brought along a large envelope and each put in the same amount of cash. Every time it ran low we hit the ATM and each put in the same amount again. All joint meals, activities and purchases were paid for from the envelope and recorded on the front for my records. Any solo purchases (such as souvenirs or separate activities) were to be paid for out of our own pockets, but I we didn’t end up doing anything significant on our own. I highly recommend this system to any couples or friends wondering how to manage their cash on a joint trip!
All of this can be exhausting just to read, and I’m sure some readers are wondering if it all is even worth the hassle. I put in hours of research before opening each of my accounts, and I would do it again twice over if it would keep my money flowing freely from my bank account into the hands of the person handing me a banana pancake on the street rather that into the coffers of a credit card company. You worked hard for that money, keep it for yourself! So go forth and research. Find the right system for you managing your money abroad. Land the best travel rewards card. Enroll in online banking, check it often. Call your banks and alert them to travel. Don’t buy one of those money belts. And never change currency at the airport.
Do you have any tips for managing money traveling that I missed?