Managing money on holidays :: Business Line

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On a holiday, carry your money in a mix of cash and prepaid card and make large payments in advance, if possible.

Summer is upon us! And while it may bring in sweltering heat, it’s also time for a vacation. And if you are planning a holiday overseas, there’s enough excitement with visas and hotels and fretting over food and language.

Amidst this chaos, do spare a thought on how you’re going to take the money needed for the holiday. If you’re a newbie traveller, the choices and their pros and cons can be confusing. Your options to carry money abroad are international debit or credit cards, traveller cheques, prepaid foreign currency cards, and obviously, plain old cash.

CONVENIENCE

Coming to the pros and cons of each option, hard cash is clearly the most versatile and convenient. International credit and debit cards are convenient too. But then, forex spending overseas is capped at $10,000. You must keep note of the cash you spend or track your swiping and withdrawals to keep within the limit.

That leaves us with traveller cheques and forex cards. Both offer a wide range of currencies – US, Singapore and Australian dollars, pounds, euros, Swiss francs, yen and even dhirams . They can be used at shops, restaurants, hotels or exchanged for cash (cheques) or used at ATMs to withdraw cash (prepaid cards).

Being over-the-counter products and requiring minimal documentation, buying them is a simple process too.

Fill up a couple of forms, provide copies of PAN card, passport, visa and ticket (you will have to show the originals for verification), make the payment and that’s it. Unused amounts can be refunded from the provider, but if more overseas trips are in the offing, the cheques/ cards can be retained and cards reloaded.

But some merchant outlets may not accept travellers’ cheques these days. Exchanging them for cash will require you to go to a bank or currency exchangers – not a good idea if you’re in a hurry or if it’s a holiday on that day.

Prepaid cards negate these problems, and emerge the most convenient. Acceptance of cards at merchant outlets is very wide. Need cash? Find an ATM, and bingo! Unless you’re going to a really remote place, you won’t have trouble. Then again, if you do go to a remote place, nothing other than cash will work anyway.

SAFETY

Though cash is the most convenient, toting around wads is hardly safe. In any case, rules don’t allow you to take more than $3,000 in currency notes.

In contrast, debit and credit cards are very safe, since you have to sign the transaction slip at the time of purchase. You can quickly block them in case of theft. The same holds true for traveller cheques and prepaid cards, with the added benefit of replacements being shipped out to you (for a charge).

COST

But debit and credit cards can prove very expensive, with commissions of up to 3 per cent being charged every time you use them. VISA or MasterCard can charge a conversion fee of up to 1 per cent, while the bank itself can charge commission of up to 3 per cent. This fee applies every single time you swipe or withdraw money. You will also have to contend with currency fluctuations on a daily basis.

You won’t need to keep a watch on daily forex fluctuations with prepaid cards and travellers cheques. For better or worse, you lock into the rate on the date of card/cheque purchase. But some establishments may charge a fee for accepting travellers’ cheques.

On the other hand, swiping cards does not entail any such fee, though withdrawing cash with it carries a flat charge. Next, buying or reloading a card is cheaper since it entails a flat charge, unlike cheques where banks take a percentage of the amount as fee.

BOTTOM LINE

To put things in perspective, carry your money in a mix of cash and prepaid card. Set aside some cash for emergencies, such as card loss. Make large-value payments such as hotel bookings in advance if possible, and you can use debit or credit cards for these