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Money
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This is an article in Travel topics.
Virtually all travellers will need to spend money on their trips. There are a number of ways to do this. You are always trading off expense, risk and convenience.
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Automatic teller machines
Automatic teller machines (ATMs) are, overall, probably the most convenient way of obtaining cash worldwide. All you need do is memorize your Personal Identification Number (PIN) code and carry around your ATM card. The biggest disadvantage of using ATM's is the fees involved. In addition to the fees that your bank charges you for the withdrawal, they will probably charge you an additional "Network Fee" for using the Cirrus, or Plus networks, and the bank that owns the ATM often charges "convenience fees" for using their ATM. The "White Label" ATM's (ATM's not associated with a bank, usually located in convenience stores and hotels) often charge even higher convenience fees. These fees are almost always fixed amounts, so it is usually better to do fewer withdrawals that are large amounts rather than a number of small withdrawals. Your bank also usually charges a higher currency exchange than you could get elsewhere. If you withdraw small amounts it is not uncommon to pay as much as 5-10% in fees.
There are two major international ATM networks, namely Cirrus (http://www.mastercard.com/cardholderservices/atm/) (affiliated with MasterCard) and Plus (http://www.visadps.com/prod-plusatm.html) (affiliated with Visa). Nearly all international-enabled ATMs support both and nearly all bank cards can use both, although you may want to confirm with your bank — in particular, you may have to get international ATM support specifically activated for your bank account.
There are some catches to beware of:
- PIN code lengths vary from country to country. 4-digit PINs are more or less universal, but longer codes may be rejected. Ask your bank to issue you a 4-digit PIN for travel.
- Many Third World countries either have no ATMs, very limited ATMs or are not connected to the international networks. At time of writing, this includes eg. Cambodia, Laos and Myanmar in South-East Asia, as well as much of Africa.
- Some countries have extensive national ATM networks but very limited international support. The most notable example is Japan, where you will often be limited to Citibank and post office ATMs (which are fortunately quite common).
- Many ATMs also support cr card advances in addition to cash withdrawals, but this service can be considerably more expensive as you will usually also have to pay interest.
For longer trips or stays in any country, it's worth considering opening a local bank account and obtaining a local ATM card. Procedures vary widely though, you will usually need at least a local mailing address and many countries will also insist on a valid residence permit.
Vernacular for ATMs in different countries
ATMs are not referred to as such in all parts of the world. To help when asking for ATM locations or when looking out for ATM signs, here are some pointers. This is for generic and widely understood equivalents of ATM in their respective geographies, and not for bank-specific trademarks such as CIBCs "Instant Teller." Please add to the list:
- Canada: ABM (ATM is also used) I have never heard anyone use ABM I think CIBC uses that in their literature, but it is not a normal term, at least in Western Canada (However, ABM is used in some machines in Western Canada)
- Italy: Bankomat
- Switzerland: Bancomat
- Japan: Cash Corner (????????? kyasshu k?n?)
- Most ATMs though are labelled as such and ?t?emu is usually understood
- Cr card advances are known as "cashing" (?????? kyasshingu)
- Germany: Geldautomat
- United Kingdom: Cashpoint
- Latin America: Cajero Automatico
- United States: ATM
Cr cards
The acceptance of cr cards varies by country. Rarely can you buy everything by cr card, but in most of the developed world you will be able to buy most of your major purchases (hotels, air travel, car rentals, expensive purchases and expensive restaurant meals) on cr card. In less developed locations your cr card may be totally useless. In all cases there will be some expenses that cannot go on a cr card so you cannot rely on a cr card exclusively.
The best-accepted cards worldwide are VISA (http://www.visa.com/) and MasterCard (http://www.mastercard.com/). American Express (http://home.americanexpress.com) comes in a good third, but acceptance for any other card (Diners' Club (http://www.dinersclub.com/), Discover (http://www.discovercard.com/), JCB (http://www.jcbusa.com/), etc) is spotty at best.
The biggest advantage of a cr card is convenience. You do not need to know exactly how much money to bring with you. You also don't need to deal with the inconvenience of money exchange.
The next biggest advantage is the low risk. In most countries you are not responsible for any expenses made on your cr card that occur after you report it lost or stolen. Cr card companies will also protect you if you are charged more than you agreed to pay, or if you pay for something and never receive it. However, be careful where you use your card in some countries, as your card can be cloned (duplicated) without your knowledge and then used for fraud without being physically stolen.
Many cr cards also include some forms of insurance protection for all expenses made with the card. This can include cancellation insurance for flights (usually only in the case of serious sickness), theft or loss insurance for goods, Collision insurance for rental cars and even travel health insurance when you are travelling. You should look over you cr cards insurance carefully before you start to travel to see what it provides. It may even be worth getting a travel cr card, if you don't have one, just for these coverages. Also note that you can often tie in a cr card to a frequent flyer program, so you get more miles and free trips faster.
The biggest disadvantage is cost. At one time cr card companies used to apply the exchange rate they got to your exchanges. However, most cr card companies now incorporate a exchange fee into the exchange rate that they offer. This is generally in the 2-3% range. You can call your cr card company and ask what the fee is as well as asking what the current exchange rate is for the currency that you would like to find out about. One thing that should be noted is that the exchange rate is applied at the date the expense was posted to the account, not the date the charge was made. Therefore if you are dealing with a fluctuating currency it is impossible to know exactly what exchange rate will be applied for an expense until a few days after you make the expense. Hotels in some countries (notably Ireland) will perform the currency exchange at the time of the transaction. This removes the uncertainty about what you will pay, but the downside is that the exchange rate fee (about 2-3%) that is incorporated into the transaction may well mean that this is not in your favor.
