If you are planning to travel overseas you will need to decide not only how much money you are going to take with you, but in what forms you will take your currency. Often it is best to take a credit card and some travelers cheques. Visa and MasterCard are the most widely accepted cards around the world.

The first point to realize is no matter which option you choose you will have to pay fees and commission for foreign currency transactions. For traveller’s cheques the fee is usually charged at 1% of each cheque purchased before you travel. Keep in mind if you buy many traveller’s cheques and do not cash them all while overseas, you can do so back home, but you do not get the commission back. Also the ‘selling’ rate for traveller’s cheques is usually less than the ‘buying rate’. Some credit cards may offer commission-free traveller’s cheques. If you cash your traveller’s cheques in a Bureau de Change at your overseas destination you may be charged an additional fee.

The best way to minimise fees is to buy large denominations of traveller’s cheques. This is particularly the case if you are travelling in countries with different currencies, as each additional currency conversion will cost you. You should pre-purchase at least $100 in cash in the currency of your destination prior to departure to cover cab fares and other small expenses upon arrival.

Traveller’s cheques used to be the main means of carrying large amounts of money while travelling overseas, but the convenience of credit cards has changed this. You can keep the card in your wallet, or better still a money belt under your clothes, whereas your wallet of traveller’s cheques is too big and must be carried in a bag, putting them at a higher risk of theft.

Although it is best to use both methods, the one you use the most may be determined by the rate of exchange with the currencies of the countries you will be visiting. A distinct advantage of traveller’s cheques is that at the time of purchase you lock in the rate of exchange. This is because you are buying the cheques in the currency of the destination, so no subsequent currency conversion is required. This method is better when the rate of exchange is weakening, i.e. you can buy less with your currency. If the rate is strengthening then a credit card is better as you are likely to get a better rate when you use your card.

Traveller’s cheques allow you access to relatively large amounts of money at once, for instance if you wanted to make a large cash purchase such as for clothes where credit cards or cheques are not accepted. But traveller’s cheques have their disadvantages too. Because they are bulky you may have them locked away in your hotel safe when you find that special gift. You also need to present your passport when getting your cheques cashed as proof of identity. Also there may be nowhere open close by to cash them.

For more information on a range of banking and credit card options go to.

Summary

  • When travelling overseas both traveller’s cheques and credit cards are useful.
  • Your cards and cheques should be carried separately for security reasons.
  • The best number of cheques to buy is influenced by whether the rate of exchange is strengthening or weakening at the time.
  • Traveller’s cheques are good for obtaining large amounts of cash quickly.
  • Credit cards are convenient for making impromptu purchases.

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