With advances in technology and improved systems for taking your money with you safely and securely when visiting foreign countries, travellers are increasingly seeking complementary solutions to make their finances portable and available when they need them.
According to David Weideman, Head of Retail Foreign Exchange Marketing at First National Bank`s International Banking division, several financial solutions are available to address the specific requirements of travellers and have differing advantages that can be leveraged for the best benefit in terms of security, safety and convenience.
These options include travellers cheques, foreign notes, credit cards and debit cards. Weideman suggests looking at the differences in the products before making a decision on which financial solution suits your needs, as this will more than likely be a combination rather than an isolated product.
According to Weideman, travellers cheques are still widely used despite the emergence of internationally accepted credit cards and debit cards. "South Africans, in particular, tend to favour paper-based systems. As such, the travellers cheque, a `traditional` payment mechanism that offers the benefit of portability and security, remains a popular choice for many travellers. It also fixes the rate of exchange at the point of purchase," he says.
However, Weideman notes that commissions paid on the exchanging of travellers cheques for cash can be very expensive.
Despite the prevalence of travellers cheques, he explains that people tend to unwittingly `misuse` them to their own detriment. "People forget that a travellers cheque should not necessarily be cashed, but rather used as cash. Using the cheque as cash to pay for goods or services does not draw a commission, as opposed to when they are cashed," he explains. "Not only do you save on the commission, but you receive change from the transaction in cash, which can be used for smaller purchases such as a cup of tea at the train station."
For example, if you took a lb50 travellers cheque to London and cashed it at a bureau de change you could pay as much as lb6 commission on the transaction. If you used this cheque to pay for a meal of lb25, you wouldn`t pay commission at all and would receive lb25 cash in change.
With internationally acceptable credit cards and debit cards it is quite possible for holidaymakers or businessmen to traverse the globe without a single travellers cheque or any foreign currency. "These cards are accepted around the world, and can even be used to draw money at participating ATMs. Credit cards and debit cards are immensely practical and, as such, are indispensable for people on the move," says Weideman.
"There is a misconception that drawing money with a credit card or debit card is more expensive than buying travellers cheques," continues Weideman. "But, when you take commission charges into account, the convenience of credit cards and debit cards could outweigh that of the travellers cheque."
He adds, however, that unlike a travellers cheque, credit cards and debit cards leave the user at the whim of exchange rates, which might work favourably - or not. If, for example, you flew overseas during a volatile period in the currency markets, it would not be beneficial to have only a credit card or debit card as a means of transacting, as the foreign exchange rates could move against you by a significant margin.
Finally, the oldest method of taking cash with you remains popular and is always useful. "Foreign notes give the holder a sense of comfort and, of course, are greatly useful for small purchases in the country of your destination - coffee, taxi rides, newspapers and tips. Cash in the pocket is always a good financial solution for the traveller. However, there is always the risk of losing cash or having it stolen with no recourse," he says. "Credit cards and debit cards can be re-issued with ease and travellers cheques could be replaced, but cash, once taken or misplaced, is lost."
Weideman suggests that travellers make use of a combination of these financial mechanisms when going abroad. "Having a back-up is advisable - if your credit card or debit card should get swallowed by a machine, you`d want your travellers cheques or cash handy. If your wallet gets lost or stolen, you might have some cash or cheques in your luggage. It`s always a good idea to have a contingency plan in place wherever you are so you`re not caught without any means to pay."
First National Bank is a division of FirstRand Bank Limited.
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