Difference between revisions of "Money"
Revision as of 21:26, 26 April 2013
This article is a travel topic
Information on using money is covered in the "Buy" section of destination guides. This article contains general information useful in many destinations.
There are a number of ways to obtain and exchange money while traveling. You are always trading off expense, risk, and convenience. Unfortunately, organized and other criminals have developed numerous ways to take your money. Credit cards have legal limits on how much you are liable if used illegally. Debit and ATM cards have other risks/benefits. This article discusses how to use them, their risks, and how to obtain currency or cash.
Debit, credit and prepaid cards
Debit/ATM and credit cards can be used to withdraw cash from automatic teller machines (ATMs) and to make purchases at stores, restaurants, and hotels where they are accepted. Debit cards are sometimes known as "check cards" because they generates a withdrawal from an associated checking account when they are used.
Acceptance of debit and credit cards at point of sale
The acceptance of debit and credit cards varies by country, with acceptance generally being more common in more developed countries, and close to non-existent in non-developed countries. Check the country guides for details on credit card acceptance.
By far, the most accepted cards worldwide are VISA and MasterCard. American Express and Diners' Club cards have global networks but acceptance varies widely depending by country and merchant. Discover, JCB, NYCE, Star, MAC, and Shazam are regional, not global, and are rarely accepted outside of the region they are issued in, and, even then, acceptance is often limited to areas catering to visitors from that region.
Split-tendering, which is the practice of paying part of the transaction in cash and the balance using a card is usually allowed. You just need to inform the staff at the till that you intend to do this.
Acceptance of debit and credit cards at ATMs
Mastercard, VISA, Cirrus, and Plus are accepted at nearly all ATMs worldwide. As prompted while you use it, you "identify" yourself to the servicing banks for that machine and your account by entering a Personal Identification Number (PIN) after you have inserted your card and its data has been read. Because it makes so much possible, never keep your PIN near or write it on the card it activates.
Some developing countries either have no ATMs, very limited ATMs, or are not connected to the international networks. This includes Myanmar in Southeast Asia, as well as parts of Africa. In Japan, most bank ATMs don't work with international cards (the cards are even an incompatible size), so you need to look for a post office, 7/11 or Citibank ATM. In certain countries, not every ATM accepts foreign credit or debit cards. So check in-advance about what's available, and do what's necessary to ensure you have adequate cash during your travels.
When in an unfamiliar location and you have any choice, use an ATM in a bank lobby or highly public place, e.g., airport lobby. This helps to avoid scanners/cameras secretly installed by criminals, and it greatly reduces the risk that you might be robbed after securely withdrawing cash. In addition, "official" ATMs placed in such areas by major local banks tend to better protect your data as it is transferred between the ATM and your bank's account.
Debit versus credit cards
Debit cards are linked directly to a bank account and immediately deduct the amount of the purchase or withdrawal from the account. Credit cards are cards that are not linked to an account with funds in it, but instead charge against a credit line, which must be repaid at a later date. If the charges are not repaid before the end of a grace period (variably 0-25 days), interest will be charged...perhaps daily.
ATM-only cards (aka ATM cards) (often without a Visa or Mastercard logo) are intended only for use to withdraw cash at ATMs. See "Debit and ATM cards: Risks/trade-offs" below.
When using an ATM to withdraw cash, it is much more expensive to use a credit card than a debit or ATM card. Using a credit card, you will typically be charged a cash payday advances fee of ~3% on top of foreign exchange and other transaction fees. In addition, most card issuers will start charging interest on your cash advance the day you withdraw from the ATM (i.e., they won't give you a grace period) unless you have a credit balance on your account. In addition, the interest rate for cash advances is generally much higher than for purchases. In most cases, cash advances are limited to a small portion of your overall credit line.
Despite the fees you or the merchant pays, when making point-of-sale purchases, it is usually better to use a credit card than a debit card. If your card is stolen, your liability may be limited by law (for U.S. banks, $40 for all subsequent misuse), you can easily dispute the charges on a credit card, while a stolen debit card may lead to an overdrawn bank account requiring many additional hassles (again see "Risks/trade-offs..." below).
