At one time, travellers cheques were the preferred way to carry foreign currency. They were secure, low on fees, and in some cases were the only way to pay for things abroad. But they’ve been going steadily out of favour since the 1990s. They pose security risks and cause extra work for retailers, the commissions and fees aren’t competitive, and even banks abroad are hesitant to cash them. A reader told me about a European vacation during which she visited 12 banks, none of which were willing or able to cash her travellers cheques.
These days, there are other, more secure and cost-effective ways to access your money while travelling, such as the following:
In most Western countries, you can pay for almost everything with credit cards. Many of my North American friends don’t even carry cash any more. Credit cards are convenient, they provide a record of spending, and if you collect frequent flyer miles, they’re a great way to passively collect miles to get you on your next flight. Buyer beware: pay off your balance in full each month to avoid costly interest charges and credit problems.
Security: Although there’s risk of your credit card information being hijacked, in my experience the credit card company has always known about it before I did, and I’ve never been responsible for paying fraudulent charges.
Debit cards are useful for ATM withdrawals and debit (Interac) purchases. If your debit card has a Visa or MasterCard logo on it, you can also use it in place of a credit card (although you need sufficient funds in your account to cover the charge). Interac purchases aren’t as widely available abroad as they are in North America, and are practically non-existent in developing countries.
Security: If somebody gets your debit card and PIN, there’s no recourse if they clear out your bank account. So don’t keep your life savings in your bank account, and set a low daily/weekly withdrawal limit with your bank.
In many developing countries, cash is king. If you’ll need more than the ATM can reasonably give you (for example: in Peru I had to pay for an expensive retreat with cash), then you can pre-purchase foreign currency at your home bank before you go.
Security: Cash is the easiest to lose when travelling, and impossible to recover. So make sure you have a good strategy for keeping it safe. It’s a good idea to carry it securely out of view, and to store it in more than one place.
Prepaid Travel Cards
Charge up your prepaid travel card (such as a Visa TravelMoney or Mastercard Cash Passport) before you leave, and you can use it in place of a credit or debit card abroad. Their popularity, however, has decreased due to non-competitive fees and limited currency availability.
Security: The upside to prepaid travel cards is that they’re very secure. They’re not linked to your personal accounts, so the total liability is the amount on the card, which is protected by your PIN/signature.
A Note on Fees
Unfortunately in Canada, almost every payment method you choose (including travellers cheques) will charge fees—hidden or otherwise.
Credit and debit cards hit you with currency exchange fees by charging a higher percentage than the prevailing exchange rate.
Using your debit card for ATM withdrawals and Interac purchases can result in not only your bank’s currency exchange fee, but also withdrawal fees and ATM commissions.
Prepaid travel cards are the worst, charging any combination of monthly fees, currency exchange fees, and even cash-out fees if you don’t use all the money during your trip.
The lowest fee you’ll pay will be to buy foreign currency at your home bank before travelling, but carrying cash poses the largest security risk.
There’s No One Solution
To minimize fees and mitigate security risks, I suggest a combination of the strategies above. I carry two credit cards (separately in case one is stolen), one debit card (for ATM withdrawals), and some cash (stashed in different places). When travelling, a multifaceted approach to paying for things is best.
If you do end up carrying and using cash over card, we’ve got 16 tips for you for carrying cash while travelling.