Between climbing the Eiffel Tower to tossing a coin into the Trevi Fountain, traveling is filled with experiences you'll never forget. But before you can take the trip of a lifetime, first comes the tricky bit: choosing how to pay for it all. Because regardless of whether you plan on keeping to a budget or living large, choosing the right travel card is essential.
According to Mozo research last year, Aussie travelers were estimated to have wasted $385 in unnecessary fees just by choosing the wrong travel money option. So, if your next getaway is right around the corner, here's a breakdown of the different travel money options available…
Prepaid Travel Card
What they are: Also known as a 'cash passport', prepaid travel cards allow you to load up currencies of your choice onto the card. You can then use the card like a regular debit card to spend or withdraw money.
Pros: One benefit of using a prepaid card is the convenience of being able to take the card to most destinations in the world. Just keep in mind that these cards are not available for every currency and that there's usually a maximum currency amount per card. These cards also have exchange rates, which can be 'locked in' before you leave to safeguard your money against any drops in the Aussie dollar while you are traveling. And since you'll be using your own money, prepaid cards are a great way to ensure you don't go overboard and stick to a budget.
Cons: Some common prepaid card fees include reload and cross currency conversion fees - a reload fee is the cost to top up your card with additional funds while you are traveling. These can either be a flat fee or a percentage of the load amount. A cross currency conversion fee is only charged if you make a transaction or withdrawal in a currency not loaded on your card. So if you do opt for a prepaid card, be certain on the spending money and currencies you need.
ATM withdrawal fees are another thing to be aware of and can reach upward of $5 a pop. While that might not seem like much, if you make two withdrawals a day, you would've wasted $70 in fees by the end of the week!
Travel Credit Card
What they are: Just like a credit card you'd use back home, a travel credit card can be used for everyday spending or in case of emergencies when you're on holiday.
Pros: Many travel credit cards often come with rewards programs that allow you to earn points that can be put toward free flights, gift cards, and other freebies. These cards are also usually jam-packed with travel-friendly perks and features, such as complimentary travel insurance and exclusive airport lounge access.
Cons: All these luxe perks come with a price tag to match, as travel credit cards more than often have hefty annual fees, interest rates above 20% and foreign exchange margins over 3%.
According to research by Experian, three in five Aussies didn't immediately pay off their holiday debt when they returned home, with younger Aussies taking one month to two years to repay their balance.
Turning a blind eye to debt like this could see you accrue interest quickly, so make sure you'll be able to pay down your holiday debt before things get out of hand.
Travel Debit Card
What they are: This is just like your regular debit card that's used for daily transactions, like buying groceries or paying bills but has travel-friendly features like no foreign exchange fees or overseas ATM charges.
Pros: Using your day-to-day debit card means you'll be spending your own money and will avoid travel debt. Most cards also come with no ATM withdrawal or foreign exchange margins, which could save you a bundle in unnecessary fees. In fact, according to the Mozo database, there are 10 debit cards that don't charge either, so it really pays to do your research and shop around!
Cons: Using a debit card means missing out on earning points and cashing in perks, which could be handy to have if you're someone who travels frequently. And since every dollar you spend is your own, you'll need to make sure your account balance is always full and can keep up with your holiday spending.
About the author
Ceyda Erem is a personal finance writer at financial comparison site, mozo.com.au. She's passionate about helping Aussies live the life they want, without breaking the bank.
When she's not staying on top of the latest banking news or looking after the Mozo Facebook page, Ceyda's catching up on true crime podcasts.