By Shon Alam, Bidwedge
As a business owner you may well be feeling ready for a holiday or have got to the point where you would like to go abroad to meet customers or suppliers. There is still a need to ensure you keep safe but business is opening up and it is time to look ahead.
As you prepare to travel it is a good idea to think about how you will take your money when you are going abroad.
Let’s review some of the options that are available:
It’s a good idea to take some local currency with you when you go abroad, so you can pay for things like taxis, public transport, food and drinks and tips. When exchanging your money, be sure to shop around and compare not only the exchange rate but any charges that may be applied.
Taking all – or a lot – of your money in currency carries various risks, in particular the loss or theft of your cash. Travel insurance usually only covers you up to a certain amount, so do check your policy before you go to help you make an informed decision about how much cash to take.
Also, don’t keep all your cash in one place while you’re flying or out and about at your destination. Split it between different bags, wallets and pockets so if your bag does get lost or stolen, at least it’s only part of your money that’s gone.
The ‘more mature’ traveller is likely to be familiar with these little beauties, which have been in popular use since the late 80s. They offered a safer alternative to cash because each cheque has a unique number. So, much like any other cheque, if it is either lost or stolen, the issuer can cancel it and replace it, meaning the lost or stolen cheque cannot be used by anyone else and you don’t lose your money.
In principal, valid cheques can be used like cash, as each cheque is for a pre-paid amount in your currency of choice. You simply counter sign and handover just like cash to pay for your chosen product or service. Also, like cash, they are not linked to a bank account and do not contain any kind of personal information so there is no risk of identity theft.
The benefits are clear and they have done a great service for years but, to be honest, they’re becoming outmoded and many places no longer accept them.
If you want to save the hassle of arranging your currency before you go on holiday, you can use your debit card abroad much as you can at home. However, you need to be very careful! Most debit cards will charge you a fee for using them abroad. The charges are typically around three per cent, but you can check in advance with your bank.
Taking a debit card is – at least - probably good as a back-up option in case you do go a bit over budget but make sure you tell your bank before you go so they don’t cancel your card, thinking you are a victim of fraud when they see unexpected foreign transactions.
A debit card has the advantage that, as the money comes direct from your bank account, you cannot spend more than you have, meaning you shouldn’t end up getting yourself into debt while you’re away. The disadvantage of it being linked direct to your bank is that if your card is stolen or hacked the money in your bank account is at risk, so you must be cautious at all times when using your card.
If you generally use Apple Pay or Google Pay on your phone to make transactions, you can use these abroad, much as you can a contactless debit card and the same charges will be applied. It is, arguably, more secure to pay this way than with a debit card as there are layers of security to get into your phone and then another layer to access the app.
Similarly, a credit card provides a convenient way to buy things abroad. Of course, the downside is that you could run up a debt in the heat of the moment. Paying this back at the high rates of interest that credit card companies charge could make for a very expensive purchase.
Also, beware of the charges. It’s possible that the provider or bank may apply charges every time you use your card, meaning your next credit card bill may have a nasty sting its tail, possibly taking the shine off the good time you had!
Ask about charges before you travel and be very aware that if you make a cash withdrawal, you will probably be charged a fee and interest from the moment you withdraw it. So, if you’re going to be spending a lot of time in, say, rural locations where they only take cash, you will need to consider that carefully and probably arrange to get before you leave, rather than rely on getting it from your credit card.
An advantage of taking your credit card is that for purchases between £100 and £30,000 made on your credit card, you are protected by Section 75 of the Consumer Credit Act, meaning you can claim for breach of contract and misrepresentation.
When paying with either a credit or debit card, do be aware of which currency you pay in. If you choose to pay in Sterling, rather than the local currency, charges - known as DCC or dynamic currency conversion charges – are added, meaning you could pay up to 10% more for what you are purchasing! If you choose to pay in local currency, it will almost certainly cost you less in currency conversion but the exchange rate will be applied on the day the exchange is made via the bank, not necessarily the day of purchase. (https://www.telegraph.co.uk/money/consumer-affairs/paying-card-overseas-offered-currency-choice-should-always-do/).
Pre-paid cards are becoming an increasingly popular option, largely due to how easy they are to use! A pre-paid travel card allows you to load cash onto it before you go abroad so you have you spending money ready when you arrive. They are accepted by most retailers, with the exception of petrol stations, plus there are no credit checks when you apply. Travel pre-paid cards are intended to cost less to use in other countries but check the fees from the card issuer and whether there are charges for using local ATMs.
Pre-paid cards are particularly useful if you’re travelling on a strict budget, as you can load the card before you go with the budget you intend to spend. But, if you really can’t help going over, you can top it up while you’re on your travels!
They also have the advantage over debit and credit cards in as much as you can’t go overdrawn or borrow money on them so you cannot incur fees, interest and charges in the same way.
That said, they may come with other fees, such as: a fee for purchase of the card, monthly or annual usage fees and fees for paying onto or using the card – or indeed fees for not using it. So do look into the card you are thinking of getting.
When doing your research, consider that there are three different types of cards:
Single currency, such and Euros or dollars - if you are going to a single destination; Multi-currency so you can load different currencies if you are visiting multiple destinations in one trip; and Sterling cards, where you can load it with Sterling and spend in many different currencies, with each transaction in a foreign currency likely to attract conversion fees.
There are now several banks known as disruptor banks. These are digital banks that aim to challenge the ‘big four’ (Barclays, Lloyds, HSBC and NatWest).
Many of these offer some great benefits when travelling abroad.
For example, Revolut is especially aimed at people who travel a lot. In the same way as a pre-paid card, you can transfer money to it before you travel and use it without any hidden fees. Starling Bank allows you to make cash withdrawals abroad without adding fees, offers competitive exchange rates and doesn’t charge for things such as topping up your card. Monzo offers a way to pay in any currency with no fees and, again, no additional charges – unless you go over your limit, in which case the charges can be hefty.
Also, as with most card purchases where you are using Sterling to pay for something in another currency, the actual conversion happens a couple of days later and not on the date of purchase.
These guys are definitely worth taking a look at, particularly if you do a lot of travel. However, do your research carefully and consider whether you want to replace your traditional bank account or, perhaps, have one of these as an extra account.
These are the main alternatives available. However, I would recommend not relying on just one of these options. If your chosen option fails for any reason, you should have a back-up to ensure you are not stranded without money. It can be a lot of hassle and expense to get it sorted out, which is bound to put a dampener on the trip.
And when you get home, don’t forget to exchange any leftover currency using either buyback or a platform like Bidwedge, which offers a competitive sell-back rate, even for small amounts.
As you prepare for a trip abroad I hope you will find this quick review helpful.
ABOUT THE AUTHOR
Shon Alam is founder of Bidwedge. Bidwedge makes it easy to change your left-over cash currency back into Sterling – at great rates for even the smallest amounts. Just enter the amount, see the rate you’ll be paid, post the cash and watch the money appear in your bank account. It’s easy to do.
Website - www.bidwedge.com