Updated: Oct 3
Money management is different than knowing how much money to bring on a trip. The trick is how not to become a victim of your own ignorance when dealing with foreign money situations. Good money management begins with some pre-planning at home then following these simple tips to avoid simple mistakes. Understanding when to pay cash or use your debit or credit card, using foreign ATMs and avoiding the cash trap are all critical to overseas money management and avoiding potential scams or frozen accounts.
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Money Management Before Your Trip
This is a critical step before you go overseas. What’s the correct amount of cash to bring and for what countries? Order cash in advance at your local bank, but remember that showing up with a wad of cash in your pocket is never a good idea (if anything, split that wad across multiple places in your carry-on luggage).
Living in Florida, we always hear of tourists carrying thousands of dollars in cash for their vacations and getting it stolen from their person or out of their hotel room safes. It’s never a good idea to carry that much cash. It's better to have a good money management plan and avoid the money traps.
Part of this plan is to think ahead for how to obtain more money abroad (since you're only taking a small amount out at home).
You may have to get pre-authorized by your bank before your leave home to do this but it’s a must to avoid a frozen bank account. Foreign ATMs will lock you out if the debit card is not authorized for oversea use. Simply send your bank a travel form request through the bank's website before you travel.
Many credit cards still operate this way as well, so inform them of your travels in advance or your card will also be frozen, rendering it completely useless on your trip.
Smart Money Management While You are Traveling
Only Use Cash When Absolutely Necessary
Since the cash you brought is limited, you need to preserve it for the instances where you can’t use your credit card. I always charge purchases in reputable places like hotels, restaurants and shops and never at flea markets or street vendors. I charge everything regardless of how small the purchase.
It is not uncommon for vendors to have a minimum purchase amount or complain that their credit card machine is broken so you are forced to pay cash.
Keep this in mind and again, always have cash on hand for when it's needed.
When paying cash have a few small bills in your purse or pocket. Never pull out your money wad and scroll through the bills. You never know who’s watching.
Come with Two Types of Credit Cards
As for credit cards, Visa seems to be the credit card of choice overseas. Most establishments take Visa and Master Card. Some take American Express and Discover but mostly major hotels and large restaurants. Don’t be shy to ask up front if they take your credit card.
I was embarrassed once when taking a client to dinner and having him pay cash when the restaurant refused my American Express card. I didn’t have a Visa card on me or enough cash to cover the bill. The lesson learned is to carry two different types of credit cards with you, one being a Visa.
Also, if you share a credit card number with your spouse, for instance, make sure that's not the only credit card amongst the two of you. You may get your card stolen and have to cancel both cards, leaving you S.O.L. for options.
Always have two types of credit cards.
Pay in the Local Currency
A very important credit card tip is to pay in the local currency when given the option on the charge machine. Not all credit card purchases ask if you want to pay in local currency or US dollars. It’s always tempting to say US Dollars because then you know the exact amount but DON’T.
There is a third party that does the exchange and charges you a fee that is not visible. The only way to detect the fee is if you divide what you paid by the exchange rate.
Always pay in local currency.
Keep Eyes on Your Card at All Times
Another credit card tip is never hand your credit card to anyone overseas and never let it get out of your sight. Almost all restaurants bring a credit card machine to your table. They use wireless payment and expect you to tap your card on the machine to pay.
You can also use your watch or phone if you have preset up your Apple Pay or Google Pay wallets. That’s my choice and I never pull out my wallet or credit card in public.
In some establishments you may have to get up and walk to the cashier that has the credit card machine wired to the register inside the restaurant. Never give your credit card to the waiter like we do here at home.
I don’t trust anyone when it comes to my money.
Cautiously Use the ATM
ATMs are everywhere when you travel but they are all not created equal so beware. Try to use a bank affiliated ATM. Avoid the ATMs in stores and small establishments. These are usually privately owned and charge extra fees.
There is no avoiding ATM fees unless you have a debit card from the overseas ATM bank. The fees are not out of line but just be aware of the ATM you are using.
I went to withdraw money from a German ATM when I realized at the last button push that I was actually at a post office machine that looked like an ATM! I almost had a $500 worth of German stamps to bring home.
Never Use Your Credit Card as an ATM Card
The smartest money money management tip I can give you is to NEVER, NEVER, NEVER, NEVER use your debit card overseas to pay for anything except one place - an ATM.
Use your debit (ATM) card to withdraw cash from an ATM and NOT your credit card.
NEVER, NEVER, NEVER, NEVER use your credit card in an ATM. It will work every time but you will fall into a cash trap. The ATM will give you the money you asked and will charge a cash withdrawal to your credit card. You won’t notice this until your next credit card bill showing a cash withdrawal and an unbelievable amount of interest you have to pay.
I did this by mistake using my Visa card instead of my debit card at the ATM. Everything worked as it should until I got my next credit card bill and was shocked. I fell into the cash trap.
Unknowingly charging cash to your credit card puts you into the cash trap. This can happen at ATMs by using your credit card instead of your debit card or at less obvious places overseas.
Once I was leaving the London baggage claim at Heathrow airport and I passed one of those convenient money change booths. The airport was busy and I needed to catch the next train to London.
The money changer had a big sign reading get your train tickets here instead of waiting in line at the ticket counter. It sounded good to me so I purchased a train ticket using my credit card.
What I found out later is that they didn’t charge the ticket as a credit but instead withdrew cash from my credit card in the ticket amount. I didn’t realize this until I got home. My next credit card bill had incurred a cash withdrawal and significant interest charge.
The cash trap is that credit card companies make it as difficult as possible to pay off the cash balance while the interest piles up. Making minimum payments or paying the statement balance will never pay off the cash amount owed.
If This Happens to You
You need to stop using the card and wait until there are no pending charges. This could take a month or more and hopefully you have another credit card to use.
When all the charges are accounted for, pay off the credit card balance in full then wait another month. The only charge that should be left on your card is the cash.
You have to make a separate payment in the amount of the cash owed to get rid of the cash balance on your next bill.
I would wait until the next billing cycle to be sure there is no balance left on your card then start using it again and AVOID the cash trap overseas.
Always Carry a Coin Purse
My last tip for money management is to carry a coin purse. We are not used to using coins that way they do most countries. Coins come in large denominations and are very convenient to use.
You’ll find bathrooms have a coin machine collecting money to using the facilities or they may have an attendant with a small dish for coins. In either case you need to pay with coins.
I’m sure bills would be accepted by the attendant but don’t expect change. You also can’t pay by credit card for the bathroom use. So, carry a change purse and collect coins as you go. They will come in handy.
As you can tell, smart money management is not complicated but an important part of your trip overseas. Pre-planning your expenditures before leaving home, bringing some foreign cash with you, using ATMs properly and avoiding the cash trap will help you travel smarter.