Credit Cards vs Cash vs Travel Money Cards

When planning how to pay for purchases overseas, there are three main ways to do it with (and none of them are travellers’ cheques).

We’re going to tell you about credit card vs cash vs travel money cards overseas, and the pros and cons of each.

Cash – is it still king?

This old-school form of payment is fast becoming a dinosaur and seems not far from extinction. Still, if you insist on carrying cash, be aware of the complexities involved.

  • Cash is arguably the simplest form of money to use (pro): You pull out a note and hand it over, easy peasy.
  • Cash limits in other countries (con): As a general rule of thumb, you should not expect to carry more than the equivalent of $10,000 AUD across borders.
  • Loss and theft (con): There are very real risks involved in carrying cash when on holidays. For starters, how much cash do you want to be carrying on you? No matter where you travel, you could be mugged or find yourself the victim of a wallet snatcher or pickpocket. Or, you could simply lose your purse or wallet by leaving it behind on a café table or bus station seat.
  • Cash is not replaceable (con): It’s advisable to divide your total cash into smaller amounts and keep them in different places. Use the hotel safe or hide money in your belongings. Some people use everyday objects like empty and washed sunscreen bottles to hide cash. Carry a portion of your money with you but never all of it.
  • Don’t be too quick to trust that your money will be safe (con): If you’re staying in a backpacker hostel, find out exactly what the situation is with lockers and the property’s communal safe.
  • Don’t be caught flashing your cash (con): It can be difficult trying to familiarise yourself with local currency, especially when you’re not accustomed to the value of the notes and coins compared with Aussie money. Never be seen rearranging your cash in your purse or wallet. Go to a public bathroom or somewhere not so visible to do it. Before you set out each day, make sure you have your small denominations within easy reach and your larger ones folded and hidden from easy view.

  • Don’t fall for expensive exchange transactions (con): Once you figure out how much money you need to take, look no further than good old Australia Post. It too is becoming somewhat of a dinosaur and has had to reinvent itself in countless ways. You can order foreign currency online or in store and then pick it up from a participating Post Office within a couple of days. The best thing is, you pay zero commission! On an exchange of $300 AUD, you can expect to pay at least $16 in fees at currency counters and banks and even more at airport kiosks where they’ll gouge you in a heartbeat. Order up to $5,000 AUD at Australia Post and dispense with costly fees.

Summary: Cash always comes in handy for small transactions, tipping and for places like markets so make sure you have some on you when travelling.

Travel money cards

A prepaid travel money card is a smart facility if you’re travelling for more than a week or so. You obtain these through your bank, Australia Post or a specialist provider and you load foreign currency onto it before you leave.

You can then use the card just like an ATM card and withdraw cash in your destination country or use it as a credit card to purchase online, over the phone or in store.

The difference is that you only have access to the actual funds you have deposited into your travel money card; you can’t ‘borrow’ from the provider like you can with an actual credit card.

Here are the pros and cons:

  • Lock in the exchange rate (pro and con): Whenever you deposit funds to your card, you lock in the exchange rate of that day. However the currency fluctuates, you will be protected. Of course, if the fluctuation is in your favour, you’ll miss out on that benefit so it can also be a con.
  • Reload card as required (pro): You can add more money to your travel money card as it’s needed. This is easiest if you acquired yours through your bank. Simply transfer directly from your regular bank account using online banking.
  • Delays for non-bank cards (con): If your card is not through a bank, you may have to do a BPAY transaction, which could take a couple of days to appear.
  • Less risk (pro): You’re usually given a duplicate backup card so if you lose one, you simply use the other. Your card is not connected to your usual savings or cheque accounts and plus, it has a PIN for security too. If your card is stolen and the thief knows your PIN, you can cancel the card or quickly transfer the money out of it, back into your bank account.
  • ATM fees apply (con): Depending on where you are travelling, you may still have to pay ATM fees to withdraw cash.

Summary: Travel money cards offer flexibility, security and versatility but they can be expensive to use.

Credit and debit cards

When you’re used to using your credit or debit card for everyday transactions, it can be hard to switch mindset when you go overseas. So here are the pros and cons to help you decide.

  • Rewards points (pro): If your card reaps you rewards points or frequent flyer miles, you won’t want to miss those when you go away.
  • Additional travel benefits (pro): Some cards provide purchase protection and fraud protection and some even give you discounts on tickets, airfares, accommodation and purchases from partner companies. Concierge services may even be offered via your card issuer that can help you book activities in your holiday destination.

  • Expensive ATM fees (con): Hit the ATM up for a cash advance and you’ll be paying in the vicinity of 3% in fees. Also, depending on your card, you could be paying interest on that withdrawal straight away, even if you have an interest-free period on normal transactions.
  • Easy to overspend (con): Sometimes it can be tempting to spend more than you should because there’s plenty of money there. Just remember that it’s not ‘your’ money and you’ll have to pay it back when the afterglow of the holiday is a distant memory.

Your money, your choice

No matter which option you choose – credit card vs cash vs travel money cards overseas – there are pros and cons.

You have to weigh up which you’re comfortable with and which are not worth it. Two final tips though can help you to decide:

  • Calculate how much spending money you think you’ll need on your trip. Remember to include taxis or Uber fares, bus fares, meals, snacks, drinks, souvenirs, laundry fees, shopping, essentials, extra clothing for unexpected weather and so on.
  • Pay in advance for as much as you can such as flights, accommodation, tours, bus, boat or rail travel, airport transfers and equipment hire.

You may even decide on a solution that encompasses all of these options! Just be aware of all the pros and cons before you settle.