November 24, 2017 - firstname.lastname@example.org
Using your debit or credit card overseas, when you're on a holiday or on business, is a convenient way of paying for things. But would a travel money card be cheaper? And how could you save money and keep things a bit more safe and secure?
Mastercard and Visa both have a standard currency conversion rate, which changes every day. Here's Mastercard's and Visa's. It's normally around 3% 'worse' than the actual interbank rate (the ones the bank actually pays).
In addition, most debit or credit cards charge a 3% overseas transaction charge on top. Unlike the charge built-in to the Mastercard or Visa rate, this charge normally appears separately on your bank statement.
In total, spending the equivalent of AUD$100 overseas will cost 3% in your local bank fees, and another 3% on the Mastercard or Visa conversion rate - a total of AUD$106 by the time it hits your bank account. That AUD$800 hotel stay is less of a bargain at $848.
In short, everything is 6% more expensive if you pay with a card overseas.
Is there a way to avoid this?
Examples of these are the Commonwealth Bank Travel Money Card, the Qantas Cash card, the Velocity Global Wallet, Cash Passport and others. They are all prepaid cards.
These claim to have "no overseas transaction fees". They work by transferring money over from your main transaction account, and optionally transferring from AUD into a range of other currencies in advance. With "no overseas transaction fees" it makes perfect sense to use these.
However: Travel Money Cards are almost always more expensive to use overseas than using your normal debit card.
Load a Commonwealth Bank Travel Money Card with Australian Dollars. This is advertised as a "free reload", and it is. But when you transfer your AUD into any other currency, Commonwealth Bank gives you a conversion rate - which is about 4% worse than the normal Mastercard rate. (Check their rate here against Mastercard's).
So to use this bank card as the Commonwealth Bank designed it will, for AUD$100 of equivalent money spent abroad, cost you AUD$107 - an extra 4% above the normally 3%-more-expensive Mastercard rate.
Alternatively, you can leave your money in AUD, and have the card convert at the time of purchase. That costs even more: 4.5% above the normal MasterCard rate. (See the fee in section 7). You won't see this charge split out on your statement, either. So your AUD$100 will cost you AUD$107.50
There's another gotcha. Transferring the money into a foreign currency cost 4% above the Mastercard rate. At the end of your holiday, transferring the money back to AUD will - guess what - cost you another 4%. So if you don't spend every penny, you'll be charged again.
The Commonwealth Bank may claim you get 'more for your money' using this card, but that's misleading. If you have an ordinary Commonwealth Bank card, you'll be charged less if you just use that instead.
These rates were checked in Sept 2017
You can load a Qantas Cash card with BPay or bank transfer for free.
Transfer your money into any other currency, and the bank rate you get is an extra 4.3% above the normally-3%-more-expensive Mastercard rate. So for the equivalent of AUD$100, it'll cost AUD$107.30.
Leave your money in AUD, and have the card convert at the time of purchase, you'll be charged 5.8% above the Mastercard rate. So, for the equivalent of AUD$100, you'll pay AUD$108.80.
With the first option you'll get 205 Quantas points, and with the second, 208 Qantas points. Most frequent flyers believe that 1 point for 1c is a good rate; here, you're paying around 4.2 cents a mile. This isn't a good deal.
In addition, just like the Commbank card, transferring unspent money back into AUD will cost you 4.3% on top of that.
These rates were checked in Nov 2017
Above, we show you that "no transaction fees" isn't the only basis to choose a card. You need to find a card that charges no transaction fees, and ideally operates on a better base rate than Mastercard or Visa. And obviously you also need to ensure you don't pay an annual fee for the card, too.
(Banks still earn money - around 1% - from the retailer every time you pay, incidentally, so don't feel too sorry for them.)
There are only two cards in the Australian market right now that offer no transaction fees and stay on the standard base rate.
Credit Card - The 28 degrees card
Debit Card - The Citibank Plus debit card
Both of these cards won't charge you any extra - in transaction fees or currency conversion - to pay overseas. In addition, they use the direct interbank rate rather than the MasterCard or Visa rate - which is normally around 3% better than the MasterCard or Visa rate.
As far as we know, every other card charges you more (or charges you an annual fee).