As above, credit card companies will protect you if you are charged more than you agreed to pay, if you pay for something and never receive it, or if your card is cloned (duplicated) without your knowledge and then used for fraud without being physically stolen. You'll often receive a better exchange rate if you have the merchant charge the amount in local currency. That way, you receive the bank's exchange rate...usually substantially better than that offered by merchants.
Credit cards may also include other benefits such as cancellation insurance for flights (usually only in the case of serious sickness), theft or loss insurance for goods (usually only if stolen within 90 days of purchase and a proper police report is filed), collision insurance for rental cars, and emergency health insurance in certain situations while you are travelling.
Credit cards may provide rewards programs that give you free flights or cash back after a certain amount of spending. The cards may be linked to a frequent flyer program. If you have an American Express card, in case of a lost or stolen card, you can obtain cash advances and replacement cards easily, by visiting and American Express Office.
Traveling with debit and credit Cards
Your bank and experienced travelers regularly recommend that you:
Many credit cards issued in Western Europe feature a chip and PIN system, where credit cards all have a chip built in and you have to type your PIN code into a reader instead of signing a receipt.
Many Visa or Mastercard debit cards (mostly found issued by banks in Asia) are not embossed (no raised letters/numbers), hence they are indicated as "For Electronic Use Only." This means that they can't be used for transactions that require physically imprinting on a merchant's charge slip and/or manual authorization. Acceptance of these "Electronic Use Only" debit cards for online purchases may not be guaranteed even with sufficient funds, and may need clarification with the issuing bank. Consult the issuing bank about how to effectively use one.
Debit and ATM cards: Risks/trade-offs
The risks for debit versus ATM cards are somewhat different and at times much greater for debit cards.
Some experts suggest that frequent travelers, and those who must use ATMs in less-desirable locations, consider obtaining and using an ATM card instead of a debit card. The basic rationale is:
As above, you can and need to help avoid trouble by notifying your bank about your travels in-advance, and your intent to make withdrawals only in certain amounts at certain destinations on certain dates.
Card usage fees
Transaction fees can be charged by the merchant, the ATM-owner, the bank that issued the card, and in-effect through an unfavorable exchange rate.
In some countries, it may be possible to get a VISA, Mastercard or American Express-branded prepaid card. This prepaid card works similarly to a VISA/Mastercard debit card except that it is technically not a bank account. Since it's not a bank account, your money in your main bank accounts remains safe.
Prepaid cards may or may not be capable of being topped-up, depending on the issuer's policies . In the case of the latter, it means that once the balance is completely depleted, the card can't be used anymore and must be disposed of. However for cards that may be topped-up, they can be done so in the issuing banks or online. You do not need to have a bank account with the bank that issued the prepaid card but having one has advantages such as more convenient options to top-up your card (e.g. online, via ATM). There is usually no minimum denominated amount for top-up. With that, you can only top-up the amount you need for a certain number of transactions.
Availability within each country varies. Some countries like the US have prepaid VISA, Mastercard and American Express available at the counter of pharmacies or grocery stores; they just need activation at the purchase point. Others will allow you to get them from well-known foreign exchange stands (e.g. Thomas Cook, Travelex). But a few will only make these cards available directly from participating banks. Sometimes these cards may be branded as gift cards but you can gift them to yourself. Depending on the issuer, the fee that you will pay may be for just the card itself or can contain consumable credits. Identification is often required.
Generally, these prepaid cards can be used worldwide unless indicated otherwise (most notably, generic VISA, Mastercard and AMEX gift cards issued in the US). However online use of prepaid cards depends on the issuer.
Prepaid cards may or may not allow withdrawals from the ATM (depending on the issuer) and those that do may assess an additional fee on top of the usual fees imposed for withdrawals using a debit card since a prepaid card is supposed to encourage electronic POS transactions.
