Nick's Travel Tips

Australian credit and debit cards in Europe

DISCLAIMER: This information is believed to be correct at March 2012. It does not constitute formal financial advice. Everyone should always make their own enquiries about whether a financial product is suitable for their needs.

This information is intended for Australians who are going to travel overseas, particularly in France and Italy. The general principles are applicable to travellers from any country who are visiting any other country.

There is no way of obtaining foreign currency without paying some kind of charge for the service. Some charges are obvious, such as the fee your bank charges for foreign purchases with your credit card. Others are hidden: the change bureau that proclaims "No commission, no fees" makes its profit by adjusting the exchange rate. You need to be aware of both obvious and hidden charges when deciding how to obtain foreign currency.

Above all, you need to be sure that you will not suffer any financial injury. There are many financial products around that will have an effect similar to that of the weapon illustrated.

Travellers' cheques

For all practical purposes, travellers' cheques are dead: killed by plastic cards. In most European countries, they will not be accepted by any hotel, restaurant or shop. If you can find a bank that will cash a travellers' cheque, the commission may be as much as 20%. Do not use travellers' cheques.

Exchanging cash

This is an expensive option, as there is usually a poor exchange rate. Typically, there is an effective commission rate of 4% to 8%. If you use a shopfront bureau de change near a major tourist attraction, the rate may be 20%. And, of course, if you carry a substantial amount of currency, there is the danger that it will be lost or stolen. It may be worthwhile to obtain some foreign currency so you do not have to look for an ATM immediately on arrival, but otherwise do not exchange cash.

Pre-loaded travel cards

These cards are a new product that has been developed to make more money out of travellers. Look carefully at the exchange rate being offered, fees for loading extra cash onto the card, and fees for getting a refund of any amount not spent during your holiday. These factors usually make these cards poor value, and I recommend that you do not use these cards.

Obtaining money by using a debit card at an ATM

Usually the best way of obtaining foreign currency is to use a debit card to get money out of your usual bank account at an ATM, just like you do at home. You will need a debit card that has the logo of one of the major ATM systems: Visa, Mastercard, Cirrus, or Plus. In general, banks in Europe do not charge for ATM withdrawals, so any charges come from your bank. However, many Australian banks have quite high fees. There are at least two ways around this.

The best option seems to be a Citibank Everyday account, which has no fees at all for overseas withdrawals. An NAB Gold account does not charge any fees for overseas cash withdrawals. There is a $10 monthly fee on the account, which is waived if at least $5000 is put through the account in the month (probably not difficult when you are on holiday). In any case, $10 represents only the fees charged by many cards for four overseas withdrawals. An ING Everyday Orange account has no monthly fees, no fees for ATM withdrawals in Australia of $200 or more, and a flat fee of $2.50 for foreign withdrawals.

Remember that a debit card is usually not accepted when you rent a car: a credit card is required.

Update at 18 April 2012: The NAB has advised that, from 10 August 2012, it will be applying fees for overseas ATM withdrawals from a Gold account of $4 plus 2% of the transaction. Therefore it will not be worth having one of these accounts for overseas travel.

Credit card purchases

It is a good idea to use your credit card for larger purchases, but many Australian banks have quite high fees. The best solution is a 28 Degrees Mastercard (www.28degreescard.com.au), which has no fees for overseas purchases. If you want to, you can put the account into credit and then make cash withdrawals without any fees. However, this card should not be used unless you are sure you can pay off your purchases in full each month: the interest rate if you don't pay is around 20%.

Disclaimer

We know from personal experience that the NAB Gold account, the ING Orange Everyday account and the 28 Degrees Mastercard provide exchange at a rate very close to the official inter-bank rate. We do not have experience with the Citibank Everyday account, and so do not know whether it adjusts the exchange rate. The inter-bank exchange rate can be obtained by asking Google for "1 AUD IN EUR". If anyone uses the Citibank Everyday account, perhaps you could note the inter-bank exchange rate on the date of a withdrawal, compare it with the rate given by Citibank, and contact me with the information.