Wallet-wise vacation

Muthukumar K finds out how people plan their finances and carry money while travelling abroad

It’s that time of the year when families take time off to go on vacation. Some prefer to hit nearby hill-stations to beat the heat, while others love to travel abroad and explore exotic destinations in Europe or Australia. Travelling to a local destination is a breeze, for often you have ATMs, cash and loads of friends to take care of exigencies.

But travelling abroad involves more meticulous planning to meet financial contingencies. If you are travelling with your family, it is all the more important to have a plan B in place, for the worst possible scenarios.

On the go

Some people love doing things on impulse. They hit their destination without sweating the small stuff — like reviewing places to stay in or booking in advance. They choose the hotel and the day of stay on the go. Take, for instance, Sandeep Maurya, a Mumbai-based businessman, who likes to take off to an island in Thailand on a whim. “I have been to Thailand almost 25 times and know the place like the back of my palm. So I hit the destination, and go to my preferred set of hotels and eat at destinations I like,” he says. He loves to keep his travel plans flexible and avoids pre-booking. Ko Tao or Phi Phi Lee — he picks any of these exotic islands no sooner than on the day of travel.

However, he is well-prepared for financial contingencies. Before embarking on any travel, he estimates the daily expenses (hotel, entertainment, travel, food) and also the maximum number of days he may be willing to stay.

He assumes the worst-case scenario and provides for his liquidity needs accordingly.

Family types

But not everyone enjoys the thrill of living in the moment. And those travelling with family certainly prefer to be less adventurous. “I usually go for standard tours offered by various travel agencies that take care of all expenses — be it food, travel or sight-seeing,” says Sonny John Abraham, a musician and CEO of a music learning portal. “I prefer a bigger brand and read reviews of past travellers, before choosing a tour operator,” he adds.

Group tours — as against individual tours — are cheaper as bulk booking is done, bringing down overall travel and food costs for the traveller. “So if you are okay with being straitjacketed (as far as tour plan is concerned) and don’t mind the company of others, this strategy fits the bill. For such travellers, the need for liquidity is also relatively less — since most of your expenses are taken care of by the tour operator.

Yet, one has to provide for contingencies like missing a flight or an unexpected extension of stay.

“I prefer using international debit card and cash on such prepaid tours,” says Abraham. Some travellers also prefer carrying dollars — regardless of the destination of travel — as it is accepted in most countries.

Delhi-based Sunil V, who frequently travels to the UK, makes it a point to carry at least £500 when he is travelling alone.

He usually spends the hard cash first and then uses other alternatives. This is because the hard cash, if unspent, will have to be converted back into rupee, which would involve additional charges.

Financial planners also suggest taking about one-fourth of money requirements in the form of hard cash (local currency of destination), and using international credit cards, forex cards or travellers’ cheques for the rest of the expenses.

Tapping Friends

Some others, like Sandeep Vinerkar of adivine.net, an international recruitment agency, love the comfort of having friends abroad. “I travel to Dubai frequently. And I have lots of friends out there, since I have worked there in the past. So, whenever I travel, I use their local credit card to save on losses from currency conversion.”

And since his friends have a rupee bank account in India, he transfers money to them in rupees based on existing currency rates.

But not everyone can depend on the largesse of family and friends or throw themselves at the mercy of strangers. After you run out of hard cash, you have to decide on which other modes of payments are best suited for you.

Not many use travellers’ cheques nowadays, so the choice lies between pre-paid forex cards and international credit cards. In case of forex cards a customer has to be aware of other charges. For instance, there is a €1.5 charge for each ATM withdrawal done in European destinations.

In addition, there are charges levied per transaction (usually 2-3.5 per cent of the transaction value), which is also applicable for credit cards.

Credit card is held out by many as the best way to make payments abroad. Abraham, however, prefers using international debit card to an international credit card.

“I like to have control over my expenses,” he says. Moreover, with the issue of safety over magnetic strip-based technology, many prefer the chip technology.

“I am planning to use the chip card issued by banks, which is safer,” says Abraham. ICICI Bank, for instance, has a chip card which works on chip-based technology — which is safer to use in merchant outlets abroad.

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