Another key element in planning for extended travel is developing a payment strategy that is both simple, easy to manage on the road and minimizes bank fees. By payment strategy I’m only referring to the methods by which you access cash and how you pay for things. I’ll write about how I created a budget for the trip and how I manage my expenses on the road in a future post.
Current (Checking) Account
Before I started looking at the offerings from different banks, I first took a step back to assess my current financial situation and identify what unique constraints I would have traveling abroad. An initial consideration is that being unemployed, I don’t have a steady paycheck for which I can use the direct deposit function. Most banks waive monthly maintenance fees if you have a direct deposit or if you meet some other criteria. With my Bank of America account, I had to keep a monthly average minimum balance $1,500 to waive the $8.95 monthly maintenance fee, which is a lot to have tied up in a non-interest bearing account. The goal for me was to find a current account that didn’t charge monthly maintenance fees regardless of my minimum balance and direct deposit status. Other major considerations are the ATM withdrawal fee and foreign transaction fee. Traveling abroad, transactions in a foreign currency are a given and so are ATM fees from local banks. My goal here was to minimize these as much as possible. Luckily, I did find a current account that met all of my criteria, Capital One’s Interest Online Checking Account. With this account, I have no monthly fees regardless of my balance, no foreign transaction fees and a reimbursement for ATM withdrawal fees of up to $20 per month. An added bonus is that my balance also earns monthly interest, a feature that is not very common with basic current accounts.
Another consideration related to what current account you choose is your ATM withdrawal strategy. Since we know that ATMs often charge non-bank customers to withdraw cash, it’s best then to minimize the number of ATM withdrawals you have to make. Of course, you need to balance the expense with the risk carrying too much cash at any given time. The solution here is experience – get a feel for how quickly you burn through money. If you find yourself spending money faster, then opt for larger withdrawal amounts to decrease the number of withdrawals you’re making. For me, the optimal number of withdrawals per month is about 4-5. And please, always count your cash! You wouldn’t believe the amount of unclaimed shortages that end up back in the bank’s pocket.
[UPDATE: It's been two months since I've started traveling and I wanted to give a quick update on my ATM withdrawal situation. The bank ATMs I've been using in Perú (BBVA, Interbank) have been charging fees in such a way that the amount is actually baked into the exchange rate and Capital One had no way of determining what amount was the actual fee. I e-mailed them about how I could get the fee reimbursed and it turned out to be an extremely easy process. They simply told me to send them the amount of the fees in US dollars with the corresponding dates and they would reimburse me. I was quite glad I saved all of my ATM receipts!]
After my initial assessment regarding which credit cards to carry, I determined that as with my current account, I didn’t want to pay foreign transaction fees. Also, in a lot of the places where I intend to travel, debit and credit cards are simply not as widely accepted as they are in North America and Europe. For this reason, I also wanted a credit card that had no annual fee because I wouldn’t be using it all that much. Of course there are the rewards. I love rewards, but this isn’t a necessity for me at the moment. Luckily though, there are plenty of rewards card options out there with no annual fees. I again went with Capital One – Venture Rewards – because of the no foreign transaction fees feature. When I was living in Amsterdam and using my Citi PremierPass, the fees added up like Starbucks coffee runs. For me, Capital One had the best solution but there are probably other considerations one might have such as interest rates. Since I always pay off my credit card in full and always recommend doing that, this wasn’t an issue for me. I can’t address all of the issues each individual might have with finding the credit card that’s right for him/her in this post, but if you have some more detailed questions, please feel free to get in touch with me.
When it comes to finances, you always want to hope for the best but prepare for the worst. Not to strike fear in the heart of would be travelers, but the possibility of being robbed or pickpocketed does exist abroad and even at home. The best thing you can do right now in the planning stages for extended travel is prepare for this possibility by developing a strategy to minimize your risk and exposure. Obviously, I hope everyone knows that no amount of money is worth your life. I don’t suggest resisting a robber’s demands, but hopefully the tips below will minimize the damage.
- As you will hear almost every traveler say, common sense is your first preventative measure and believe me, it’s easy to forget in certain situations. I learned the hard way with my solar charger. Be aware of your surroundings, do not venture into unsafe neighborhoods alone, etc.
- Make up a quick reference sheet for numbers of your banks, credit card companies, embassies and anyone else you might have to call immediately after being robbed. Keep this sheet in a safe place, perhaps with your passport in a money belt or neck wallet. Worrying about finding an internet café to get all of these numbers is probably the last thing you want to do after being robbed.
- Consider creating a decoy wallet. I keep a few expired credit cards on me to offer up in the event of a robbery – my hope being that the robbers don’t think to check the expiration date and then ask for the real ones.
- Try to have two stashes of money. This may also prove useful in regards to your ATM withdrawal management. Again, if you do get robbed, it will be comforting to know that you have some extra cash hidden somewhere else in case you’re stranded or don’t have easy access to an ATM.
- I caution the use of this next strategy and would only recommend it to people who are really on top of their finances and don’t mind frequently monitoring their accounts. One of the things that I liked about not having a minimum balance for my current account is that I can run it as close to zero as possible. I always used to do this as a matter of principle – I didn’t like leaving my money in accounts that didn’t earn interest. But in this case, keeping a smaller balance in my current account minimizes my exposure in the case of a robbery. The hypothetical situation I’m thinking of is being robbed at an ATM and being forced to withdraw all of your funds.