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Cash, Cheque or Card?

For first time travellers choosing the right way to access your money abroad can prove difficult. Twenty years ago it was much easier as travellers cheques were the only way to transport large sums of cash as there was no access to cash machines or internet banking. While some older travellers still insist on using travellers cheques the increase of fraudulent use and alternative methods of accessing money abroad have all but rendered these items a relic of a bygone era, much like disposable cameras and barbed wire tattoos.

In place of travellers cheques banks and card companies such as Visa and MasterCard have created an electronic version, the Travel Card. While each version has its own unique name they all offer essentially the same services. Before you travel you buy a prepaid card and load it up with the currencies and amounts of your choosing. The exchange rate is fixed at the time of purchase and any additional top ups are done at the current exchange rate at the time of topping up. You can then withdraw or spend this money at cash machines, stores, restaurants and anywhere else that accepts debit card transactions. When you return from your trip you can convert the remaining funds to your local currency and dispose of the card.

It all sounds so straightforward, so why aren’t Travel Cards more popular with backpackers? Like most things sold by banks and card companies there is often a catch. The exchange rate is often quite poor and losing the card abroad can be a nightmare if it’s your only way to access cash. There are fees just about every step of the way and, depending on your card provider, these can include a fee to purchase the card, a fee to top up, a fee for a replacement card if yours is lost and a fee to convert the remaining funds to cash when you arrive home. Additional fine print often stipulates that the card issuer is not responsible for any fraudulent use in the event your card is lost or stolen, effectively absolving them from reimbursing your for any fraudulent transactions. To put it simply, unless you have a real need or desire to use a travel card there are plenty of better ways to access your cash abroad.

An alternative option is to purchase currency before you leave home which ensures that, upon arrival at your destination, you’re able to make purchases straight away. Banks and foreign exchange stores offer competitive rates and an easy way to access foreign currency before you travel. Not only does this lock in the current exchange rate it also gives you a chance to familiarise yourself with the currency, thereby minimising your risk of accidently overpaying for things or being short changed by scammers. It is, however, not a good idea to arrive at your destination with several hundred dollars’ worth of foreign currency as you are more vulnerable to theft, loss or spending your cash too quickly. As such it’s often best to purchase just enough cash for two to four days’ worth of anticipated expenses and obtaining more from a cash machine at your destination.

It should be noted that not every currency is available for purchase and, asides from staple currencies such as the Pound, US Dollar and Euro, the range of currencies offered can vary quite significantly. In some cases, such as the ‘Dirham’ in Morocco, it is illegal to take currency out of the country and you will not be able to purchase it prior to arrive. Additionally some other currencies, such as the Argentine ‘Peso’ are deemed too high risk and as such you will struggle to find them available for purchase outside of neighbouring countries. When comparing rates be sure to take into consideration any applicable fees that currency exchanges may charge and, if possible, get a quote from several different outlets before making your purchase to ensure the best price.

Another option is to apply for a travel friendly credit card, such as the 28 Degrees Card (http://www.28degreescard.com.au/). These types of cards are specifically designed for travellers and often have no currency conversion fees, no international transaction fees and low or no annual fees. Having access to a credit card not only allows you to access emergency cash if required, it also allows you to track your spending abroad and adjust your budget accordingly. Ensure that you read the terms and conditions and compare cards before making any purchases, as some cards have certain restrictions or fees for services. If you do decide to apply for a credit card make sure you pay the card off in full before the due date to avoid paying interest on payments and purchases.

The final, and most popular, option is to access funds abroad from your local bank account with a debit card. Not only is it easier than the options listed above using your debit card enables you to withdraw cash as you need rather than carrying around large amounts of cash. While this option is popular and easy be sure to check what kinds of fees you may incur if making cash withdrawals abroad and how good the exchange rates are. Examine your own account and determine its suitability for travelling. If the fees prove to be too high, or the exchange rate too low, consider opening an account elsewhere specifically for travelling. Ensure that you notify your bank of your intended destinations and the dates of your travels to prevent them from blocking your card when you use it abroad.

Madrid – Spain

Sol Square, Madrid
Sol Square, Madrid
Parque del Retiro, Madrid
Parque del Retiro, Madrid
Parque del Retiro, Madrid
Parque del Retiro, Madrid
Royal Palace of Madrid, Madrid
Royal Palace of Madrid, Madrid
Royal Palace of Madrid, Madrid
Royal Palace of Madrid, Madrid
Royal Palace of Madrid, Madrid
Royal Palace of Madrid, Madrid

 

 

View my reviews for hostels in Spain on Trip Advisor:

Madrid – Barbieri Sol Hostel

Zürich – Switzerland

Zurich
View from the Rathaus Bridge
Zurich
View across the city
Zurich
Houses on the edge of the Limmat River
Zurich
The view from Limmatquai street
Zurich
View from the Rathaus Bridge
Zurich
The Limmat Club
Zurich
The view from Münsterbrücke bridge
Zurich
Grossmünster Church
Zurich
View from the Rathaus Bridge
Zurich
A statue looks out over Obersee Zürich

 

View my reviews for hostels in Switzerland on Trip Advisor:

Zurich – City Backpacker Hotel Biber

Luxembourg City – Luxembourg

View my reviews for hostels in Luxembourg on Trip Advisor:

Luxembourg City – Youth Hostel Luxembourg City

Colombo to Kandy – Sri Lanka

Colombo to Kandy

Colombo to Kandy

Colombo to Kandy

Colombo to Kandy

Colombo to Kandy

Colombo to Kandy

Colombo to Kandy

View my reviews for hostels and hotels in Sri Lanka on Trip Advisor:

Colombo – Colombo City Hotel

Colombo – Colombo City Hostel

Kandy – Blinkbonnie Tourist Inn

Pinawalla – Hotel Elephant Bay

 

