31 Oct 2019
I am often asked for my recommendations on credit/debit cards for international travel. Most financial institution-issued credit/debit cards charge ‘foreign transaction fees’ or some other terminology for extorting money out of unsuspecting customers. On top of that, for the privilege of being charged an annual fee the exchange rates on A$ converted foreign currency amounts are poor.
Note that Travellers Cheques are a thing of the past. Under no circumstance should you go for a financial institution-issued Travel Card. These travel cards have fees attached to it, unreasonable conditions, inflexible and terrible exchange rates.
A card for international travel should have the following properties:
- A card account with no annual fee.
- A card account with no foreign currency conversion fees.
- A card account that does not charge ATM fees if used overseas.
- A card account that has competitive FX conversion rates.
There are a few card accounts available in Australia that fulfill the abovementioned criteria. I will go through them here:
- Credit Card: 28 Degrees Mastercard (https://www.28degreescard.com.au/home/). This card account has been around for quite a few years and has been a market leader in this sector. It was previously owned by GE Money but currently owned by a consortium under the name of Latitude Financial. Note that cash advances incur the usual fees and interest.
- Credit Card: Bankwest Zero Mastercard. This card account is a newcomer and operates similar to the 28 Degrees card.
- Debit Card: Citibank Plus Account (https://www1.citibank.com.au/banking/bank-accounts/citibank-plus). A debit card Mastercard is issued that links to the account. I found Citibank to have slightly better exchange rates than 28 Degrees Mastercard. Just transfer funds into the account before traveling. Note that funds in the account earn no interest.
- The Citibank Global Currency Account (https://www1.citibank.com.au/banking/bank-accounts/global-currency-account). A debit card Mastercard is issued that links to the account. You can have up to 10 major currencies. You can control when you want to convert the currencies. I generally don’t recommend this account for an everyday traveler unless you are comfortable in taking a ‘punt’ in exchange rate movements. Funds sitting in this account earns no interest. I have this one and hold only US$. This is great for internet shopping with stores in the US and also for traveling. Most destinations tend to price hotels and flights in US$. So, I found it pointless holding any other currencies to keep it simple. I tend to use an external FX conversion service provider, like CurrencyFair (https://www.currencyfair.com/) for better exchange rates. CurrencyFair’s rates are about 30-50 basis points from the market spot rate. This is better than any financial institution by far. Then you may transfer the funds into the Citibank Global Currency account for that particular currency which normally is US$. This is not recommended for the uninitiated. It is also not recommended if you want to convert anything less than $10,000. There are not much savings to be had on small amounts.
There few things to note when traveling with credit/debit cards (in addition to the usual security precautions):
- Never allow merchants in foreign countries to convert the foreign currency amount into A$. Merchant bank exchange rates are usually way off the mark and I believe this little scheme is a money earner for the merchant. Always make sure that the merchant charges the card in the foreign currency amount. Your card issuer will do the conversion into A$ which is always better than the foreign merchant bank exchange rates.
- When withdrawing money from a foreign ATM, some bank ATMs will advise you that the withdrawal will entail a conversion by the bank to A$. Again, the exchange rates are off the mark. Try using a different bank’s ATM. I discovered this issue on a recent visit to Singapore. An OCBC bank ATM wanted to charge a conversion rate at S$1 = A$1.16. I found another ATM a short distance away that allowed my card issuer in Australia (Citibank) to do the conversion. The conversion was done at S$1 = A$1.10. A huge difference.
- Although the cards recommended above do not charge fees for using an ATM in a foreign country, some foreign bank-owned ATMs charge a fee. I have experienced this in Cambodia and the US (including Hawaii).
22 Feb 2020
On a recent trip to Singapore and Malaysia, I discovered that at hotel checkin, staff would not accept debit cards for deposit payments. Only credit cards are accepted. The deposit is normally a pre-authorised amount on your credit card that remains as a pending transaction, that covers expenses that you might incur during your stay. When you settle the final bill at the end of the stay, you may elect to pay by a debit card. In this case, the hotel will release the pre-authorised amount from the credit card.
20 Apr 2023
Since my last update, Latitude Financial (issuer of 28 Degrees Mastercard) was floated on the ASX in 2021 and had a serious data breach in March 2023. Latitude has moved into the BNPL area with arrangements with some major retailers e.g. Harvey Norman, issues store-branded credit cards and arranges traditional loans. The 28 Degrees Mastercard is still an attractive option for travelers even though a few fees (for cash advance and payment on account outside of billing cycle) have been introduced.
The Commonwealth Bank Ulitimate Awards Mastercard is also an attractive option. It is fee-free if you spend $2,500 per month (otherwise $35 per month) and has a comprehensive range of benefits. If this card is used as the main card for domestic and overseas expenses, it is great option for keeping all your expenses on one card. The card has a comprehensive rewards programme.
As of 1 June 2022, NAB took over Citibank’s local retail operations. This includes the card business. A few months ago. NAB had informed customers that it is ceasing the operation of the Citibank Global Currency Account. I felt that this would eventuate when NAB’s takeover of Citibank operations was announced last year. Fortunately, I found an alternative and a better one at that too. It is the HSBC Global Account. In addition to all the features Citibank Global Currency Account had, it allows you to park unused funds in an interest bearing account. As with the Citibank account, the main benefit of this card is that you can lock in an exchange rate, (USD, EUR, JPY, etc) prior to travel and cover expenses in those currencies while overseas. Whereas in Citibank, who have to nominate prior to using the card which currency you would be using, HSBC does this seamlessly. As long as you have enough funds in the currency being used, it will debit the appropriate account. Otherwise, AUD account will be used.
A debit card that seems to be getting some traction is Revolut. As a debit card, you use your own funds, supports Apple and Google Pay and has essential security features. However, on the fee-free Standard plan, there is a $350 per month cash withdrawal limit. The paid plans (Premium and Metal) increases the limit and also introduces other benefits. For a budget traveler the Standard account it ideal.
Choice has covered in two separate articles on fee-free/low-fee Debit and Credit cards for travel.