If you are Australian you can buy a Travel Card from the Commonwealth Bank for $15. This works the same as a debit card and you can load up to six different currencies on to it. The Travel Card works out a lot cheaper than if you were to use a Debit Card to access your money, and has other benefits such as a spare backup card in case your main card is stolen or lost. In that case the main card can be easily deactivated from the Commbank website, you can also add more money to your card with your Netbank account.
A traveller's cheque is a cheque issued for a fixed amount in a specific currency that you purchase with your funds in advance. Be sure to get the cheques in the currency of the country to which you are travelling, or (if that's not possible) whichever one gives the best exchange rate there. Traveller's cheques are available only in major currencies. For example, if you are travelling to the USA, you could purchase ten US$100 traveller's cheques before you travel there, and use them when you arrive. You sign each cheque when you purchase it and again on the same cheque to redeem it.
The main advantage of traveller's cheques is complete protection against loss or theft. Once you report them as missing, the issuing company will replace them. You must also keep a record of your used cheque numbers. Most traveller's cheque issuers have arrangements to replace them around the world in a short time frame so you are not long left without cash. If you are unsure which cheques you have already cashed and which are missing, your refund may be delayed until the issuer can figure out which ones have been presented.
Traveller's cheques can be exchanged for cash at most banks. Exchange bureaus will also usually cash them, and a hotel may sometimes provide this service to its guests. American Express traveller's cheques can also be exchanged at American Express travel centres. Fees for cashing traveller's cheques vary by destination and institution. Some banks will cash some brands of cheques free. American Express will cash their cheques free at their travel centres if they are in the denominated in local currency. Often, fees apply, a sliding scale or a flat fee that may apply only above a certain threshold. If you are cashing traveller's cheques into different currency to their denomination, fees may also be built into the exchange rate.
Traveller's cheques are particularly useful in the United States and Canada, as the banks will cash cheques from major issuers (such as American Express) that are issued in the local currency without charge. As a result, almost all supermarkets, stores and tourist companies will accept them like cash. If you can purchase the cheques at a good rate they can be the best way of taking money to the US and Canada.
Traveller's cheques can also sometimes be used for purchases at point of sale, although less widely than credit cards. In general, only the largest stores and hotels will accept traveller's cheques for payment.
You will pay a fee to buy traveller's cheques. If they are denominated in a foreign currency, this fee may be built into the exchange rate.
If you are buying traveller's cheques in a foreign currency, you lock in the exchange rate on the day you purchase the cheques. Buying traveller's cheques prior to travel in small increments can sometimes have the effect of averaging out the exchange rate you obtain, and you don't have the risk involved in keeping foreign currency cash for extended periods.
If you have travel insurance, you may care to compare the benefits under your policy. Credit card companies will usually offer a 48-hour emergency replacement or cash advance service for a fee, and these fees may already be covered under your policy.
When you are visiting a developed country where your credit or debit card works, these electronic forms of payment are almost always better than traveller's cheques. You won't have to find a bank or merchant that accepts the cheques (and bankers' hours are often inconvenient), and you won't have to guess in advance how much money you will need. This avoids unnecessary fees if you guess too high and running out of money if you guess too low.
Personal Cheques and Manager's Cheques
A less widely-accepted cheque used for travel is the personal cheque issued by your bank. Cheques are provided if you have a current account with your bank. Should you run-out of cheques, you will need to pay a fee to reorder a new chequebook. Acceptance is typically confined to to the traveller's home country and in the home currency. Another consideration is that you need to ensure that associated account is adequately funded otherwise it will result in hefty service fees, not to mention a possible blacklist on accepting cheques from you at the establishment's discretion. That said, the main advantage of using a personal cheque is security. As long you don't put "CASH" in the pay to the order of line, you shouldn't worry if the cheque is misplaced on either side; you can contact the bank to cancel the cheque and the one who gets a hold of the missing cheque can't cash it for himself. Should you wish to use a cheque, make sure that you address it to the correct person or company (i.e. as much as possible, use their complete names).
