Travelers checks have long been out of fashion, so what's the smartest way to spend money on vacation?
March 12, 2016
A vacationshouldbe all about the relaxing, but far too often money concerns get in the way. When I started traveling back in the 1990s, it was considered fool-hardy to go anywhere without safely converting your money into travelers checks first.
But, like the Walkman andFull House, travelers checks went out of fashion, replaced with a variety of credit cards and prepaid cards. (Unlike the Walkman andFull House, travelers checks have not been the subject of a recent semi-ironic revival.)
But what about hidden costs and safety? We've investigated the smartest ways to spend your money while on vacation.
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When to Carry Cash
Having a few notes on your person is a comfort when traveling and can really come in handy, especially if you're traveling to a less-developed country where you're unlikely to find a card machine in every kiosk. We recommend carrying a minimal amount of cash when traveling and splitting it up just in case. A small stash in your money belt or sock can be a life saver.
Foreign Exchange Rates
A major concern when traveling abroad is not getting stung by the exchange rate. A seasoned traveler will advise you to wait until you get to your destination and use an ATM to withdraw money as the withdrawal rates are usually more favorable. Avoid currency exchange kiosks, they usually charge exorbitant fees.
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Alternatively, foreign post offices sometimes offer commission-free currency exchange. For example, the Irish post office system (An Post) offers commission-free conversion of Euro to Sterling.
Prepaid Cards Preloaded with Currency
Prepaid travel cards were the main downfall of travelers checks, and are a simple and common solution to keeping your money safe yet accessible when you travel. These cards function as a debit card and are accepted almost anywhere with a Mastercard or Visa symbol (see below for more).
The great advantage to these cards is that the rate of exchange is fixed on the day you load it. So if you wait for a day when the exchange rate is favorable, you won't be penalized later if the exchange rates were to rise. Of course the converse is true, so it's important to pick your moment. Another bonus is that these cards often don't charge fees or interest for cash withdrawals, so you can take money out as you need it, rather than carry around big wads of cash.
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While prepaid cards are a solid solution, they do come with some caveats. The biggest one being that most car rental companies do not accept them, instead requiring a credit card to cover your rental. It's also important to check the terms and conditions of the card before you purchase. Most cards make their money by catching you out with hidden charges like "inactivity fees," but if you inform yourself you should be able to avoid them.
Credit Cards Offer the Best Security
Credit cards offer the most security in general, including while traveling. Unlike debit cards, credit cards aren't linked to your checking or savings account, so there is no risk of a fraudster accessing your funds. Neither debit nor credit cards hold users accountable for fraudulent charges, but fraud is still easier to deal with when money hasn't actually been deducted from your checking account.
Unlike debit cards, credit cards aren't linked to your checking or savings account, so there is no risk of a fraudster accessing your funds.
Not all credit cards are the same either. Helen Saxon, Chief Product Analyst at MSE.com found that "Mastercard plastic, barring a few anomalies,gives you a better rate than Visa cards for comparable spending." So all things considered, stick with Mastercard for your larger transactions to maximize your vacation funds.
The only area where credit cards fall down is on cash withdrawals. Most credit cards charge high transaction fees and interest compared to prepaid cards. For this reason, it's best to keep your credit card for larger charges like car rental and hotel bills, and use a prepaid card for day-to-day walking around money.
Use All Options for Best Results
In summary, use a three-pronged attack on your vacation spending. Carry a small amount of cash with you, and use a prepaid card for the majority of your expenses to take advantage of favorable exchange rates. Put any major expenses on your credit card to make sure they're safe.
Our final tip is to advise your bank that you're going on holiday, so you don't get cut off when they see a bill of $100 in theBahamas!
This article first appeared in DealNews.
FAQs
For larger transactions, he recommends credit, provided there are no foreign transaction fees. “You're more likely to encounter fraud or operators not necessarily giving you what you've paid for when you're in a remote area where you don't know where you are, you don't know who you're dealing with.
Is it better to use cash or credit when traveling? ›
Cash is king, but credit can offer greater security when you travel. Before you head out on vacation, make plans for whether you'll pay for expenses such as meals, souvenirs and local transportation with cash or credit.
What is the safest form of payment when traveling? ›
Credit Card, Pre-paid Credit Card, and Gift Card
Credit cards are often considered one of the safest ways to travel with currency.
