Banks and the travel industry yield significant profits from foreign exchanges, simply because they can. Undiscerning travellers who do not bother to perform due diligence can easily incur a majority of their travel expenses from using their credit card or other bank services. That’s not to say you should not be using your credit card at all; you should, provided you are aware of the benefits and costs associated with it. Undeniably, credit cards offer safety as you do not need to carry a huge wad of cash as you travel, and the convenience granted allows you to make hassle-free payment while on the go. Yet in most cases, you can save more by simply using cash.
Here’s why you should use cash in local currency while you are travelling.
#1 Avoid the Conversion fee and Processing fee
On top of the benefits offered by credit cards, such as reward points, cashbacks, rebates and fraud protection, credit cards may charge additional fees for its service when you are abroad. These fees can be in the form of foreign transaction fees, conversion fees, administrative fees, and processing fees, and they can cost up to 4% of what you are paying for. Whether we realise it or not, these fees may add to the majority of our expenses despite being seemingly insignificant, yet it pays to know that these fees are simply money grabs designed by banks to exploit unwitting visitors. So before you make a purchase with your card, consider whether that additional 4% is worth it.
#2 Avoid Dynamic currency conversion fee
Here’s a tip – refuse to sign or make a payment in any purchase and service which offers to convert the receipt into the home currency. Many banks now offer a service called Dynamic currency conversion(DCC), which basically converts your bill into the home currency, instead of the local currency. Sounds good? Think again. Aside from the additional fees (of around 3%) from opting to use this service, banks and merchants offer the worst exchange rates for ignorant travellers who fall prey to such ‘scams’. Some banks may even charge you for both the transaction charge (see above) and DCC. Thus, it’s always good to bring along a calculator or a mobile phone for the app if you are unsure of the costs.
In countries where tipping is customary, it is often better to leave the tip in the local currency otherwise the service person would have to do additional work to exchange the currency, and they are likely to be charged with an additional fee for the conversion. In other words, be a gracious tourist and leave aside some local cash for tipping. If you are new to the tipping practice, do find out how much you need to tip for every services before you set disembark from your flight.
#4 Most commonly accepted form of payment
Some establishments, such as stores, restaurants or even hotels may not accept credit card payment, and you’ll need to carry cash at all times. This does not just apply to remote areas, but those in developed areas as well, such as the New York city. There are few reasons why these establishments refuse to use such service. For one, they may find the service too expensive to use (2-4% fee for the cashless transaction), while other contributing factors may be the administrative work involved, to the slow processing time for the amount to show up in the company’s bank account. Cash payment may be the preferred method, as it is immediate, and employers can cut cost.
Therefore, you should always carry cash while you are travelling. To get the most out of your money, look for any authorised money changer with the most competitive rates by using our app, Get4x. With Get4x, you can save up on travel expenses, by getting the best exchange rates and avoid the hefty fees incurred from using bank and credit card services.
Download Get4x and get the best value for your money