Friday, 5 September 2014

What is a cheap, safe way to travel with money around South America?

My long awaited annual overseas holiday is coming up and I am excited!  I am going to Latin America for the first time and I have been planning this trip for months. However, as with any international trip you need to have plan for how to carry your money around when you are travelling.

Travelling to South America I wanted to make sure that my plan for my money

  1. Minimised the amount I was going to be paying in fees (these can really add up)
  2. Ensured that any payment option was convenient
  3. Ensured that any payment options was also safe (i.e. I was going to be safe and my money was going to be safe
Several of my friends had their accounts hacked when they were in South America so I spent a fair bit of time and effort developing the following plan which I wanted to share with you all.

Check your fee structures carefully before deciding what payment method to use

Fees suck and they really suck when you are travelling overseas.  If you decide to withdraw cash from an overseas ATM on your credit card you are normally stuck with the following fees:
If you withdraw $100 in cash you're paying ~$10 (or 10%!) in fees and getting nowhere near what you thought you would be getting in foreign exchange.  You try and minimise the impact of the fees by withdrawing large amounts (e.g. $1000) but you are still paying $50 in fees.

Travel cards are not a lot better.  You still get
the Foreign ATM withdrawal fee and the crappy foreign exchange spread especially if you are not withdrawing in a pre-loaded currency (there are typically only a few pre-loaded currencies) and you also have to add in deposit fees as well as the fact that you have to use your money out of the account when you get back or you lose it (after ~12 months)

Checking your fee structure is really important when you go overseas if you don't want to get ripped off.  And keep in mind that fee structures change.  The 28 Degrees Mastercard used to be an amazing option when you were travelling...until they started charging many of the fees I mentioned above.

The best option I found for withdrawing cash when you travel overseas is the Citibank Everyday Plus Transaction Account (note I am not getting paid to promote this...I just happened to open one myself).  
  • Same crappy foreign exchange spread
  • No other fees
It is the best option that I have found so far and one that was recommended to me by a lot of people travelling.

Have multiple convenient payment options

I know that travellers checks have an incredible amount of safety attached to them but realistically no one accepts them any more.  Cashing them is incredibly hard and if you have ever seen the exchange rate you get stung with you will never use them again.

Have a strategy which involves convenient payment options...and have MULTIPLE options!  The fact is that you money can get stolen - it has happened to many people I know.  If there is one thing that I recommend it is not being reliant on a single card or strategy.

Here is what I will be doing:
  • I will have one transaction account (the Citibank account I mentioned above) which will have a small floating balance in it ~$1000.  This is the card I will use to withdraw cash at ATMs
  • I am travelling with my girlfriend and have had her set up a Citibank account as well.  This account will have more of our cash in it and we can use it to transfer cash into the primary account as we need it. In the event the first account gets compromised we will switch to the second account
  • I am taking my credit card but don't plan on using it except in emergencies
  • I have a small amount of 'emergency only' cash which is a last resort 
Although it sounds complicated it is actually an incredibly easy system to use and implement.

Make sure you and your money are safe

If I was just trying to minimise fees and wasn't worried about multiple payment options I would probably just carry around cash however this is impractical...especially in South America.  Make sure you and your cash is safe by having plans and back up plans.  Some ideas include:
  • Never carrying around too much cash
  • Not carrying around your cash in a wallet - they are far too easy to steal
  • Don't have all your money in an account which can be hacked (see my strategy for dealing with this above)
  • Have 'emergency only' sources of funds
I'm making South America sounds like a terrible place to travel to but I am still incredibly excited to go.  I just know and have been told by many people that having a plan is absolutely necessary and it takes a few days effort but can save a lot of heartache.

Do you have any tips that travellers (like me) can use?  I'd love to hear them!

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  1. I found the money part of it reasonably safe, if you're heading to Peru, which from memory you are, I found the best ATM's/Bank to use was BCP. they're in most of the major towns (Lima, Arequiba, Cusco, Nasca, Puno) and even some of the smaller ones.. I would agree with keeping some $$ locked in the hotel safe, I kept mine in a locked suitcase..

    Also some of the ATM's may not accept your card.. All in all I felt really safe, took a combination of the CBA Travellers Cash (which wasn't that great) and cash to exchange and you'll have an absoulte blast..

    Enjoy :) and when do you head back?

    1. That's SUPER helpful Jef. Thanks for letting me know.

      I am going to Peru and to most of the towns you mentioned above. Interesting that you found it reasonably safe - many of my friends have had real problems and have been really thankful for having back ups.

      I'll let you know how it turns out

  2. You're welcome, I found of course it can be a bit intimidating although travelling with a company does make it slightly less daunting.. Having said that we had a blast, were safe and embraced the culture of South America..

    I am probably a bit light on with back-ups but I have several cards and methods for taking money, which I found worked out alright :)