Seven things to keep in mind about money before your next foreign trip

Beyond covid-appropriate protocols, it is also a good idea to think in advance about how you will manage your finances when going abroad. Normally, a general lack of awareness about how one can be wiser with one’s money while travelling is observed among people planning trips. Planning requires some information, a bit more of understanding and lots of active organization.

Here are a few key tips that can be kept in mind as you set out decoding and decluttering your finances before your next big adventure.

Airtight travel budget

It is never too early to create a travel fund, where you can direct a portion of your earnings solely towards your getaway. Have a rough idea of where you want to go, how long you want to be there and what you would like to do. Decide what is important to you; for example, when visiting a city, you can cut costs on accommodation and food, but set out larger amounts for sightseeing and shopping. Aim to set aside a fixed amount every month that should go into your travel fund. You can use an app or financial management tool on your phone to track your spending and stick to the budget.

travel money

Rashmi Satpute, country manager India, Wise, a global technology company, said foreign exchange bureaus at airports typically know just how to play on traveller’s excitement to reel you in, and offer the least bang for your buck.

This can be due to the exorbitant costs of exchanging currency at the airport, which eats into your travel budget.

“Don’t buy into ‘zero commission’ deals either—you will still be ripped off by unfavourable rates. To know which rate is the most favourable, look for the exchange rate that’s closest to the mid-market rate as presented on Google/Reuters. To save money, organize your holiday money well before you get to the airport,” Satpute said.

Dangers of DCC

Dynamic Currency Conversion (DCC) is a service offered by banks and payment providers that gives international card holders a choice to pay in their home currency when they travel abroad.

This is often advertised as a safe, convenient option for travellers that offers the benefit of choice—to convert the value of their purchase into their home currency or complete the transaction using the local currency.

“The misconception is that DCC helps you avoid foreign transaction fees on credit cards—in fact, it does not. If you agree to a merchant’s offer to use DCC when you make the purchase, that exchange will also be subject to any foreign transaction fee levied by your credit/debit card or ATM network—and these markups are typically exorbitant,” Satpute said.

“These fees typically add up to between 1.5% and 3% or even more on the transaction amount, and it’s difficult to know what the true rate really is. So, exercise the benefit of choice—pay in the local currency only. Decline any merchant’s offer to convert your currency for a purchase and find a multi-currency travelling card that does not charge a transaction fee,” Satpute said.

travel insurance

It’s a lot less expensive to manage disruptions like baggage/document loss, delayed travel, personal accidents, dental and other medical emergencies and senior citizen health concerns when you are insured with the right insurance plan. However, as with everything, choosing the right insurance plan is of paramount importance.

Satpute said, “Different institutions vary in terms of the amount of coverage they offer, but it is safe to assume coverage within the range of $50,000 to $500,000 in accordance with your needs and package chosen. There is no ‘one-size-fits-all’ approach that applies, so the travellers are encouraged to read, research and see what plans are being offered to them by their banks and other service providers.”

travel cards

Even though using debit or credit cards abroad is often the most convenient and safe option, the best way to go about it is to get a multi-currency travel card.

These cards can be picked up before you leave home, and topped up online. You then select the currency you need when you are abroad, and switch your balance, so you know exactly how much you have in the foreign currency, and there should be no surprise fees or costs associated with exchange rate fluctuations. Since your prepaid travel card isn’t linked to any of your other accounts, it is unlikely that you would be a victim of fraud or lose your card.

ATM withdrawal fees

You are bound to withdraw money more frequently when you travel, in order to retain your mobility and stay safe. However, over the course of your travels, the more you withdraw, the more ATM withdrawal fees levied add up.

“To avoid these, look up if you can get a card in the global ATM alliance, where these fees can be waived off if you use any partner ATM around the world. Moreover, speak to your bank or service provider to see how you can get your hands on a low fee card,” Satpute said.

money transfer

Bank transfers from around the world are beset with hidden fees—from transaction costs to exchange rate spreads and even correspondent bank fees. “This can be a complex web to navigate if you need your money to reach someone back home rapidly, safely and effectively. To make the process easier, use a reliable mobile app or tech platform that transparently transfers money as per the mid-market rate and keeps you updated on the details of your transactions from end to end,” Satpute said.