Manager's (or Cashier's) Cheques are cheques that are issued and purchased directly from a bank. You need to fill-out some paperwork and there is a fee for every request. You have to give your name, contact details and the name of the person or company who will receive your payment. Unlike the personal cheque however, the manager's cheque is always adequately funded since you already paid it with cash at the issuing bank.
Cash is the most versatile method there is. Aside from some car rentals, airlines (while onboard), and a few gas stations, virtually everybody takes cash.
In some countries, you may be able to get by entirely with U.S. dollars or another major currency. However, this will often be at an additional expense as the exchange rate offered by merchants and hotels can be unfavorable. Merchants in border communities may accept currency of neighboring currencies. For example, northern border areas in the United States may accept Canadian coins on par with corresponding U.S. coins but not Canadian dollars, and, in the U.S. South, a Canadian quarter is usually worthless. Macau practically accepts Hong Kong Dollars at a 1:1 basis with the Pataca and the difference is not noticeable for smaller transactions. However exchanging Macau's money back into Hong Kong Dollars outside Macau is quite expensive if not impossible, even in Hong Kong. Another example is Malaysia and Singapore where cross-border transportation-related charges are accepted in either currency at a 1:1 basis so it is greatly disadvantageous to use Singapore Dollars instead of Malaysian ringgit when for instance purchasing train tickets or paying for tolls.
For remote travel, be sure to bring notes from your own currency only in good condition and only the most recent redesign (unless it's really new). Banks at your destination cannot easily or cheaply exchange worn-out currency for replacement as they can with their country's own currency. Worn paper currency may be devalued--if it is accepted at all. Even if in good condition, previous designs of your currency may not be accepted due to counterfeiting concerns. If possible, go to your bank early in the day, and well before the departure date, and ask for "like-new" currency.
The biggest disadvantage to cash is the risk. If you lose it, you can't get it back, and if someone finds out you have a large wad of cash, you become a potential mark. Some defences are discussed in the pickpockets article, but there is no complete defence — carrying cash always involves a risk. Travel insurance may cover a theft of cash to a certain value.
When you use local money, familiarize yourself with the basic note designs and their security features (watermarks, holograms, etc), and watch out for counterfeits and obsolete currencies. Banks and money changers (operating out of an office, not flashing wads of cash from a coat pocket) are nearly always safe, but taxi drivers and petty traders may be tempted to palm off useless notes. When in doubt, reject unfamiliar notes. Also, be particularly suspicious of large notes, as they are more commonly faked.
Where to get or exchange cash
In many developed countries, the best option (given the convenience and typically good exchange rate) is to use an ATM in the destination country instead of bringing large amounts of cash to exchange. There are modest fees, some fixed per transaction, others as a percent of the amount withdrawn. The fixed fee(s) mean you should withdraw whatever substantial amount you may need for a few days in the area where that currency is used. Occasionally, ATMs offer more than one currency, often driven by their location and customer base. ATMs in developed countries may offer more than one language for use, also depending on customer base.
In contrast, there are typically larger fees and or poorer currency rates (noted below) associated with currency exchange. You should not exchange more than you need. Money exchanges work on the basis of selling a foreign currency at one rate and buying at another. Make sure that you know the current interbank exchange rate before you leave home . Where there is more competition, the rates are likely to be better.
The most convenient location (such as at airports, malls or major hotels) can be the worst rates available for exchanges. If possible, check the difference (or spread) between "we sell" and "we buy". When this is more than 10%, you're definitely being ripped off. The best exchanges can go as low as 2%. Also, check if there is an additional commission for each transaction and its amount. Exchange counters such as those associated with jewellery stores or pawn shops usually have fairly reasonable rates. Exchanging foreign currency directly with banks is usually possible but some banks will only entertain you if you have large amounts. In addition, some banks will require you to fill-out some paperwork and/or show a valid ID. Another disadvantage is that they mostly have limited operating hours so during weekends and holidays, you're out of luck.
