When planning for a round-the-world (RTW) or long-term trip, there’s one factor that will make or break your trip: money. Just like a car needs gas to keep it moving down the road, a traveler equally needs money to keep their trip going in a forward motion. But once you’ve budgeted what you’ll need and you’ve saved up all that cash, what do you do with the money? This is one of the most popular questions we receive, as it’s usually the main dilemma travelers face. The simple answer would be “you spend it”, but when you travel you have to decide how much to carry, what forms of money should you carry (cash, credit, or traveler’s cheques), how will you access it, and most importantly, how will you keep it safe?
With this in mind, we’ve decided to share with you how we deal with “the money question(s)” on the road.
What forms of money should you use?
There are three main forms of money travelers can choose from when on the road; cash, credit cards, or traveler’s cheques. Personally, we opt for using a combination of cash and credit cards. Traveler’s cheques aren’t very convenient for us and generally don’t get very good exchange rates when you cash them in anyways. It can also be difficult to find a place willing to accept them. We really wouldn’t recommend using them in the first place, especially if you’re traveling for a long period of time.
Good ‘ol hard cash is the best form of money to use. It’s simple, easy, and accepted anywhere in the world. But knowing how much you should carry on you is another question in itself. We’ll cover that next.
Credit cards are another great form of money to carry with you, but depending on where you’re traveling, they aren’t always accepted. We try to make as many purchases as possible on our credit cards since credit card companies offer better exchange rates than banks. Purchasing items on credit also means you don’t have to hit an ATM as often and you don’t have to walk around with excess cash, therefore minimizing the risk factor involved with carrying money. Having one of Visa or Mastercard should do the trick, as they are the most widely accepted cards around the world. However, we have been finding it difficult to find places in Southeast Asia that will actually accept credit cards. In cases where they do, they usually pass the credit card processing fee onto the consumer, adding an additional cost of at least 3.5% to our total bill. For big-ticket items, this processing fee can be a more attractive option than paying a bank’s withdrawal fee (plus getting their poorer exchange rate), so weigh the pros and cons if you’re going to be charged the processing fee.
Keep your credit card number safe by following these three tips: make sure the card doesn’t leave your sight while the person is processing your purchase (so they can’t copy your number) and double check that the copy you sign doesn’t have your full card number written on it (the copy the store keeps). It should show a series of x’s with only the last 4 digits of your card visible. If you see that you’re credit card number is clearly visible, scratch it out! Lastly, if you’re going to be purchasing something over the phone, make sure to be aware of your surroundings and the level of your voice. You don’t know who could be listening, especially if the walls are paper thin in your guesthouse.
How much do you carry?
At any one time, the total amount of cash (paper money) we carry with us is equal to one maximum withdrawal from an ATM in a particular country. That money is put into our money belt, which almost never travels out and about with us on our daily adventures. For each day, we physically carry only twice what our daily budget is (more if we know we’ll need it), to allow for a little flexibility should the need arise. Since there are two of us, each one will always have a total of one daily budget’s amount at the beginning of the day, so that if anything should happen, one of us will be able to see us through the day. The rest of the money is left at our establishment, under lock and key, using our portable pack safe.
How do you access your money?
We access our money only from established bank ATM’s. Before we make any withdrawals in a new country, we research which banks are reputable and which ones have the fairest exchange rates. Sometimes this information is tricky to find, and you might have to do a little trial and error to find out about the exchange rates. Before you head out on your trip, it’s advisable to talk with your bank to make sure you can use your bank card abroad (there’s nothing worse than getting to your first destination only to find out your card can only be used within your home country) and ask them if they can recommend any banks that would be best for you to withdraw your money from (sometimes they have affiliate banks where you might even be able to save money on withdrawal fees, more on that below).
When we actually withdraw the money, we do a cursory check of our surroundings (checking to make sure there are no interested shady parties watching our withdrawal), and make sure that the ATM has a locking device over the card intake to make sure nobody can attach a card reader to steal our info. Once again, since there is two of us, we immediately separate the money to ensure that if anything happens, there is a good chance only half the money is lost. We only withdraw money when we are planning on immediately returning “home”, since we withdraw the maximum amount, and that should never be walked around with.
Now the biggest problem with accessing our money through ATM’s is the dreaded withdrawal fee. Generally you’ll get hit twice with this fee, once from the local bank you’re withdrawing from, and second from your home bank for an international withdrawal. These fees can add up very quickly, especially if the ATM you’re withdrawing money from has a very low withdrawal limit.
