It’s your first time living by yourself overseas. You no longer have the safety net of a credit card you understand, an ATM in your language; you can’t even ask your parents for a bit of pocket money! If banks, finances and economics have always made you want to tear your hair out, you’ve come to the right place. So what is the best way to store your money overseas for you?
This is probably the simplest method of bringing your funds over to a new country; cold, hard cash. If the exchange rates are good in your country (and they usually are, since the currency you want to sell is typically the strongest in that country) you can lock in that exchange rate without worrying about it dropping. Otherwise, you can also get good exchange rates by bringing your native currency overseas, if that country has strong business ties to your home country. Unfortunately, as you’re probably already thinking, this is also the most risky method – it’s easily stolen and doesn’t have a password (most countries also have a limit on how much cash you can bring out, although you probably won’t need that much anyway). Nevertheless, it’s still a good idea to bring a significant amount of foreign currency when you’re travelling overseas, so that when you’re getting settled in you don’t have to worry about cards or fees or banks.
Credit cards are safer than cash but will probably cost you more in the long run – almost every credit card has a charge for foreign transactions (usually 3%) as well as not having a great exchange rate in the first place (depending on your card). The good news is that credit cards can be used in almost all other countries and are harder to steal since they need a PIN. Since buying things with a credit card effectively means you’re borrowing money from the bank (which you pay at the end of the month) there’s a very large or infinite spending limit – on the other hand, if you want to withdraw money from an ATM rather than paying for individual transactions it will charge you more interest.
Debit cards have quite a lot of the same pros and cons as credit cards – they have a surcharge (although there are some specialty cards that don’t) and typically worse exchange rates, but are safer than cash. Unlike credit cards which borrow money, debit cards use the money available in your account so you’ll need to make sure there’s enough in there, and you can also set a limit to budget your spending. Additionally it’s better to withdraw from an ATM with a debit card than a credit card since there’s no interest, but make sure you find one with no withdrawal fee.
A travel card is a card you buy, put your currency on and load or change that money into foreign currencies. It’s reloadable, and you can lock in exchange rates and have multiple currencies on one card. There’s no surcharge, but the rates could be worse than credit/debit cards and you usually also need to buy the card itself for a fee, as well as having to manually convert your currencies. If you’re based in Australia, OzForex has a pretty good travel card although it seems they’re discontinuing it. Another option is Travelex, and many airlines also have travel cards now that have pretty good features and rates.
These are cheques you can buy in your home country, then cash in at a bank overseas. Although this locks in the exchange rate, has no surcharge and is relatively safe, not many companies accept them (sometimes even at the bank at which you got them, apparently) since they’re not that popular anymore.
Another option is to open a bank account in one of your host country’s banks, then transfer your money from your home account. Although this is arguably the safest method, you have to pay a telegraphic transfer (TT) fee (around $25) for each transfer as well as account keeping fees at the bank, and exchange rates will fluctuate. You’ll also have to do some pretty solid research for this before you leave – many banks do not let you open an account if you need it for less than a year.
I hope this information has made it a little easier for you to choose the best method, or combination of methods, for your stay overseas. Personally I like to bring cash, and use a credit or debit card as a backup. Obviously I’m not a financial advisor, so make sure you do your own research – and tell me if I’ve missed any good points!