Traveling With Cash: Is It Worth The Risk?

Should you take cash when travelling?

It's a question that's been asked by travellers for decades, and the answer is... it depends.

The case for cash

Cash is king in many parts of the world, and some businesses – particularly small, independent retailers and restaurants – may not accept card payments. Even if they do, they may add on extra service charges for card transactions, making it more expensive than paying in cash.

Cash can also be useful for tipping, and it's always good to have some local currency on you in case of emergencies, especially if you can't get to an ATM or your card is declined or blocked.

The case for cards

On the other hand, carrying large amounts of cash can be risky. If it's lost or stolen, it's gone for good. Cards, on the other hand, can be replaced, and you won't be liable for any fraudulent purchases made on them.

Cards are also more convenient and less bulky than carrying wads of cash, and if you lose your wallet, it's easier for a thief to spend cash than it is to use a card (although you should always notify your bank immediately if your card is lost or stolen).

So which should you choose?

The best option is probably a bit of both. That way, if you incur high fees for card transactions or you find yourself in a place that only accepts cash, your bank account won't take too much of a hit. It also gives you backup options if one of your cards is lost or stolen, or if you find yourself stuck in a cash-only location.

If you do decide to take cash, be sure to shop around for the best exchange rate, and only carry small amounts on your person, keeping the rest in your hotel safe. It's also a good idea to let your bank know that you'll be travelling, so they don't block your account because of suspicious foreign transactions.

Research your destination

When deciding whether to take cash when travelling, it is important to research your destination. This includes understanding the local currency, the payment methods accepted, and the potential for fraud or theft.

Firstly, it is important to know the local currency of your destination. This will allow you to exchange your money beforehand if needed, and to understand the exchange rate. Exchanging money at foreign exchange offices, whether at home or abroad, is often not the best option as they may have poor exchange rates or charge high commission fees. Instead, it is recommended to use local ATMs to withdraw cash, as this will usually result in a better exchange rate and lower fees. However, it is important to be aware of potential ATM usage fees, which can range from a flat fee to a percentage of the total withdrawal amount. Researching the fees charged by different ATMs can help minimise these costs.

Secondly, understanding the payment methods accepted at your destination is crucial. While debit and credit cards are widely accepted in most European and Asian countries, there may be situations where cash is required. For example, smaller restaurants and retailers, street vendors, and businesses in remote areas may only accept cash. Additionally, some countries have cash-only shops and restaurants, so it is important to be prepared.

Finally, it is essential to be aware of potential risks such as fraud or theft when travelling with cash. Tourists can be vulnerable to scams and pickpocketing, so it is important to take precautions. This includes keeping your money secure, such as using a money belt or a secondary wallet, and being discreet when handling cash. It is also recommended to notify your bank of your travel plans to avoid any issues with your account.

In summary, researching your destination is crucial when deciding whether to take cash when travelling. Understanding the local currency, accepted payment methods, and potential risks will help ensure you have a smooth and enjoyable trip.

Research your card or bank

When it comes to researching your card or bank, there are a few key things to consider before travelling.

Firstly, it is important to be aware of any foreign transaction fees that may be applied to your card. These fees can quickly add up, so it is worth checking with your bank or card company to understand their policies. If your card does charge foreign transaction fees, you may want to consider getting a card that doesn't, especially if you plan to travel frequently.

Secondly, research your card's travel policies, including any perks or rewards that may be offered. Some card companies add an extra tax for purchases made abroad, so you may want to save this card for emergencies only. It is also important to confirm your spending and withdrawal limits to avoid any unexpected debts.

Additionally, compare your bank's exchange rates and fees. You will often get a more favourable exchange rate at home than abroad, and most banks will buy back any unused foreign currency.

Another important consideration is to ensure that your card is accepted at your destination. Mastercard and Visa are the most widely accepted cards outside of the US, while Discover and American Express are accepted in fewer places.

Finally, check if your card offers travel insurance or travel rewards. Some cards provide travel protections such as rental car insurance or baggage delay insurance, while others offer perks such as hotel room upgrades or access to airport lounges.

By researching your card or bank's policies, fees, and perks, you can make informed decisions about how to manage your money while travelling.

Make a budget for your trip

Making a budget for your trip is a great way to ensure you have a stress-free holiday and get the most value for your money. It is recommended that you budget $50-100 per person for each day that you will be away. This should cover accommodation, food, drink, and transportation costs. However, this number can vary depending on your destination and travel style.