We’ve actually managed to work out an agreement with our home bank that allows us to withdraw money without getting hit with their international withdrawal fee. But we still have to pay a withdrawal fee to the local bank and usually pay anywhere from $2-5 extra at the local ATM. Nomadic Matt wrote a great article about how to avoid bank fees while traveling that’s worth a further read.
Keeping it safe
Now that you’ve decided what form(s) of money you’ll use, how much you’ll carry on you, and how you’ll access it, the bigger concern becomes keeping your money safe. First and foremost, our best piece of advice: don’t carry an excess amount of cash on you! As mentioned above, we only ever have one maximum withdrawal in our bags or on us in total at any given time. Once we’re running low on funds, we’ll stop in at an ATM and withdraw only our daily withdrawal limit ($500). This means that should our room be robbed, at most we can only lose $500, minus the day’s budget amount each one of us carries. And vice versa, should we be physically robbed (God forbid!), we at most would only lose the value of two days budgets.
We also don’t carry our bank and credit cards on us during our daily activities. Unless we know we’ll want to be charging stuff on our cards, or need to make a withdrawal, those cards stay in our money belt, locked inside our pack.
To keep our stuff safely locked away, Arienne and I travel with a Pacsafe. It is relatively light and compact, but an effective way of deterring any room invader from actually getting at our most important things (money, passports, laptop etc.). The Pacsafe is a wire netting that covers the exterior of one of our packs, preventing the pack from being opened, or having any large items removed. It not only keeps the bag from being opened, but can also be anchored to any immovable object in our room (i.e. bed, cabinet, pipes etc.) so a potential thief can’t walk off with our bag and try to open it later. Check out our Pacsafe video to see how it works.
While traveling in Southeast Asia, Central or South America, it is highly advisable to keep with you an emergency stash of $75 – $100 American dollars. This money should only be accessed in a complete and total emergency, and should be hidden in the most secretive place you’ve got. Some people suggest splitting it up and hiding it in various places, but you’ll have to decide what will work best for you. We prefer to keep it together, hidden in our money belt.
American dollars are the most widely accepted currency in the world and, therefore, most likely to get you out of a dire situation. Some of those situations may involve but are not limited to: completely running out of cash and finding yourself without access to an ATM, issues at a border crossing, unexpected costs when short on cash, and greasing the wheels with police looking for a bribe or payout.
If you’re traveling through Europe, you’ll also want to set aside an emergency stash using Euros.
If you’re using ATMs to always access your money, getting local currency isn’t a problem. But sometimes you’ll end up with some of that currency left over once you’ve entered a new country, or you might have to dip into your emergency stash. Instead of spending like a fien just to use it up (you’re trying to stay on a budget after all), you’ll want to exchange it. Finding places that exchange money isn’t difficult, in fact you’ll be surprised at how many place offer money exchanging, especially in tourist frequented areas. But the one difficulty you will face is ensuring you’ll get a good exchange rate.
Before you go to exchange your money, find out what the current exchange rate is for that day. We like to use www.xe.com. Their site is easy to use, you can pick from any currencies, and there is even an exchange rate histories to see whether the currency you’re interested in has been getting stronger or weaker over the past week, month, and even years. If you’re traveling with a smart phone or an iPod Touch, you can also download their mobile app right to your device. You can load in up to 6 different currencies at one time and see how they all compare to each other. It’s a great app and one that we use very frequently on the road. And the best part, it’s free! When we’re exchanging money, we’ll use the app to see how the bank rates compare with the exchange rates being offered on-site. Sometimes they’ve been exactly the same (bonus!), but most of the time they’re slightly less than what the current daily exchange rate is. As long as it’s close, we’re happy.
Some key things to remember, always double count the money you’ve received and never let the person who’s exchanging the money for you take back the cash to “re-count” it. They may try to cheat you out of some bills. If any of the bills look questionable, ask for a different one. And don’t be afraid to shop around to the different exchange places, even smaller mom and pop shops (you’d be surprised how good their exchange rates can be). Even a couple points difference could mean a few extra coins (or bills) in your pocket.
So with all that in mind, you should now have a better idea of how to approach the “money questions” while traveling abroad. Keep in mind that these are tips that have been working well for us, though you might find a few tweaks here and there might be necessary for you.
Are there any tips we’ve missed or recommendations you’d like to add? Post them below!