Udawalawe National Park – Sri Lanka

Udawalawe National Park

Udawalawe National Park

Udawalawe National Park

Udawalawe National Park

Udawalawe National Park

Udawalawe National Park

Udawalawe National Park

View my reviews for hostels and hotels in Sri Lanka on Trip Advisor:

Colombo – Colombo City Hotel

Colombo – Colombo City Hostel

Kandy – Blinkbonnie Tourist Inn

Pinawalla – Hotel Elephant Bay

 

What to Consider When Purchasing Travel Insurance

Travel insurance is one of the few absolutely non-negotiable items that every backpacker needs to have regardless of the destination or the duration of the trip. To put it simply, if you cannot afford travel insurance, then you don’t have the money to travel. Travel insurance should be the first thing you buy even before your flights and accommodation. Why? Because anything that happens between the dates you purchased travel insurance and the day of departure, such as a death in the family or a broken leg, which forces you to change plans, is covered by the insurance policy. Travel insurance does not work in reverse, and you cannot buy travel insurance and lodge a claim for something that has already caused a disruption in your travel plans.

It’s important to note that travel insurance is a competitive industry, and an abundance of cheap policies are available. The problem with cheap policies is that they are cheap because they only cover the absolute basics, and in some cases, they don’t even cover that. Take the time to compare a dozen of the leading travel insurance plans on the market, paying attention to exactly what is and isn’t covered and the payout levels for each area covered. If you’re planning on skiing, snowboarding, sky diving or engaging in any similar activities, note that these may be specifically excluded from your cover or may incur a surcharge in the cost of your policy.

So what constitutes a good travel insurance policy? Well let’s look at the details. There are a few particular categories to pay extra attention to when examining a policy such as anything medical related. Expenses such as ‘Medical Expenses’ and ‘Medical Evacuation’, should ideally have an unlimited level of cover, as injury or illness that requires hospitalisation abroad can incur costs in the tens of thousands of dollars, which, without a sufficient level of coverage, can potentially ruin your finances for a long time to come. ‘Cancellation Costs’ and ‘Additional Expenses’ should also have an unlimited or higher-end threshold, as these cover expenses incurred in the event of things such as natural disasters, strikes, riots and death. Each policy will differ on exactly what is covered under these categories, so, again, it’s important to do your research thoroughly.

The majority of travel insurance companies will let you choose your level of excess (normally between $0 and $500), and you can get a cheaper plan the higher the level of excess you select. Be aware that your level of excess is the amount you agree to pay upfront for a travel insurance claim. If you choose a policy with a $500 excess and your brand new $1,200 DSLR camera gets stolen, the most you will get from your travel insurance company is $700. If you select a policy with no excess, this means you will be reimbursed the full amount with no out-of-pocket expenses. Choose your level of excess according to your personal preferences, but note that an extra few dollars upfront for a reduced excess may save you hundreds in the event of a claim.

To compare a basic policy with a more comprehensive one we have given the same conditions for each policy. Each is for a 20 year old travelling from 1st-31st December 2014 with worldwide coverage and a $250 excess:

 
Site: www.itrektravelinsurance.com.au

Policy: Wanderer

Cost: AU$93

Unlimited Overseas Emergency Medical Assistance

Unlimited Overseas Emergency Medical and Hospital Expenses

$500 Overseas Emergency Dental Expenses

$5,000 Family Emergency

No cover Return Airfare

No cover Resumption of Journey

$5,000 Hospital Cash Allowance

No cover Luggage and Personal Effects

No cover Luggage and Personal Effects Delay Expenses

No cover Travel Documents, Credit Cards and Travellers Cheques

No cover Theft of Cash

No cover Cancellation Fees and Lost Deposits

No cover Travel Delay Expenses

No cover Alternative Transport Expenses

$1,000,000 Personal Liability

As you can see the Wanderer policy has several notable shortfalls in its policy, namely the lack of coverage for theft, luggage delays and loss of travel documents and travel delay expenses. In a nutshell this policy only covers medical problems and nothing else, potentially leaving you stranded in the event of travel delays, theft or loss of luggage including your passport or returning to your journey after a family emergency. As you will see below the second policy is much more comprehensive.

 

Site: www.travelinsurancedirect.com.au

Policy: Standard

Cost: AU$179

Unlimited Medical Expenses Overseas

$12,000 Luggage and Personal Effects (Optional extra cover for valuable items)

$2,000 Travel Delay

Unlimited Cancellation Costs

Unlimited Additional Expenses

Unlimited Medical Evacuation

$250 Theft of Cash

$2,000 Travel Documents – Loss, Theft, Damage

$500 Delayed Luggage

$6,000 Return Airfare Reimbursement

$3,000 Resuming Your Trip

$2,500,000 Personal Liability

$25,000 Accidental Death

$12,500 Total Permanent Disability

$2,000 Special Events and Returning Home to Work

$10,000 Loss of Income

$500 Dental Expenses Overseas

$6,000 Out of Pocket (Hospital) Expenses

$500 Withdrawal of Services

Snow Sports and Activities (Optional)

Rental Vehicle Insurance Excess (Optional extra cover)

What a difference comprehensive cover makes. Not only does it cover coverage for theft, luggage delays and loss of travel documents and travel delay expenses the previous insurance doesn’t it also provides additional cover for worst case scenarios such as Medical Evacuation, Accidental Death and Total Permanent Disability. Additionally you can add optional coverage for snow sports and rental vehicle insurance excess, something that you need to consider when renting a car abroad.

In case you missed it the total price difference between these two policies is just $86. This small difference provides extra cover than can potentially save you tens or even hundreds of thousands of dollars in the event something goes wrong on your travels. When it comes to travel insurance you cannot afford to be cheap.