Managing your money on a long term holiday

Exchange Money Conversion to Foreign Currency

Managing your money overseas usually while on a short holiday isn’t too hard. It’s often as simple as estimating how much money you are going to need, withdrawing it from your account and converting it. And of course, making sure you have a card that will work overseas in case you go on a crazy shopping spree or run into problems and need to access additional funds.

But how do you manage your money if you are travelling overseas for an extended period of time. It’s certainly not practical, nor a good idea, to set out from home with a full years worth of cash on you. You could carry some travellers cheques and occasionally wire transfer money, but realistically you are going to be accessing ATMs frequently.

If you are not careful, fees from overseas ATM withdrawals can really add up. You will most likely be taking money out of your account 2 times per week. ATM fees vary around the world but $5 per transaction is a good estimate. If you are travelling for a year, that’s over $500 in ATM fees. That’s a lot of money that could go a long way in a cheap country like Vietnam or Turkey.

You need to come up with a plan for regularly accessing your money overseas and how to minimize the fees you will pay for overseas withdrawals.

Shop around

Not all cards and financial institutions are created equal when it comes to overseas withdrawal fees.

  • Most banks and credit unions charge fees for accessing your money overseas but the fees vary widely.
  • Some institutions offer no fees for overseas transactions on specific cards.
  • If you can’t find a zero-overseas transaction fee card that suits you, look for a major bank that has partnership agreements with international banks. If you use ATMs belonging to these international partners you will receive free ATM withdrawals.
  • Many international banks offer international bank accounts that can have your money in several currencies. This can be a good idea if you plan to spend a large period of time in one country as you’ll be able to access money in that country without paying currency conversion fees and international ATM fees. Some global institutions also offer the option of opening an account in an overseas country. Your accounts are linked so that you can easily transfer money between countries without attracting fees.

Know when to use your credit card

Many overseas credit card purchases are fee free. Of course it pays to check this first! Try to pay as much as you can on credit.

Of course you don’t want to come home to a huge credit card bill. Make sure you have a plan for paying off that credit card frequently. Alternatively look at applying for a loan that you can use to make payments on your credit card. Interest fees associated with loans are much smaller than credit card interest fees. These days it’s easy to find loans online so you can quickly work out if this is the right option for you.

Plan ahead

  • Do you know how long it takes for money to clear from cheques, to wire money or transfers between accounts? If you need to make loan repayments while you are away, do you have a process in place for paying these on time? You may want to schedule regular payments with your bank. It’s easy to loose track of what day it is when you are sitting on a beach in Thailand. Nothing detracts from a beautiful sunset more than realizing you’ve defaulted on your loan or overdrawn your account because you forgot to transfer funds.
  • What happens if you loose your credit card while overseas? Do you have a backup credit card? It’s actually a good idea to have two or more cards from different institutions. You should definitely have several different types of cards. You may arrive in a small town and realize for some inexplicable reason the only ATM in town does not accept your card. Maybe it doesn’t like visa, maybe it’s the bank that is the problem. Or maybe just maybe it’s some random reason you will never work out, espically since that same card worked in the same ATM yesterday. Regardless of the reason, it’s probably going to happen so carry several cards just in case!
  • If you need to order a new card or reset your PIN, make sure you can do this from overseas and know whether you can get it sent to an overseas address. It’s worth knowing this before you find yourself in Mexico with no access to your money and a two week wait for a replacement PIN or card. !
  • Always have a small amount of emergency money hidden away. Make sure it’s in a currency that is easily exchangeable world-wide – US dollars, euros or pounds are perfect. You’ll never know when you might need it. Wallet stolen, cards not working, waiting on funds to clear. Or as we’ve had happen, a 48 hour blackout in a small town preventing all the ATMs from working just as we were down to our last $5.
  • Before you leave, arrange for a family member or close friend to receive your mail, particularly mail from your banking institution. You don’t want to miss receiving important information on changes to your account fees and if you need to order a new card you’ll want to make sure its being posted to someone you trust.

Don’t change money at airports

Exchange rates at airports are almost always worse than exchange rates you will get anywhere else. Plan in advance to avoid changing money at the airport.

You will almost always get a better exchange rate in the country that the currency belongs to than overseas. We usually try to change just enough money to get us from the airport into town and cover the first 24 hours, then we shop around for the best exchange rate.

It’s worth knowing that often the best exchange rates are through your credit card and ATM cards.

Withdraw the maximum

You want to avoid going to an ATM too often. The easiest way to do this is to withdraw the maximum amount that you can each time.

Keep an eye on exchange rates

Exchange rates fluctuate. When they are in your favour withdraw more money than you need. When they aren’t, adjust your mental conversions in your head. There’s no point thinking that you are getting 30baht to the dollar when in reality it’s now dropped to 20 baht to the dollar. You’ll quickly blow your budget. If you are heading to Australia next month and the dollar drops, exchange some money now in the hope that it goes back up!

Accept that fees are a cost of long-term travel

Accessing your money overseas almost always attracts some kind of fee. Even if your credit card doesn’t charge ATM fees, the local bank that you are using to withdraw money from might throw in their own fees, even if it’s just an currency conversion fee. Having your money with a bank that has international partners doesn’t mean you can always find their partner ATMs. Believe me I’ve tried! You might arrive in a small town to find that none of the partner banks have branches there. Or you might find yourself in a city the size of Bangkok or Tokyo, possibly needing money in a hurry, and realize searching for that one ATM that doesn’t attract fees is like searching for a needle in a haystack.

You will pay fees for accessing your money overseas. Just accept this. By all means try to minimize the fees but accept that it is part of the price of your amazing adventure.

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