Fri, 13 Jul, 2018
$1000 travel mistake you could be making
Aussie travellers are being hit with hidden fees on travel cards that in some cases, are costing more than the trip itself.
Financial comparison website Mozo.com.au has revealed which travel money cards could see travellers fork out more than $1000 in bank fees.
The company’s banking experts researched 314 travel money products from 89 providers and found that prepaid travel cards often offer the best value for money, rather than credit and debit cards.
Mozo’s director Kirsty Lamont warned travellers to be cautious of annual fees that may be charged on travel cards.
“A travel credit card can be very appealing when planning a trip overseas, especially when you’re able to nab complimentary travel insurance and rack up a few frequent flyer points,” Ms Lamont told news.com.au.
“That said, don’t succumb to slick marketing — some travel credit cards have annual fees that could cover a return trip to tropical Fiji.”
Another hidden cost that travellers get hit with is foreign exchange conversion costs, along with overseas transaction and ATM fees.
“Travellers should always look out for the annual fee as this is where you can get really slugged, and it pays to always keep an eye on the foreign exchange margin on overseas transactions, which can range from 0 per cent to 5 per cent on a debit card and 0 per cent to 3.65 per cent on a credit card,” Ms Lamont said.
“Overseas transaction fees and ATM fees can also leave a major dent in your pocket. If you’re booking everything from flights to accommodation to evening meals on your travel credit card, those charges can really add up. A travel credit card with a spend of $10,000 can incur charges ranging from $0 to $1089 which is quite the margin.”
Heightening the problem for travellers is that some companies will purposefully confuse customers when explaining the costs involved.
Last year, consultant and writer James Cridland posted the complaint letter he sent to Commonwealth Bank after a disappointing experience using its travel card.
He demanded a refund as he was charged $87 more in fees than if he’d just used his CBA debit card.
— James Cridland (@JamesCridland) August 30, 2017
James explained in the letter that he was interested in the Travel Money Card so he could avoid the international transaction fee.
Despite being promised a “cost effective way to access your money overseas”, Cridland was hit with foreign exchange rate conversion costs which made him spend more than he would’ve done with his debit card.
Which card should you use?
According to Mozo, travellers should use credit cards if they want to make large purchases overseas, rack up reward points or take advantage of free travel insurance. However, the downsides of credit cards overseas include cash advance fees when using ATMs to withdraw money, annual fees and negative exchange rate fluctuations.
Mozo said prepaid travel cards are good for those who want to lock in an exchange rate before leaving for the trip. But the downside of a prepaid travel card is that the currencies of smaller countries may not be supported and any leftover funds need to be converted to AUD when you come back home.
Mozo found that debit cards have small or no ATM withdrawal or currency conversions fees as funds are converted into the local currency when you use it. However, customers are also subject to negative fluctuations in exchange rates.
Mozo selected HSBC as the Travel Money Bank of the Year and Bankwest took the title of Travel Credit Provider of the Year.