If you have multiple cr cards it is often a good idea to only carry around the one you will usually be using and keep others in a safe location. Then if your main one gets lost or stolen you will not be left without a cr card, or have to go through the hassle of replacing a cr card in a foreign country.
Travellers' cheques
Travellers' cheques were at one time the primary method of taking money with you when you travelled. These days they are not as common, but they are still widely available and relatively widely accepted. Generally these are not accepted as widely as cr cards and they are usually not as convenient to use. In general, only the largest stores and hotels will accept cheques for payment as is.
Travellers' cheques are issued in a specific currency. American Dollars is the most common currency, but many different currencies are available.
The main advantage of travellers' cheques is complete protection against loss or theft. Once you report them as missing, the issuing company will replace them. However, you must also keep a record of your unused cheque numbers, and the replacement process can take time and be inconvenient.
With travellers' cheques, you will typically have to pay fees both to buy them and to cash or use them. This may be a straight fee, or it may be hidden in the exchange rate if you are buying them in a foreign currency. If you are buying them in a foreign currency, it may be worth it to find out if you can buy them with cash in that foreign currency.
When cashing your checks, pay close attention to commissions and fees: if the fee is per cheque, cashing many small checks can be very uneconomic. Be suspicious of claims of "no fees", as this usually means that the exchange rate is terrible.
Cash
Cash is the most versatile method there is. Virtually everywhere takes cash. The one exception is that some car rentals may not rent you a car or ask for a very large deposit if you don't have a cr card.
In some countries you may be able to get by entirely with American money or other local generally accepted currency. However, this will often be at a huge expense as the exchange rate offered by merchants and hotels is usually not very good. (Can be as much as 15% or even more). Be sure to bring only paper money in good condition. Banks cannot easily or cheaply exchange worn-out foreign currency for replacement as they can with their country's own currency. Worn paper currency may be devalued if it is accepted at all.
This biggest disadvantage to cash is the risk. If you lose it you can't get it back, and if someone finds out you have a large wad of cash you become a potential mark.
Money exchange is a very complicated business. All money exchanges work on the basis of selling a foreign currency at one rate and buying at another, with the difference being the spread. Newspapers usually will quote the average of the two as the daily rate. Where there is more competition, the rates are likely to be better.
Currency exchanges are not all created equal. Where the best rates are available varies tremendously from one country to another and from one currency to another. In some cases it may be better to exchange your money before you leave, in others it may be better to do it in your destination. Rarely is the most convenient location (such as at airports, or major hotels) the best rate available. In some cases it can be significantly higher.
As you loose some money on every currency exchange it is important never to exchange too much money. It is usually a good idea to make sure you spend most of the cash you have. Therefore, if you have a large chunk of cash left over at the end of your trip and you were planning on paying for your hotel or car rental with cr card, pay for some of it with cash to get rid of the currency.
If you are exchanging very large amounts of money it may be possible to do a certified cheque currency exchange. This is sometimes offered at a cheaper rate at currency exchange. You bring in a certified cheque to a currency exchange and they give you a certified cheque made out to you in the new currency.
Most major currencies are subject to counterfeit these days. It is a very good idea to study the bills of the currency of the foreign country to become familiar with how it is supposed to look and feel. Almost all currencies employ anti-counterfeit technologies. This can be colour shifting ink, watermarks, special threads, iridescent inks, raised printing, holograms and other features. Become familiar with them so that you can quickly check them when you get a new bill whether it is as change or from a money exchange. If you are unsure, don't be afraid to say you would rather get a different bill, or just say you would rather get 2 smaller bills for change (As an example if you get a ten in change that you don't like the look of, ask for two fives instead). If you end up with a counterfeit you wont get compensated, and you may end up having to explain it to the police.
Hard currency
In many poorer countries with inflationary, unstable and/or inconvertible currencies a foreign hard currency may prove more useful. The gold standard for currencies remains the US dollar, which will in a pinch be accepted as payment by nearly everybody on the planet and is the de facto currency of many countries, especially for larger purchases (including hotels and fancier meals). The euro is increasingly well accepted, at least in regions with many European visitors, and small countries with powerful neighbors may also accept regional hard currencies (eg. Thai baht in Laos and Cambodia, Australian dollars in much of Oceania).
It is wise to carry an emergency stash of hard currency separated from all your other belongings and valuables.
Black market exchange
In some countries the official exchange rate is fixed at a completely unreasonable or unrealistic rate, eg. Zimbabwe's 55 Zim dollars to 1 US dollar. In these countries the black market will provide much more realistic evaluation of the currency's worth, in Zimbabwe's case around 1500:1 (as of 2005), and is practically unavoidable.
That said, the risks of black market exchange are legion. First and foremost, black market exchange is illegal and both buyer and seller may face severe sanctions if caught: the seller may even be (or work with, or tip off) a police officer out to trap tourists. Second, the risk of fraud is high: you may get obsolete banknotes, fake banknotes, less than the promised amount or nothing at all. Consider carefully whether you need to exchange in the first place, as businesses in countries with basketcase currencies will often be more than happy to accept hard currency directly instead (although this, too, will often be illegal), and you may get all the local currency you need back as change.
The key guideline to successful black market transactions is to receive the money before you hand yours over. Count the bills, inspect the bills carefully, compare them to any you already have, and only then surrender your own money to the vendor. Do not allow them to take back the money they gave you, as this is where various sleight-of-hand tricks can be pulled to replace the legitimate bundle with something entirely different.
In countries where foreign exchange rates are reasonable, it is best to avoid the black market entirely: you risk losing all your money for gain of a few percent at most.
External links
The current exchange rate can be looked up at several web sites such as
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