Is it safer to travel with a credit card or debit card? ›
Credit cards are generally the recommended choice of payment method to use when traveling.
Should I use debit or credit on vacation? ›
Credit cards remain the best all-purpose payment method, accepted in far more places abroad than debit cards. It's also a good idea to take more than one card with you when you go away to avoid finding yourself without any resources if your card is lost, stolen or blocked.
What is the best way to carry money when traveling? ›
Guidelines/Tips for Traveling with Cash
- Carry as little currency as possible.
- Carry cash in a money belt that sits on your waist (under your clothes) or a money pouch that hangs around your neck.
- Keep cash concealed and close to your body at all times.
Using credit cards for purchases when possible and using ATMs to get local currency for when you need to pay cash are by far the best ways to pay for things when abroad because you will get the wholesale exchange rate rather than the less favorable retail rate posted in currency exchange facilities or at bank teller ...
How do I keep my money and passport safe when traveling? ›
A money belt attached to your body would be the safest, portable option. Otherwise, covering up the passport could help. If a thief doesn't know what it is, they might be less inclined to steal it.
What is the best payment method to not get scammed? ›
Secure online payment methods
- Credit cards. By and large, credit cards are easily the most secure and safe payment method to use when you shop online. ...
- ACH payments. ...
- Stored payment credentials. ...
- Credit cards with EMV chip technology. ...
- Credit cards with contactless payment. ...
- Payment apps.
The payment method (such as PayPal, Venmo or WeChat Pay) should be secured with a password, biometric authentication, or two-factor authentication. Your financial institution (such as your bank or credit union) can help to initiate payment disputes, such as a chargeback request (if you paid with a credit card)
Protection against Fraud
If someone happens to steal your cash and they spend it, then you have a very slim chance of being able to recoup that money. If you have a debit card, then you should know that this comes with built-in fraud protection.
Should I bring my debit card when traveling? ›
A debit card offers a convenient way to access money when you're traveling, whether you're on a Greek getaway or a Rocky Mountains ski trip. Using a debit card while traveling may not be the best option, however, due to limitations in fraud protection and the potential for fees.
When should you use a debit card instead of a credit card? ›
If you find yourself struggling to pay off your credit card, using a debit card may be a better way to manage overspending. “If you have credit card debt, then putting routine purchases on a debit card would make sense in order to avoid going deeper into debt.
Is it better to carry cash or card when traveling? ›
Cash is the best — and sometimes only — way to pay for bus fare, taxis, and local guides. If you'll be shopping a lot or settling bills at pricey business-class hotels, you might use your credit card more than I do — but you'll still be better off using cash for smaller purchases.
Which is safer to use debit or credit? ›
Credit cards often offer better fraud protection
With a credit card, you're typically responsible for up to $50 of unauthorized transactions or $0 if you report the loss before the credit card is used. You could be liable for much more for unauthorized transactions on your debit card.
Is it safe to travel with cash? ›
While cash is necessary while traveling, carrying large amounts is not recommended in any country. Look into a money belt that you wear under your clothes to keep your wallet with cash and any important documents close to your body. Never carry money in your back pocket, where pickpockets will have easy access.
Is it better to get a travel money card or cash? ›
Prepaid travel cards offer a level of security that cash simply can't match. If you lose your card or it's stolen, you can block it, safeguarding the funds. Many card companies also offer quick card replacement services or can provide emergency cash, which can be a lifesaver when you're in a foreign country.
When should you use cash instead of credit? ›
When Buying Beyond Your Budget. If you can't afford a purchase, whether it's a restaurant meal, a new outfit, or a vacation, avoid using a credit card. Without the cash flow to pay the credit card balance, you will face interest charges that can snowball your debt.
What are the advantages of using cash while travelling? ›
Pros of Travelling with Cash
In some destinations, cash may be the only accepted method of payment at markets, restaurants, and small hotels. You can use your cash anywhere, and know that you'll have a sure-fire method of paying your way if you get stuck.
Is it better to use vacation or cash out? ›
The bottom line: Studies show that employees who are taking vacation days, even if they don't go on vacation, are more productive in the office. However, there are situations where cashing out PTO can be beneficial and stress-reducing, like paying debts or covering needed repairs.
