To be a financially smart traveller, you need to do more than just stick to your budget.
This article originally appeared in Dollars and Sense.
The holiday season is upon us! Many Singaporeans are now eagerly anticipating their overseas trips as they look for a well-deserved end-of-year break.
Most travellers tend to fret over what to wear, where to shop and what local food to try overseas, it’s important to not forget about the financial matters surrounding these trips. Being financially smart while travelling isn’t just about keeping to your budget; it’s also about making smart financial decisions during your travels.
1. When Using A Credit Card, Pay In Foreign Currency
When making payments via credit cards overseas, you may encounter the salesperson asking if you would prefer to pay in local currency (i.e. the currency of the country you are travelling in) or your home currency (i.e. Singapore Dollar).
The short version of the answer is to always opt to pay in foreign currency when you are overseas. The main reason for that is due to this thing call “Dynamic Currency Conversion” (DCC), which allows cardholders to see the amount their card would be charged expressed in home currency instead of foreign currency.
DCC services are offered by third party operators in association with merchants. Compared to credit card companies, their rates tend to be less favourable.
If you are interested to find out more, this article from Forbes explains in detail the additional charges you can expect when you choose to make payments in your home currency while travelling.
Hack: Pay In Foreign Currency Whenever You Are Given The Choice
2. Pay Using A Great Travel Card
Some people avoid using credit cards while travelling. The reason is because unlike in Singapore, the use of credit cards overseas usually involve additional charges. You can expect additional charges of about 1.5% – 3%, depending on which bank and credit card you use.
While one option is to sacrifice safety and convenience by carrying large amounts of cash, the alternative would be to arm yourself with a travel card that gives you perks for using your credit card overseas.
For example, if you were to use an air miles card such as the Citi PremierMiles Visa Card, you can earn 2 Citi Miles for every S$1 that you spend overseas. This way, the miles you receive, which you can convert into flights in the future, offset the additional costs that you incur from using your credit card overseas.
In contrast, if you were to use a regular credit card that offers no overseas perks, then you will not receive anything besides convenience.
Hack: Have A Designated Credit Card That You Always Use When Travelling Overseas
3. Never Redeem Your Miles For Discounts
Some miles card would allow you to redeem your miles for discounts when you make travel related purchases.
For example, you might be doing some duty-free shopping at Changi Airport and (wisely) using your travel card to make payment when the cashier ask you during payment if you would like to redeem your miles for discounts.
The answer you should give is “No”.
The conversion rate for such redemption is usually quite poor, and you are better off keeping your miles to redeem free flights in the future.
Hack: Never agree to redeem your miles for discounts.
4. Compare and Get The Right Travel Insurance
Are you one of those Singaporeans who buy the same travel insurance policy whenever you travel, regardless of where is it that you are going, or what is it that you would be doing?
Travel insurance can be a complex business to navigate since different insurance companies offer different levels of coverage. In addition, an insurance company that is able to offer the most competitive rate for one country may not necessarily be the best when it comes to another country.
Furthermore, the type of coverage you would require also differs each time you travel overseas depending on your activities. For example, if you were renting a car during your travel, you would want more comprehensive coverage for car rental damages and if you were skiing or engaging in other extreme sports, you would want coverage for those activities.
Hack: Make use of insurance comparison platforms to find the best priced and most suitable one for your trip
5. Ensure Your Mental Sums Are In Tip-Top Shape
We tend to be less cost-conscious when travelling overseas and not without good reason. For starters, we might justify it by thinking “it’s ok, we are on holiday, and it is perfectly logical to spend more, or to buy things that we normally wouldn’t because we may never come back to this place.”
The other reason is because we are less sensitive to the value of foreign currencies. For us to appreciate the value of foreign currencies, we first have to convert it back to Singapore Dollar. This is easy for currencies like the Malaysia Ringgit (S$1 = RM3), but a lot trickier for currencies such as the Japanese Yen (S$1 = ¥80) or Korean Won (S$1 = ₩823).
One trick to employ here is to have a quick mental reference in mind. For example, if you are travelling to Korea, always remember that ₩10,000 will equal about S$12, while ₩50,000 is about S$60. This allows you to have some quick estimates on hand when deciding whether something is worth spending on or not.
Hack: Have mental references for currency conversions to give you quick estimates on prices
6. Don’t Spend Your Leftover Foreign Currency Needlessly, Or Convert It Back to Singapore Dollars
Travellers have a tendency of wanting to get rid off remaining foreign currency before they head home.
Instead of converting your foreign currency back to domestic currency, or spending it on some overpriced coffee at the airport, consider keeping it and bringing it along with you on your next trip.
Even if your next destination does not use the leftover foreign currency that you have, you can still change them for the currency that you need. This is more efficient than converting leftover foreign currency back to Singapore Dollar, and then re-changing them again for your next trip. This effectively prevents you from being “double-charged” when you exchange money. It also stops you from buying stupid last minute things that you do not need.
Hack: Do not needlessly spend or change back foreign currencies, instead use it during your next trip to convert into another foreign currency.
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By Timothy Ho of Dollars and Sense
DollarsAndSense.sg is a website that aims to provide interesting, bite-sized financial articles which are relevant to the average Singaporean. Subscribe to our free e-newsletter to receive exclusive content not available on our website. Follow us as well on Instagram @DNSsingapore to get your daily dose of finance knowledge through photos.