You may have booked your flights, accommodation and planned your itinerary, but have you figured out the best way to handle overseas expenses, without attracting high fees and unfavourable exchange rates?

Most options for taking money overseas come with positives and negatives and many of us find a combination of payment methods can be the way to go for security and convenience.

Today, we’re exploring cash versus credit cards.

Cash

While Australia is becoming a cashless society, cash is still the preferred method of payment in several countries, particularly with small merchants, street vendors, tipping and even some transport fares.

• Cash is great for tipping and/or little purchases.
• Carrying smaller notes can be useful, as not all merchants accept larger notes.
• With cash, you’re more likely to stick to a budget and not overspend.
• It is easy to split bills.
• Most accommodations provide safes in their rooms, which means you only need to take the cash you would need for the day.

It’s often a good idea to shop around for better rates, but having some local currency with you prior to arrival means that you don’t have to immediately look for currency exchanges.

Despite this, financing your entire trip with cash can be less than ideal, as:

• Carrying large amounts of cash can be unsafe.
• Cash cannot be replaced if stolen.
• Withdrawals may be subject to foreign transaction fees.
• Exchange rates might be unfavourable when you need to convert cash into the local currency.
• Many hotels or car rentals may not accept cash to secure a booking.
• Some exchange ATMs may not accept older issued notes or wear and tear.

Credit cards

In addition to benefits like travel insurance, credit cards present travellers with convenience and the ability to cover unexpected costs. However, overspending is very tempting and credit card debt will have to be repaid!

Credit cards offer several advantages, including:

• Visa and Mastercard are accepted worldwide.
• Records of all transactions make it easier to keep track of expenditure.
• Fraud protection with real time alerts of any account activity including any suspicious transactions.
• Can be replaced if lost and potential refunds if stolen.
• Credit cards may offer better exchange rates than ATMs. Further, paying in a foreign currency when prompted to pay in local or foreign currency may get you a better rate.
• Users can dispute unauthorised transactions.
• Credit cards are preferred to secure bookings and pre-authorisations.

On the other hand:

• Credit card issuers may charge fees for every transaction. It’s important to look into these fees or shop around for credit cards with no foreign transaction fees.
• Some international merchants may only take EMV chip cards.
• Certain places require ID verification, so you’ll need to carry your passport with you.
• Some countries only accept PIN for card purchases, which may need to be set up.

Always notify your credit card issuer of any travel plans to avoid your card being flagged and possibly suspended for suspicious activity.

Before travelling, consider researching:

• The preferred payment method in the country you’re planning to visit.
• The preferred method of payment for booking activities or tours, and
• Whether tipping is expected.

On a final note, despite protection measures, credit cards are still prone to fraud, therefore always be vigilant when handing over your card to pay.

Like every article on this website, this is not personal financial advice.