When traveling abroad, it is inevitable that you will spend money and use various payment methods. However, experts warn that people tend to make money-related mistakes while traveling abroad, which can lead to significant losses or overspending. Therefore, caution is paramount.
According to a report by the Huffington Post, several personal finance experts have shared common money mistakes people make when traveling abroad and offered advice on how to avoid them.
Andrea Woroch, a consumer finance and budget expert, pointed out that a common mistake people make is paying foreign transaction fees when using credit cards, which can amount to around 3% per transaction and potentially increase.
“If you travel abroad frequently, it’s best to apply for a credit card that does not charge foreign transaction fees,” she advised.
Travel expert Sally French highlighted that one of the biggest mistakes many tourists make is not carrying cash. While you can use ATMs in the destination country to withdraw local currency, you may need cash before you have the chance to use an ATM, such as for taxi fares or tipping hotel staff.
Founder of the personal finance education platform Clever Girl Finance, Bola Sokunbi, emphasized the importance of not relying too heavily on credit cards. Keeping some cash on hand can prevent the awkward situation of not having any money available.
As for how much cash to prepare in advance, it depends on your spending habits and other factors. French suggested having the equivalent of $100 to $300 in local currency before being able to use an ATM to cover costs like taxi fares and meals.
French also noted that just like airport ATMs, currency exchange counters at airports are unlikely to offer favorable exchange rates for foreign currency. In fact, exchange rates at airport currency counters are often the worst.
She stated that airport currency exchange counters may charge more than 14% above the rates used by the International Monetary Fund, and some may even impose additional fees. Therefore, it’s recommended to withdraw cash from bank ATMs for better rates and avoid exchanging currency at airports or commercial centers.
Before traveling, familiarize yourself with the exchange rates between your home country’s currency and the destination country’s currency, advised Woroch. Understanding these rates is crucial for making informed decisions while dining out or shopping, as it can affect your spending choices.
Dimitri Pan, a wealth advisor at Ally Financial, recommended practicing calculating how much foreign currency is needed to purchase certain items before traveling abroad.
Sokunbi reminded people not to overlook the costs of using mobile data and internet services abroad. Mismanaging phone data could lead to high roaming charges, while relying solely on WiFi may not always be practical or cost-effective. To avoid shocking bills, she suggested using local SIM cards in the destination country.
“People often underestimate the importance of setting a budget for travel. Whether dining out, buying souvenirs, or going on short trips, it’s easy to get caught up in the excitement of traveling and overspend. Setting a daily budget and sticking to it can help you avoid overspending,” Sokunbi advised.
She recommended thorough planning before vacation to have a better grasp of your budget. Woroch also cautioned against making multiple small cash withdrawals from ATMs because of the fees charged by the ATM and your bank. It’s better to withdraw the maximum amount needed for the trip in one go to avoid significant fees.
Doing research beforehand can help you avoid many money-related issues and fully enjoy your journey, according to Sokunbi. “Researching the best way to manage finances at your destination, setting up travel alerts with your bank, and deciding how to allocate expenses between cash and credit cards are essential steps.”
Woroch emphasized the importance of research before traveling to avoid unnecessary overspending or money mistakes. “Take some time to understand a city’s public transportation options, as there are often cheaper ways to get to and from the airport and popular attractions than taking a taxi,” she advised.
Travel insurance is worth considering, as unexpected events like emergencies, trip cancellations, or lost luggage can incur high costs, Sokunbi noted. “Having travel insurance can give you peace of mind and protect you in case of issues.”
Your credit card used to book travel arrangements may include some travel insurance coverage. It’s essential to explore the exact coverage it offers and decide if additional coverage is necessary.