DISCLAIMER: This information is believed to be correct at 22 June 2015. 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.
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.
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 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. The OzForex card seems to be the best value, but it still has a 2.99% fee.
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 Plus account, which has no account fees and no fees at all for overseas withdrawals or purchases. The card supplied with this account is a Visa card that can be used for cash withdrawals and for purchases. An ING Everyday Orange account has no monthly fees, no fees for ATM withdrawals in Australia of $200 or more, a flat fee of $2.50 for foreign withdrawals, and a 2.5% charge for overseas purchases.
In the USA, the ATM may charge a fee for a cash withdrawal. This can usually be avoided if you use an ATM that is affiliated with the bank that issued your debit card. Citibank lists affiliated ATMs on its web site. For other banks, ask at your bank.
Remember that a debit card is usually not accepted when you rent a car: a credit card is almost always required.
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 either a 28 Degrees Mastercard (www.28degreescard.com.au) or a Bankwest Zero Platinum Mastercard, both of which have no fees for overseas purchases. These cards 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 currently 20.99% for 28 Degrees or 17.99% for Bankwest.
Note that these cards are intended to be used as credit cards. They will allow users to load the account with money but a cash withdrawal fee will be charged even if the account has a positive credit balance. The fee is 3% of the amount withdrawn or $4, whichever is the greater with 28 Degrees of 2% with Bankwest. I recommend that you use 28 Degrees or Bankwest as a credit card, and use a Citibank Plus account for ATM withdrawals.
Dynamic currency conversion
Sometimes when you make a credit purchase or an ATM withdrawal, you may be asked if you want the "convenience" of being charged in Australian dollars. Do not accept this offer. The exchange rate will be poor, and your bank will still apply any fees charged for an overseas transaction. Insist on being charged in the local currency.
For example, in April 2015, I had a Hong Kong hotel account for $2640 HKD. The hotel offered to charge me that amount as $380.11 AUD. I elected to be charged in HKD, and my 28 Degree card statement showed that this was converted to $367.58 AUD. In other words, electing to be charged in Hong Kong in AUD would have cost me an extra 3.4%.
Some travellers have reported problems when their bank's fraud protection software has noticed unusual activity and the card has been blocked. To reduce the chance of this happening, contact your bank(s) and say which countries you will be visiting.
It is also a good idea to take more than one card. When we travel, we each have a 28 Degrees and a Citibank Plus card, on separate accounts. We also take our usual Visa credit cards and ATM debit cards as a backup, again on separate accounts.
We know from personal experience that Citibank Plus account, the ING Orange Everyday account and the 28 Degrees Mastercard provide exchange at a rate very close to the official inter-bank rate. The inter-bank exchange rate can be obtained by asking Google for "1 AUD IN EUR" or "1 AUD IN USD" or whatever currency you require.