If you are planning an overseas adventure, you might be wondering what is the best way to pay for everything. Should you use a travel card or a debit card? How do they differ and which one offers more benefits?

Before you head off overseas, it’s important to know the differences between the two cards. You don’t want to get stung with nasty fees and charges for simply spending your own money.

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A travel card is a prepaid card that allows you to load money in different currencies and use it abroad without paying conversion fees. You lock in the exchange rate when you load your card to avoid fluctuations in the market. On the other hand, a debit card is linked to your own bank account and lets you access your own money anywhere in the world. But the downside is you might have to pay international transaction fees and ATM withdrawal fees if you don’t have a no foreign transaction fee debit card.

According to The Currency Shop, 17.3% of Australians used travel money cards in 2019 while on the other hand, Wise reported that 60% of Australians preferred to use their debit cards when travelling internationally in 2020. These reports show that both options are popular among Australian travellers.

Before you make a decision, it’s important to compare the pros and cons of each option by weighing up fees, exchange rates, convenience and security.

Travel Cards vs. Debit Cards

Money is always a consideration when travelling overseas, and there is a range of different options to weigh up.

While cash can be good to have, it can also be risky to carry only that, so most people will also carry a card around for extra money. Cards specifically designed for this purpose, known as “travel cards”, can be purchased and used to withdraw money while overseas, but so can most regular debit cards.

These different options can be overwhelming to consider, but ultimately the right choice could save a lot of money in transaction fees and currency conversions. Here we look at both travel cards and debit cards to help determine which option will be the most cost-effective.

Travel Cards

Travel cards can be offered by a number of different organisations, that let you load money in one or more foreign currencies before you go overseas. They are specifically designed to help you avoid currency conversion fees and get access competitive exchange rates. Some well known travel cards in Australia are the Wise Travel Card, the Qantas Travel Money Card and the Travelex Money Card.

Benefits of travel cards

Packing a travel card with you has many benefits, most specifically that you get to lock in your exchange rate before you travel. This is handy so that you know how much money you have to spend. You’ll also avoid currency conversion fees if you’ve loaded in the local currency. For example, if you’re heading to America you can load USD before you leave.

If you’re journey takes you to multiple countries you can load up multiple virtual “wallets”. If you’re off to England, with a week in America beforehand, you can add GBP and USD to avoid the conversion fees.

If you’re a rewards points collector, the Qantas Cash Travel Card also earns Qantas Points. Using this card allows you to earn 1.5 Qantas Points for every AU$1 spent in up to 10 foreign currencies.

These cards are pre-loaded with your own money so that you can access it safely overseas using any number of ATMs around the world. The real benefit that these cards hold over bank debit cards is that if you lose them you will only lose the remainder on the card, whereas a lost debit card could prove to be a much more serious issue.

Drawbacks of travel cards

So now you’ve learnt about the benefits, there’s always the other side of the coin. The drawbacks. The  main thing is that these cards often carry high fees for both loading money onto the card and making transactions, so it could end up quite an expensive investment. This could negate any savings you’ve made on locking in your exchange rate.

Another drawback potentially is “inactivity fees”. If you return home with money still left on your card and you forget to use it, you could pay a monthly inactivity fee that will drain any money left. Remember to keep an eye on this when you come home.

Tips on how to use travel cards effectively

If you do decide to take a travel card with you overseas, it’s important to compare the different cards out there. Look at the fees, features, exchange rates and potentially the rewards. You should also check the fine print of your card to understand the terms and conditions, such as expiry dates, minimum balances and reload limits.

Remember to load enough money on your card before you travel, as reloading may take time or incur fees and make your purchases in the same currency as you’ve loaded up. This way you can avoid dynamic currency conversion, which could sting you with more fees.

As a backup you should also keep some cash, just in case.

Travelling with Debit cards

Debit cards are kind of like the cousin of a travel card. They allow you to access your own money, but you don’t have to load the card up. You just have to move money around your accounts.

One of the benefits of taking a debit card overseas is that you are only using your own money. You don’t have to worry about paying interest or getting into debt like a credit card. Another big plus is that some debit cards offer access to global ATM networks which means you can also withdraw cash if you need it.

Drawbacks of debit cards

But, like all things when you travel, debit cards also do have some drawbacks too. One of the main things is that you are subject to fluctuating exchange rates, This means the value of your money may change depending on the market conditions. A purchase for $5USD on Monday might convert to $7 but convert to $7.40 the next day. It’s a small difference but every cent adds up!

Another major drawback is that you may incur various fees when using your debit card abroad, such as currency conversion fees, foreign transaction fees, ATM fees, or account maintenance fees. These fees can slowly add up and reduce the amount of money you have to spend on your trip. This is unless you have a card that waives these fees, like the HSBC Everyday Global debit card account.

Tips for using debit cards overseas

It’s important to use your debit card effectively when travelling overseas. As mentioned before, choosing a debit card with no international transaction fees can help save you money. If your card does has a fee, you should think about withdrawing a bit more cash at the ATM. If you withdraw $100 in one go, instead of 5 lots of $20, you won’t have to pay 4 overseas ATM fees.

You should also let your bank where you’ll be going before you jet off. If their fraud team starts seeing transaction outside of your normal everyday use, it may get flagged as suspicious transactions. The last thing you want is for your card to be cancelled.

Which one should you pack?

Depending on your travel plans, you may find one card more beneficial than the other. For example, if you are travelling to a single destination for a short period of time, a travel card may be a good option as you can avoid currency conversion fees and enjoy a fixed exchange rate. But, if your plans take you to multiple destinations for a long period of time, a debit card may be a better option as you can access your money at any time and avoid reloading fees and expiry dates. There is no one-size-fits-all solution.

Making a decision about money before travelling will help you save more and stay safe while overseas so that you can enjoy the experience without worrying about finances.