The pros & cons of 5 payment methods for overseas

Co-author: Christine Thelander

Should you be travelling with cash or a travel card, travellers’ cheques, debit or credit card? We look at your options for spending money overseas.

There’s more to planning an overseas holiday than just hunting down the cheapest airfare and the best hotel deal. How are you going to pay for things while you’re travelling? Taking time to consider your options here and planning your travel money will result in peace of mind that you have all bases covered and are less likely to be involved in an unwanted financial drama away from home.

The first thing to understand is that there is no single right way to access funds overseas that will work for all travellers in all places all the time. Whether it’s a short trip or a long one, factors you need to work out include where you’re heading, how much money you’re taking, and the level of security you need.

So, travellers’ cheques or travel card? We explain your 5 main overseas money options and the pros and cons of each below. But first, there are two very important issues that you need to know about first off: load times and pre-authorisations of certain payments.

Do travel cards have different load times?

Yes. Travel money cards can take up to 3 days to make funds available when you transfer more money onto your card in a reload. This is not ideal because it can leave you stranded if you do not have another payment method with you and you have run out of money on that card.

How do travel cards deal with pre-authorisations?

Pre-authorisations are where money is “held” on a card by a merchant in advance of the actual payment being made. This typically happens with hotel check-in and hiring a rental car, and it means that effectively two payments are charged to the card and reduce your available balance – a pre-authorisation payment that secures payment for the expected cost of your hotel stay or your car hire, and then a second authorisation that takes payment for the actual cost of your stay or hire from your card.

This is fine if you’re using a travel credit card because you have money available up to your credit limit, and the pre-authorisation payment is usually only held on the card for a day or a week at most. In contrast, if you are using a travel debit card or a travel money card, the pre-authorisation payment can be held for up to a month.

If you’re low on funds, these two authorisation payments could wipe your card out until the first pre-authorisation payment is released up to 30 days later. You’d probably be home from your trip by then! This means less money for you to use travelling, and even worse, if you want to transfer the leftover money off your card and into your normal bank account when you return, a refund fee is typically charged.

Travel Money Cards

A traveller’s best friend…

Benefits of a travel money card:

  • Locked in exchange rate: When you load money onto your travel money card before your trip, you’ll be locking in an exchange rate for those funds. Being able to lock in an exchange rate means you don’t have to worry about the fluctuating value of the New Zealand Dollar. This will help give you certainty when planning your trip budget.
  • Load multiple currencies: If you’re visiting a few different countries in one trip, a travel money card could be useful because it allows you to load multiple currencies. Spending in the local currency means you’re not paying conversion fees every time you make a transaction.
  • Convenient: Use it like a debit card and away you go.
  • Low risk: Since it’s not a card for your general banking needs, you’ll only ever use a travel money card for your overseas spending. So if it is stolen, there is no risk to your money above what you loaded onto the card – thieves can’t access your salary or savings.
  • Replaceable: If you lose it or it is stolen, a replacement can be sent to you.

Disadvantages of a travel money card:

  • Exchange rates: According to Canstar’s analysis, the exchange rates (excluding currency conversion fees) for loading and reloading travel money cards vary, with some being less favourable than the exchange rates on travel credit cards and debit cards. What’s more, if you do run out of one currency on the card and have to use another, the exchange rate you pay on the currency conversion is the live rate not your locked in rates.
  • Higher fees: In general, there are higher fees for travel money cards. Fees include purchase fees, issue fees, load and reload fees, fees when cashing out the remaining balance, and ATM fees.
  • Load times: It can take up to 3 days to load money onto a travel money card, which can leave you stuck waiting without money in a foreign country if your card balance is low.
  • Pre-authorisations: Hotels and rental car hire pre-authorisations (see above) are more difficult for travel money cards because they are pre-paid. As discussed above, the two authorisation payments could leave you without money on your card for up to 30 days.

Compare Travel Money Cards

Travel Credit Cards

Credit cards also have both good and perhaps not so good features to be aware of when you’re travelling overseas.

Benefits of using credit cards overseas


Benefits of a credit card:

  • Good exchange rates: Some credit card providers offer exchange rates that are very close to the actual spot rate. This is especially the case on the few cards that don’t charge currency conversion fees. If you travel frequently it is possible to find a credit card that doesn’t charge any foreign transaction fees. (It’s not true of all cards though, so do your homework.)
  • More funds available: Funds are available to use up to your credit limit, which is good for hotel and car hire pre-authorisations, and for emergencies. It is also helpful for large purchases such as airline tickets, hotel bills, car rentals, and restaurant meals.
  • Concierge services: The concierge services on premium credit cards can help with requests and bookings while you’re away on holiday.
  • Pre-authorisations: Credit card pre-authorisation payments are usually only held on the card balance for a day or a week, compared to up to a month for debit cards and travel money cards.