In some cases it may be better to exchange your money before you leave, in others it may be better to do it in your destination. As a general rule, the lesser-known currencies in the world have less favourable exchange rates abroad. In fact, they may first be converted to a well-known currency like the USD before being converted back into the host currency also at unfavourable rates. If this is the case, convert your home currency into a major currency (usually the USD) before leaving then exchange that major currency into the host currency when you arrive.
Most major currencies are subject to counterfeiting these days. Study the notes of the currency of the foreign country to become familiar with how it is supposed to look and feel. Almost all currencies employ anti-counterfeiting technologies, including colour shifting ink, watermarks, special threads, iridescent inks, raised printing, holograms and other features. Be familiar with them so that you can quickly check them when you get a new note whether it is as change or from a money exchange. If you are unsure, don't be afraid to say that you would rather get a different note or say you would rather get two smaller notes for change. (For example, if you get a 10 in change that you don't like the look of, ask for two 5s instead). If you end up with a counterfeit, you won't get compensated after you leave whoever gave it to you, and you may end up having to explain it to the police.
A convertible currency is a currency that can be easily converted into another country's currency; conversely, an inconvertible currency is theoretically worthless outside its country of origin. A few countries, like Cuba, still issue one convertible currency for tourists and one inconvertible currency for locals. In some countries like Tunisia and India, importing or exporting (inconvertible) dinars and rupees is technically a crime, although such regulations are rarely enforced for small amounts. Still, find out the laws beforehand and follow them.
Convertibility is set by law and not always entirely reflected in reality: some currencies like the Indian rupee are inconvertible in theory but fairly easy to trade in practice, while others like the Swazi lilangeni are fully convertible in theory but almost impossible to sell or buy in most of the world.
Despite the name, inconvertible currencies can often be purchased at a discount outside the country of origin as people holding onto them want to get rid of them. Finding somebody to buy them is more difficult. Also note that state-run shops in some countries will also insist that tourists produce certificates of exchange to prove that their money was obtained from a legitimate source like a local bank at the official (usually poor) exchange rate, and such certificates are also often required if you want to change back any unneeded money within the country.
If travelling to a country with an inconvertible currency or one that you can't, in practice, buy or sell in your home country, you should convert all your money to a major international currency before leaving the country. In general, these currencies can be exchanged at banks anywhere in the world: U.S. dollar, euro, British pound, Japanese yen, Swiss franc, Australian dollar, and Canadian dollar.
In many poorer countries with inflationary, unstable, and/or inconvertible currencies, a foreign hard currency may prove more useful than the local currency. Although its value fluctuates, the "gold standard" for currencies remains the U.S. dollar, the largest denomination of which is the $100 bill. It may be accepted as payment directly by locals, though not necessarily at a good exchange rate. In fact several countries in the Caribbean, the Americas and Southeast Asia use it as their de facto – or even official – currency. The euro is also increasingly well accepted, at least in regions with many European visitors, and small countries with economically powerful neighbours may also accept regional hard currencies (such as the Thai baht in Laos and Cambodia, the Australian dollar, or sometimes the New Zealand dollar in much of Oceania).
You can use hard currency when haggling with locals by offering hard instead of local currency. Use the conversion rate to your advantage and make an offer in hard currency. Showing a few U.S. dollars in the process might help but be sure to show only what you are willing to pay. Also, if you plan on haggling, be sure to have small notes available so you don't need much change back, especially if you just haggled a price much lower. You don't want to be giving a vendor 50 for an item worth 5; you'll be inviting the vendor to try to sell you more things or, even worse, let nearby pickpockets know how much you have.
It is wise to carry an emergency stash of hard currency separated from all your other belongings and valuables. Some businesses that deal with a large number of foreign tourists may also accept foreign money but almost always at an inferior exchange rate to allow for the inconvenience.
Black market exchange
In some countries the official exchange rate is fixed at a completely unreasonable or unrealistic rate. In these countries the black market will provide a much more realistic evaluation of the currency's worth and is practically unavoidable. For example, in 2007, the official exchange rate was 250 Zimbabwe dollars to the US dollar, while the black market rate reached 600,000.
