Making foreign currency work for you

JOSH MARTIN
Last updated 05:00 02/02/2014
Eftpos
Reuters
BUYER BEWARE: Using your regular eftpos card to withdraw cash overseas should be done sparingly.

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Our laid-back attitude means Kiwis heading overseas often don't think about foreign exchange until they reach the airport. But having a smart foreign exchange strategy can mean more mai tais and fewer fees.

As travellers, we want different degrees of security, convenience and accessibility, but while there is no free foreign exchange lunch, your money can go further with a bit of forward planning.

Cash After jostling for position at the baggage carousel, you'll need cash almost immediately for taxis, a meal and possibly visas. Even cash-adverse travellers need to have a minimum of $100 in local currency for the first 24 hours. Of course, you can can use cash all the way but with it comes obvious security risks.

Shop around for good exchange rates before you leave - not at the airport. Your bank may waive flat fees but some can be as high as $15 a transaction or 1.5 per cent commission. Typically, promises of no commissions or fees are countered by lower exchange rates. The best strategy with cash is to get a lump sum once, based on your daily travel budget (yes, you should have one of those as well).

If travelling between multiple locations with various currencies, always convert leftover cash into US dollars as it's the most widely accepted currency so always gets the best rate.

ATMs

Using your regular eftpos card to withdraw cash overseas should be done sparingly. International ATMs usually offer reasonably good exchange rate conversions compared with airport kiosks, but you can be stung in other ways. New Zealand banks typically change between $6 and $12 per international withdrawal, even in Australia. What's more, a foreign ATM may add its own fee on top of that. You're likely to be better off getting cash before you go. Be realistic about how much money you may need during your trip. Although it may be hard to kick the eftpos habit, you should. If available, your bank will add a 1 to 3 per cent commission on every swipe at the cashier, which soon adds up in a tour full of meals, shopping and activities.

Credit cards

Being secure and accepted worldwide makes your credit card a handy travel buddy, but it's better suited to paying for hotel stays and car hire than being used as you do back home. Like eftpos, credit cards offer competitive spot rates on foreign currency, but a couple of the big players take a 3 per cent commission on every foreign swipe. Frequent foreign currency withdrawals will ensure a mammoth bill waiting for you at home because of cash advance fees (and interest on top of that). Pre-purchase flights, hotels and vehicle hire on your credit card and take it just for back up when travelling.

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Prepaid travel cards

These recent arrivals are the new traveller's cheques in terms of secure and accepted travel money. Different prepaid currency deposits can be put on one card, often without charges when you swipe or withdraw. But they still have snags.

Pre-takeoff, you lock in the exchange rate as you load money onto the card, which can fluctuate for or against you. MasterCard's Cash Passport has no international ATM or transaction fees but as with Visa's Loaded For Travel card, they claw back cash through start-up, inactivity fees and commissions when you load currency ranging between 1 and 10 per cent. A fees and rates comparison gives Mastercard the edge over Visa in this instance.

Golden rules

Make a plan and avoid airport foreign exchange kiosks - they have built a lucrative industry out of disorganised travellers.

If travelling in a group, pool your cash for one currency conversion to avoid fees and to qualify for better exchange rates.

Withdraw larger amounts from foreign ATMs to avoid fees and charges adding up.

Before departure, let your bank know which countries you are visiting so they don't freeze your credit or debit card on suspicion of fraud.

Having a good travel insurance policy gives you some peace of mind when travelling with large amounts of cash, but always be vigilant.

Josh Martin , Fairfax's travel insider, brings you the scoop on what's happening in travel.

- © Fairfax NZ News

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