Money matters

Virtually all travellers will need to spend money on their trips. There are a number of ways to do this. You are always trading off expense, risk and convenience. This article describes the most common ways to take money with you and provides some insights on how to handle exchanges, foreign currencies and safety matters on the road.

Your flexible friend...

Credit Cards

The acceptance of credit cards varies by country. Rarely can you buy everything by credit card, but in most of the developed world you will be able to buy most of your major purchases (such as air travel or car rentals) on credit card. In less developed locations your credit card may be totally useless. In all cases there will be some expenses that cannot go on a credit card so you cannot rely on a credit card exclusively.

The biggest advantage of a credit card is convenience. You do not need to know exactly how much money to bring with you. You also don't need to deal with the inconvenience of money exchange.

The next biggest advantage is the low risk. In most countries you are not responsible for any expenses made on your credit card that occur after you report it lost or stolen. Credit card companies will also protect you if you are charged more than you agreed to pay, or if you pay for something and never receive it.

Many credit cards also include some forms of insurance protection for all expenses made with the card. This can include cancellation insurance for flights (usually only in the case of serious sickness), theft or loss insurance for goods, collision insurance for rental cars and even travel health insurance when you are travelling. You should look over you credit cards insurance carefully before you start to travel to see what it provides. It may even be worth getting a travel credit card, if you don't have one, just for these coverages.

The biggest disadvantage is cost. At one time credit card companies used to apply the exchange rate they got to your exchanges. However, most credit card companies now incorporate an exchange fee into the exchange rate that they offer. This is generally in the 2-3% range. You can call your credit card company and ask what the fee is as well as asking what the current exchange rate is for the currency that you would like to find out about. One thing that should be noted is that the exchange rate is applied at the date the expense was posted to the account, not the date the charge was made. Therefore if you are dealing with a fluctuating currency it is impossible to know exactly what exchange rate will be applied for an expense until a few days after you make the expense.

If you have multiple credit cards it is often a good idea to only carry around the one you will usually be using and keep others in a safe location. Then if your main one gets lost or stolen you will not be left without a credit card, or have to go through the hassle of replacing a credit card in a foreign country.

Travellers' Cheques

Travellers' cheques were at one time the primary method of taking money with you when you travelled. These days they are not as common, but they are still widely available and relatively widely accepted. Generally these are not accepted as widely as credit cards and they are usually not as convenient to use.

Travellers' cheques are issued in a specific currency. American Dollars is the most common currency, but many different currencies are available.

With Travellers' Cheques you are protected against loss or theft. Once you report them as missing, the issuing company will replace them. However, this can take time and be inconvenient.

There is also often a fee associated with travellers' cheques. This may be a straight fee or it may be hidden in the exchange rate if you are buying them in a foreign currency. If you are buying them in a foreign currency it may be worth it to find out if you can buy them with cash in that foreign currency.

Cash

Cash is the most versatile method there is. Virtually everywhere takes cash. The one exception is that some car rentals may not rent you a car or ask for a very large deposit if you don't have a credit card.

In some countries you may be able to get by entirely with American money or other generally accepted currencies. However, this will often be at a huge expense as the exchange rate offered by merchantsis usually not very good. (It can be as much as 15% or even more). It is therefore best to use the currency of the country you're in.

The biggest disadvantage to cash is the risk. If you lose it you can't get it back, and if someone finds out you have a large wad of cash you become a potential mark for scams and alike.

Money exchange is a very complicated business. All money exchanges work on the basis of selling a foreign currency at one rate and buying at another, with the difference being the spread. Newspapers usually will quote the average of the two as the daily rate. Where there is more competition, the rates are likely to be better.

Currency exchanges are not all created equal. Where the best rates are available varies tremendously from one country to another and from one currency to another. In some cases it may be better to exchange your money before you leave, in others it may be better to do it in your destination. Rarely is the most convenient location (such as at airports) the best rate available. In some cases it can be significantly higher.

As you loose some money on every currency exchange it is important never to exchange too much money. It is usually a good idea to make sure you spend most of the cash you have before leaving the country of that currency.

Most major currencies are subject to counterfeit these days. It is a very good idea to study the bills of the currency of the foreign country to become familiar with how it is supposed to look and feel. Almost all currencies employ anti-counterfeit technologies. This can be colour shifting ink, watermarks, special threads, iridescent inks, raised printing, holograms and other features. Become familiar with them so that you can quickly check them when you get a new bill whether it is as change or from a money exchange. If you are unsure, don't be afraid to say you would rather get a different bill, or just say you would rather get 2 smaller bills for change (As an example if you get a ten in change that you don't like the look of, ask for two fives instead). If you end up with a counterfeit you won't get compensated, and you may end up having to explain it to the police.

Automated Teller Machines (ATMs)

ATMs can be found in every major city and makes them an excellent method of taking cash out of your bank account and often are preferred over exchange offices. A fee is standard for every financial transaction: ask your bank how high these are and how they are calculated. To save a bit of money on transaction fees it's wise to obtain relatively large amounts for every withdrawal that you make. For example, it's better to go to the ATM once every week than every other day.

Advice and tips

• Always carry a certain amount of strong currency on you (preferably US Dollars or Euros) in case of an emergency (like running out of money, or robbery). A decent amount would be around 50 USD or 50 EUR, that will provide you with enough money to survive for at least another few days, until you can make arrangements such as wiring money.
• Carry your emergency money in a money belt.
• It's normal to travel with a relatively large amount of cash on you, after all going to the ATM machine every day can become quite an expensive joke. Thieves naturally know about the 'wealth' of backpackers, so be safe with your cash, cheques and cards. Spread it out over a few places.
• Never keep more money in your wallet than you'll use in a day or two. Keep the rest of your money somewhere separate (in your money belt for example), and fill your wallet up with it when necessary.
• Attach a small chain to your wallet and secure it to one of your pants' belt loops. This prevents easy pick pocketing.
• Don't remove anything from a concealed money belt while you are in public. Instead keep some money and one piece of identification in your pocket to use. If you need to get more money out of your money belt, find some privacy in a washroom first.
• Don't accept torn bills or those with missing pieces. You may have difficulty spending them.
• And most importantly: Don't spend all your time worrying about saving money. You may only do your trip once so enjoy it while you can and do it comfortably.

Money resources

• The Universal Currency Converter
  From XE.com. Provides convertions for every currency in the world (over 180 currencies in over 250 geographical locations).
  
  
• Discussion and more information in the Budget Travel Forum!