That said, the risks of black market exchange are legion. First and foremost, black market exchange is illegal and both buyer and seller may face severe sanctions if caught: the seller may even be (or work with) a police officer out to trap tourists. Second, the risk of fraud is high: you may get obsolete banknotes, fake banknotes, less than the promised amount or nothing at all. Consider carefully whether you need to exchange in the first place, as businesses in countries with basket-case currencies will often be more than happy to accept hard currency directly instead (although this, too, will often be illegal), and you may get all the local currency you need back as change.
Change only a bit at one place and the rest elsewhere so that if you are scammed, it will be less of a loss.
The key guideline to successful black market transactions is to receive the money before you hand yours over. Count the notes, inspect the notes carefully, compare them to any you already have, and, only then, surrender your own money to the vendor. Do not allow them to take back the money they gave you, as this is where various sleight-of-hand tricks can be pulled to replace the legitimate bundle with something entirely different.
In countries where foreign exchange rates are reasonable, e.g. the Czech Republic, Serbia and Russia, it is best to avoid the black market entirely: you risk losing all your money for little gain at most.
An exception may apply in countries such as Nepal and India where doing a legal exchange at a bank can involve wasting an hour or more but most hotels will change money for you instantly and fairly safely. The rate may not be much better, but the convenience is.
You can't exchange coins once you have left a country in which they are legal tender. Exchange them before you leave (either for local banknotes or for your home currency though the latter is may not always be possible), drop them in a charity box, or souvenir them. Becoming familiar with coins and currency for your destination country and not mixing coins from various countries in your purse or pocket can save you collecting too many coins before you depart. To avoid accumulating too many coins in the first place, use them as much as possible to pay (instead of notes) during cash transactions. Some countries have coins that are relatively large in value (such as 5 Swiss francs, 2 Canadian dollars or 5 Bosnian convertible marks), which are advisable to spend first. At the airport, where debit/credit cards are usually accepted for any amount, you may opt to split-tender your transactions where the coins will fulfil the cash part hence reducing the amount (even slightly) charged to your account.
Carrying money across national borders
Countries track large movements of money across national borders. This is mainly to alleviate money laundering and cash transfers to criminal syndicates. If you transfer money between international bank accounts, this is done automatically, but if you carry large amounts of money (typically more than $10,000 US, Euro, or similar hard currency) you will need to declare it. Don't forget monetary instruments such as traveller's checks count as well.
The rules about personal and business checks can be confusing. If the check is "cashable" and payable to yourself, a traveling party, etc., that counts against the total. But, when abroad, you can mail a check to someone in your home country (or do it online) provided the bank in which the check is drawn is located in the same country as the payee. (If not, you must report.) In other words, the funds never accompanied you, and you're just giving permission to your home bank to pay someone domestically. Having to pay taxes is not an excuse for non-reporting, but then again, the funds to pay them would have to be located in another country for these rules to apply.
Some nations (mostly third world) have such a low import/export limit in the country's home currency (but not US dollars or euros), that these limits may represent pocket change. Often, this is due to local laws not having been updated for hyperinflation. However, in such cases, the currencies are generally not convertible abroad, and/or the rules not always strictly enforced.
Getting money in an emergency
American Express credit card holders can get emergency cash in the form of its traveller's cheques at foreign American Express offices, and designated affiliates (often a travel agency or bank). If the location is not a bank, you will have to go to one or a foreign money exchange to cash the cheques. Be sure to bring a blank cheque from your checking account back home or at least know the routing and account number (the digits printed at the bottom of each check). There is a one percent fee for issuing the traveller's cheques, and the total sum is NOT a cash advance on your American Express card. They will cash advance your credit card without further permission from you if there's a delay in cashing the check, though. Keep tabs on your checking account, and make sure it clears in a few days. Also, there's no requirement that you're destitute, as the service is available for whatever reason.
If you have someone willing to send you money, there are several options for getting money fast in an emergency. These include the following: