Mastering Travel Finances: Tips for the Savvy Traveler

Published 5 August 2024

The U.S. dollar remains strong against other currencies, and for savvy travelers, that means one thing: Get out the passport.

In places where the dollar is especially robust, such as Japan, South America, and Eastern Europe, globetrotters will find that luxury hotels and five-star restaurants seem like a bargain. Moreover, there are strategies to stretch your dollars even further. Here are five essential money-management tips that can save you money or reward you for your spending while you travel overseas:

1. Say “no” to foreign transaction fees

Foreign transaction fees are charges that your card issuer or bank applies when you use a credit or debit card abroad. The average fee is about 3% on each transaction; thus, it can add up swiftly, especially with luxury travel. For instance, if you charge $10,000 during your trip, you could end up paying an additional $300 in fees. To prevent this, opt for credit cards that do not charge foreign transaction fees.

2. Secure the best exchange rates

Your overseas purchases often undergo currency conversion at competitive rates when using credit or debit cards. However, not every vendor abroad accepts credit cards, and you might need local currency for small expenses, like taxi fares or tips. Therefore, avoid airport currency exchange kiosks as they typically provide less favorable rates and charge high fees.

Instead, consider ordering the currency you need from your local bank or credit union before your trip. While you might incur a small service fee, it’s likely to be more advantageous than the airport alternatives. Alternatively, once at your destination, withdrawing local currency from a major bank’s ATM can yield a fair exchange rate. Ensure that the ATM is within your bank’s network to minimize fees.

Note that some merchants abroad may offer to convert your purchases to U.S. dollars, but this often comes with unfavorable exchange rates. Therefore, paying in local currency is recommended.

3. Earn rewards while you travel

Using a rewards card that provides points, miles, or cash back with every purchase is crucial. If your current rewards card does not offer substantial benefits, explore other options. Many cash-back cards offer attractive bonuses and rewards rates, making them valuable for travelers. Furthermore, checking accounts are increasingly providing generous competitive perks, including cash back, enhancing your financial rewards while traveling.

4. Insure your trip

Unforeseen events such as missed flights, lost luggage, or sudden illness can disrupt your travel plans. Therefore, purchasing travel insurance can help protect against the loss of potentially thousands of dollars in nonrefundable expenses. Coverage often includes emergency medical care abroad, which may not be covered by your regular health insurance, and it typically costs between 4% to 10% of your total trip cost.

Your credit card may offer some basic travel insurance benefits, such as coverage for lost or delayed luggage and trip cancellations. Thus, be sure to review your coverage options before your trip.

5. Protect against fraud

Experiencing credit or debit card fraud can ruin your trip. To safeguard yourself, only take the cards you plan to use while traveling—two major credit cards are often sufficient. Keep your bank’s contact information up to date to alert them of any suspicious activity. Additionally, note the international customer service phone number of your bank to report any lost or stolen cards promptly.

Moreover, consider notifying your bank about your travel plans to prevent declined charges due to the automated fraud detection systems.

Conclusion

By following these practical money management tips, you can not only enhance your travel experience but also ensure your financial safety while exploring the world. Traveling with the right financial strategies in place provides peace of mind, allowing you to focus on enjoying your journey.