Many Australians embrace travel with open arms, whether it’s to visit family, explore new destinations, or simply enjoy a well-deserved holiday.
One key consideration in preparing for travel is managing finances abroad. This is where ‘fee-free’ travel cards emerge, promising a convenient and cost-effective way to spend overseas. But are these cards truly as good as they sound?
The allure of ‘fee-free’ travel cards is undeniable. They’re marketed as the perfect travel companion, allowing you to load up on foreign currency and make purchases without the pesky transaction fees that typically come with using your regular bank card abroad.
Mozo’s personal finance expert Rachel Wastell says, ‘A travel card can be a smart way to lock in your exchange rate, manage your travel budget, and is safer than carrying a lot of cash.’
‘But our analysis shows when it comes to travel cards, checking the fine print can really pay off, as the cheapest looking option isn’t always the one that gets you the best deal.’
The devil is in the details, and it’s crucial to read the fine print before the promise of fee-free transactions sweeps you away.
‘A lot of Aussies assume ‘no fee’ means best value, but when you look at the exchange rate being offered, that’s not always the case,’ Westell says.
‘You could be losing money through the rate instead of an obvious upfront charge, and unless you do the maths, you might not even realise.’
While these cards may not charge explicit fees, they often make their money through less obvious means.
One such method is the use of unfavourable exchange rates. The rate at which your Australian dollars are converted to foreign currency can be significantly worse than what you’d get at a bank or a dedicated currency exchange service.
This hidden cost can add up quickly, especially on larger purchases or withdrawals, and may end up costing you more than a card with a transparent fee structure.
Another potential pitfall is inactivity fees. Some travel cards charge you for not using the card, which can be particularly irksome for those who travel infrequently or have leftover funds on their card post-holiday.
These fees can slowly chip away at your balance, leaving you with less than you started with. Additionally, reloading fees can catch you off guard. If you need to top up your card while abroad, some issuers will charge a fee for each reload.
This can be a percentage of the amount loaded or a flat fee, either of which can be an unwelcome surprise.
Let’s not forget about ATM fees. While the travel card itself might not charge you for withdrawals, the ATM you use might.
These fees vary widely from country to country and can be quite steep, making cash withdrawals an expensive affair.
Lastly, converting it back to Australian dollars can come with a hefty fee if you return home with a balance on your card. Some cards also have an expiry date on the funds, after which you may no longer have access to your money.
So, what can you do to avoid these hidden costs? Here are a few tips:
1. Research and compare: Look beyond the ‘fee-free’ label and compare the exchange rates offered by different cards. Also, check for any other potential fees that might apply.
2. Read the terms and conditions: Understanding the fee structure of any financial product you use is essential. Ensure you know about any charges for inactivity, reloading, or cashing out remaining funds.
3. Consider alternatives: Sometimes, using a credit card with international transaction fees might be cheaper if it offers a better exchange rate. Alternatively, prepaid cash might be more cost-effective for your travel needs.
‘While debit cards often have less favourable exchange rates, if you’re looking for convenience, you’ll want to be sure your debit card is not charging you any unnecessary fees,’ Westell says.
4. Plan your spending: Estimate how much money you’ll need and load your card accordingly to avoid multiple reload fees.
5. Use ATMs sparingly: Withdraw larger amounts less frequently to minimise ATM fees, and look for ATMs that don’t charge their own fees.
In conclusion, while ‘fee-free’ travel cards can be a convenient way to manage your money while travelling, they can sometimes end up costing you more than you bargained for. By being aware of the potential hidden costs and doing your homework, you can ensure that your travel budget is spent on making memories, not on unnecessary fees.
We’d love to hear from our readers about their experiences with travel cards. Have you found them to be a cost-effective solution, or have you been stung by hidden fees? Share your stories in the comments below, and let’s help each other travel smarter!
Also read: Maximise your holiday budget: The travel hack that pays you back