Disadvantages of a credit card:

  • ATM fees: It can be very costly to withdraw from an ATM overseas using a credit card. You may be hit with a cash advance fee (potentially around 3%) and interest will begin being charged as soon as you withdraw the money, on top of the ATM fee and the currency conversion fee. If you’re not home by the time the bills come in and you haven’t made arrangements to pay them, you might be up for more than you bargained for. Again, this is not true of all cards though.
  • Temptation to overspend: Since funds are available to use up to your credit limit, you may be tempted to spend more than you budgeted for and find yourself paying off your holiday over many months at high interest rates.

Compare Travel Credit Cards

Debit Cards

Some people prefer debit to credit – but again there are pros and cons…

Benefits of debit cards:

  • Cheaper ATM access: It’s generally cheaper to withdraw money from an ATM overseas using a debit card rather than a credit card, particularly if your bank belongs to an international ATM network. Some debit cards allow completely free withdrawals from supported ATMs all over the world.
  • No debt: No interest is charged when you spend on your debit card, so you’re just using your savings without racking up further debt.
  • More control: Since you are accessing your own money, you more are in control of your spending.
  • Good exchange rates: Along with credit cards, debit cards also generally offer better exchange rates than travel money cards (excluding currency conversion fees), according to Canstar’s analysis.

Disadvantages of debit cards:

  • Less protection: If you are a victim of fraud, your money could be tied up while the dispute is resolved, leaving you without access to your funds.
  • Pre-authorisations: Some businesses like hotels or car rental agencies might not accept debit cards for pre-authorisations.

Compare Debit Card Transaction Accounts


Sometimes it’s good to get back to basics…


Benefits of carrying cash:

  • Budgeting: It’s so easy to budget for a short trip when you have an envelope of cash for each day and it is literally all you have to spend. Of course, some days may be more expensive if you want to do a certain experience or buy a large souvenir, but you know you have to spend less in the days beforehand or afterwards in order to have enough money that day.
  • Exchange rates and fees: Assuming you bought your cash in the right currencies before you left, you’re done – no more currency conversion fees as you go, no more ATM fees, and no more worrying about exchange rates.
  • Tipping: Ever tried to give a tip with a credit card? It’s much easier with cold, hard cash.
  • Market bazaar: If you’re not in a first world country, shopping anywhere but a mall means you will need some cash on you. The same goes for other small purchases like a coffee from a street cart. Get some dollars or rupees in your fist and you’re good to go.

Disadvantages of using cash:

  • Less protection: If you are a victim of pick-pocketing or you just lose your wallet, your money is gone and with it your holiday fun times. We already recommend that people travelling with cash also have another payment method available such as a credit card for emergencies.
  • Pre-authorisations: Some businesses like hotels or car rental agencies still require a credit card for pre-authorisations.
  • Inflexible: Want to spend a little more than you budgeted for? Well you can’t, unless you also brought a credit card with you.

Travellers’ Cheques

Once mandatory for travellers, the proliferation of global ATMs has taken the lustre off this form of money.

Benefits of travellers cheques:

  • Secure: If you can’t find a functioning ATM, travellers’ cheques are a relatively secure alternative to cash. There are some destinations in the third world where if you’re travelling for an extended period of time, travellers’ cheques can be a great backup.
  • Easy to replace: If you lose your travellers’ cheques, you only have to contact the nearest office of the issuing authority with the numbers of your unredeemed cheques to get them replaced, usually within 24 hours. Make sure you keep a record of those cheque numbers!

Disadvantages of travellers cheques:

  • Fragile: Paper cheques can be lost in a gust of wind, or damaged by water.
  • Inconvenient: If you don’t speak the language, and Google Maps is not working for you, it can be tricky to find your nearest bank to cash a cheque.

Finally, don’t forget to call your bank and make it aware of your travel plans. Sudden international activity using your debit or credit card could cause your account to be frozen, leaving you stranded. It’s a good idea to make sure you have multiple options if you’re travelling through multiple countries, just in case!


Compare Travel Money Cards

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