Overseas vacation is always fun and exciting. It, however, helps to be vigilant while traveling abroad. Particularly you need to be extremely careful about money matters as a single mistake of yours in an alien land can land you in some serious trouble

The first thing, therefore, to do while planning a foreign trip is to get a brief idea of your overseas expenses, including the cost of journey, fooding & lodging, and then make a budget accordingly.

The next thing to consider is how to carry your funds abroad and maintain your purchasing power there, and also about the suitability of different modes of payment such as cash, credit card and traveler’s cheque.

Cash

Cash is always considered to be king. Therefore, there is no denying the fact that you may be tempted to carry as much cash with you as possible as cash – in the form of local currency -- is easily accepted in each and every part of the world. However, despite cash being the most convenient form of payment, it is advisable to carry as little cash with you as possible.

This is because apart from some fixed limits of foreign exchange, carrying too much cash is not safe. Also, if your money gets lost or stolen, it is lost forever. You may also be a victim of roadside robbers or some cheats, which is not unlikely.

It, however, doesn’t mean that you should avoid carrying cash. On the contrary, travelers should always keep a small amount of local currency on hand for taxis and buses and tips, and some of their home-country currency as well that they would need on their return home.

But carrying large amounts of cash is certainly not desirable. It’s the one form of money that’s not replaceable.

Charge and Credit Cards

International credit cards have emerged as the preferred mode of payment while traveling abroad. They are reasonably safe, easy to carry, are accepted everywhere and offer convenient payment terms. Thus, besides providing a convenient form of payment that is readily accepted the world over, charge and credit cards also allow the traveler to defer payment and, depending on the financial institution, often provide favorable exchange rates.

The only major disadvantage, however, being that in case these cards are lost, they may be misused before their loss is reported.

For, while some financial institutions can replace a card quickly – usually within 24 hours – it may be difficult to get a card replaced if the traveler is in a remote location, or the issuing financial institution doesn't have a local branch. It’s, therefore, important to check on card replacement policies before you leave home

Debit Cards

Debit cards are also another good addition to a travel funds portfolio. In most cases, they allow travelers access to cash machines linked to their accounts at financial institutions.

The downside; lost or stolen cards, cards not compatible with local ATMs or networks, forgotten PINs (personal identification numbers), not enough funds in the linked account, and in some cases special fees for international transactions. And, they are technology-dependent.

ATMs are great, but they occasionally run out of cash or are out of service – that can be especially troublesome in a new place.

It is, therefore, advisable that travelers check on the availability of compatible ATMs in a destination – especially if travel is to a remote area -- and fees charged by the traveler’s local financial institution for international transactions.

Travelers Cheques

From theses points of view, traveler’s cheques seem to be the safest mode of payment abroad. We find that a lot of seasoned travelers use traveler’s cheques as an innovative, low cost way of hedging against the risk that travel funds won’t be available.

Here, you get a physical, tangible store of value. Something you can hold on to, that’s usable without a PIN, and is not subject to telecommunications breakdowns, or computer failures or ATM availability.

Better still, it allows travelers to budget their money. You can look at your wallet or purse and see what you’ve spent and what’s left.

The disadvantage with travelers cheque, however, is that they are not a convenient mode of carrying funds as one has to usually get them converted into cash at exchange bureaus which may not be available at all times and at all places.

Which Is Best?

Thus, each product has its own advantages and disadvantages. For instance, cash is the easiest and cheapest way of paying, but carries the highest risk. Likewise, advantages with traveler’s cheques and credit cards are that they are reasonably safe compared to cash. Also, the card is useful for unplanned big ticket shopping or paying large bills. The traveler’s cheques, on the other hand, are useful as they offer flexibility to the traveler by allowing them to shop around and negotiate for best exchange rates; something that is not possible with the card.

But while you can use traveler’s cheques virtually anywhere, the card can be used only at registered establishments of the card issuing company. In more mature markets one is asked to provide a card number to confirm a hotel reservation or at the time of check in. A major disadvantage of both traveler’s cheques and credit cards is that you usually lose a lot on the exchange rate.

Banks usually give a very unfavorable exchange rate on payments made abroad and since these are billed after a lag time and customers have very little right on negotiating the conversion rate charged. Similarly, for travelers cheques most of the exchange bureaus charge a higher rate compared to cash, while pre-paid cards are not accepted at all locations.

Have a Balanced Travel Money Portfolio

In the light of these, it is advisable not to rely on a single mode of payment, but instead bank on a balanced travel money portfolio, including cash, charge and credit cards, debit cards, and travelers cheque.

Especially those who plan to be away for a week or more must consider taking along what may be called a ‘portfolio’ of payment options. Just as you wouldn’t invest all your savings in one stock or bond, you don’t want to tie up all your travel money in one form of payment.

Each form of payment has its advantages and together they can help create worry-free travel