Priya Krishnan guides you...
Imagine being mugged in a strange country, where you might not know the local language. What if everything important was in that one bag that got robbed? Being stranded and clueless can be daunting even on the toughest people. So before planning my next foreign trip, I’ve decided to consider alternate methods of payment to minimise any risk. As usual, I bring out my notepad and start jotting down pros and cons.
Travellers Cheques
Pros
I start with the age-old Travellers Cheques (TC). All you need to do is visit your local bank, or ask your travel agent to help you get a TC. You will be required to pay in local currency; the prevalent exchange rate will be applied and you will get a TC in the currency requested. For example, a US $100 TC or a US $50 TC. By paying the current exchange rate, you will be locking the risk of currency fluctuations. And the best part is that there is no expiration date. “My mom has a Travellers Cheque, which was bought in the year 2000 and it's still valid”, shares Karan Bindra, an ardent traveller. The biggest positive for this mode of payment is that the cheque can be encashed only against the holder’s signature and you would be required to show your passport for validity. If you lose or misplace a TC, the issuing entity will replace it, making it one of the safest modes of foreign exchange.
Cons
One of the drawbacks of TCs is that you need to find a bank or institution willing to encash the same. However, nowadays, with the emergence of credit, debit and Forex cards, the relevance and charm of the TCs is slowly decreasing.
International Debit or Credit Cards
Pros
Many people use their International Debit or Credit cards for purchases, booking shows or for ATM withdrawals. These are convenient and hassle-free. The acceptance of these financial instruments has grown substantially in the last decade. They are best suited for payments of odd amounts. Additionally, you don’t have to calculate or stress about the amount of money that you are paying; unlike with cash, wherein small denomination payments can get confusing.
Cons
Travellers are subjected to currency fluctuations as payments are made at the prevailing exchange rate. For instance, if you intended to visit the US in September 2014 and started planning your visit in May 2014, you would have lost more money as one dollar would have cost you more in September than in May. On 30th May 2014, INR closed at 59.30 and on 1st September 2014, INR opened at 60.51; these are market rates which are better than the rates applicable to retail customers.
Forex Card
Pros
The Forex card has been gaining prominence in recent times. You can insulate yourself from currency fluctuations by investing in a prepaid card, which is easily available at almost any bank. You simply need to request for a Forex card and you will be given a card with balance in the requested currency at the prevailing exchange rate. You can then swipe it as and when needed as these are widely acceptable. These can also be used at ATMs and the charges to use your Forex card is generally lower than using your international debit or credit card. In case of theft you can block these cards and replace them. “Someone I know was robbed at the Eiffel Tower in Paris; they lost the handbag which had both the FX card as well as the pin, but luckily the tourist was able to cancel the card and prevent its misuse”, says Stalin Pimenta, who manages travels for a tours and travel organisation.
Cons
One thing you need to be careful about is that these cards usually come with an expiration date. So you need to either redeem the balance on returning from your trip or make sure you utilize or encash it before its expiry dates. “I kept planning a trip to London, but it never materialized; I forgot to redeem the FX card and my balance lapsed after the expiry date”, says Hemal Jasani, a Financial Service Executive.
In most foreign countries the local transport services also accept FX cards and slowly their acceptance is growing globally. "Forex cards make frequent travel very convenient, but they might not be accepted in all countries", Captain Aarti Pushpala, a pilot tells us. If you are planning a luxury trip, you can just pack up and go without worrying about dealing with the local money exchangers. But if you’re planning on being adventurous and venturing into areas where plastic money is not acceptable you’d need to make sure that you have adequate local currency. As my dad says “Never put all your eggs in one basket”.
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