• Research your destination: Find out about the likelihood of being able to pay with debit or credit cards. Small, independent retailers may add on unwanted service charges to purchases, which would ultimately make the item more expensive than if paid for in cash. Also, determine how hotels work at your chosen destination. Can you book and pay online in advance? How accessible are ATMs, do they charge commission fees, and are the exchange rates favorable?
• Research your card or bank: Look at your credit or debit card's travel policies, especially those that offer travel perks and rewards. While it's becoming rarer, some card companies will add an extra tax for purchases abroad. Also, remember to confirm your spending and withdrawal limits. Compare your bank's exchange rates and fees—you'll likely get a more favorable exchange at home.
• Think of how you'll get there: Transportation is often one of the biggest costs in a travel budget. Determine the costs of taking a flight, bus, train, rental car, or cruise ship to your destination. If you plan to travel to more than one place, estimate how much these trips will cost as well.
• Think of where you'll be staying: Research various lodging options available at your destination and their prices. If you're on a budget, look for hostels, budget hotels, or shared living options. Also, consider accommodation facilities that offer at least one meal with the stay, or a communal kitchen.
• Think of how you'll be moving around: Find out the best way to move around once you've reached your destination. Estimate how much you would need to set aside to freely move around, whether by foot, cycle, public transport, or taxi. Look for public transport ticket options, as booking in advance or for a longer period may be cheaper.
• Think of what you'll be eating: Have an idea of what a meal costs in the places you'll be traveling to. If you have no time to research, budget a minimum of at least 2 to 2.5 times the price of your accommodation per night for one day’s worth of food. Also, consider cooking at least one meal a day if you're on a longer trip, and opt for locally consumed and seasonal items.
• Think of what you'll be doing: Have a vague plan of what activities you intend to do during your trip and research their costs. Prioritize the activities according to time and cost. Booking some activities in advance can often save you money and help you skip long lines at tourist attractions.
• Think of what you'll be buying: Gifts and souvenirs are a huge part of travel. Make a list of people for whom you want to pick up gifts to stay organized and prevent overspending.
• Think of emergencies: Set aside some money for unforeseen circumstances or emergencies, such as medical emergencies, extra expenses, or happy accidents like an impromptu event. A good rule of thumb is to budget for two to three days' worth of living expenses per person.

Compare your bank's exchange rates and fees

When it comes to exchanging currency, banks often offer poor exchange rates and charge high fees. Banks usually charge an exchange rate margin of 4-5%, but by comparing money transfer companies, you can often find rates of less than 1%.

Traditional banks also lack transparency and are notoriously unclear about their exchange rates, making it difficult to calculate the total cost of your transaction.

• Exchange rate margins: Banks often charge a 'hidden' exchange rate margin, which is the difference between the mid-market exchange rate and the rate they offer to customers. This can be challenging to calculate but is an important factor in understanding the total cost of your transaction.
• Transfer fees: Banks typically charge high transfer fees, which can be a fixed fee or a percentage of the transaction amount. These fees can significantly increase the overall cost of your transaction, especially for larger amounts.
• Card processing fees: If you use a credit or debit card to buy foreign currency, banks may charge card processing fees, typically between 1-2%. These fees can add up, especially for larger transactions.
• Speed of transfer: Banks can take several days to complete international money transfers, whereas currency brokers often offer same-day delivery for most major currency pairings.
• Customer service: Banks often provide an impersonal service, with multiple points of contact. In contrast, currency brokers usually assign a dedicated foreign exchange specialist to each client, providing a more personalised experience.

Using a money transfer company or a foreign exchange broker can offer significant cost savings and faster transfers compared to traditional banks. These alternatives are worth considering, especially if you are transferring large amounts of money internationally.

Alert your bank and credit card company

When preparing for a trip, it's important to consider how you will manage your money. While carrying cash can be convenient and useful in certain situations, it also comes with security risks. On the other hand, credit and debit cards offer more protection but may incur additional fees when used internationally. Here are some reasons why you should alert your bank and credit card company when you plan to travel:

Avoid Suspicious Activity Flags

Credit card companies monitor accounts for unusual or suspicious activity. If they notice a charge from a location away from home, they may flag it as suspicious and decline the charge. By informing your credit card company about your travel plans, you can reduce the likelihood of this happening. This is especially important if you are travelling to a country or location where fraudulent charges are more common.

Prevent Declined Charges

When you notify your credit card company about your travel plans, they will know that any card transactions from that location are likely authorised by you. This is crucial if you are travelling outside your home country, as failing to file a travel notice may result in your card being declined. In such cases, you might need to contact your credit card company to approve your transactions, which could be challenging if you're in a different country with limited access to international calling.

Take Advantage of Travel Perks and Rewards

Some credit and debit cards offer travel perks and rewards, such as lounge access or lack of foreign transaction fees. By researching the travel policies of your cards, you can maximise these benefits during your trip. Additionally, some cards may add extra taxes for purchases made abroad, so it's important to be aware of any potential fees before you go.

Ensure a Smooth Transaction Process

By alerting your bank and credit card company, you can help ensure a smooth transaction process during your trip. This is particularly important if you plan to use a new card or one that you haven't used in a while, as sudden activity on an inactive card may raise red flags. Informing your financial institutions in advance can help prevent any unexpected issues or delays.

Be Prepared for Emergencies

It's always a good idea to have a backup plan when it comes to money. In addition to carrying some local currency, consider bringing multiple credit or debit cards from different issuers. This way, if one card is lost, stolen, or doesn't work, you have other options to fall back on.

Frequently asked questions