Are You Financially Ready to Hit the Road?

Key Points

  • Saving for a vacation is only one part of being financially ready to travel.

  • Make sure you consider all the costs of travel from airfare to pet care.

  • A little upfront financial planning can help make sure your travel budget isn't eaten away by transaction fees, extra charges, and bad exchange rates.

Dear Carrie,

My husband and I have been saving for a special trip abroad. He's the adventurer and is ready to hit the road. I'm the planner and still worried. Is there anything else we should be doing to make sure we’re financially prepared? —A Reader

Dear Reader,

With vacation season just ahead, this is a great question. I write a lot about the importance of saving in advance for a particular goal like a trip, so first kudos to you for making sure you have the money before you go rather than facing a barrage of credit card bills when you get home.

But as you suggest, saving is only one part of being financially ready to travel. While it's easy to keep things like plane reservations, hotels and sights to see top of mind when preparing for a trip, there are a lot of other financial details to handle—or at least anticipate—to make sure your dream vacation doesn't turn into a financial disaster.

Preplanning for expenses—big and small

When planning a trip, the big items are fairly easy to identify—things like airline tickets, hotels and rental cars. But that's just the beginning. Consider what you'll do when you get to your destination. If you plan to travel by trains or buses, it can make sense to look online for passes or advance-purchase tickets that offer a discount. Tickets to many major tourist venues can also often be purchased online in advance. It may save you money—and will surely save you time as you push past the hundreds of people waiting to get them!

On top of your daily expenses on the road, there are myriad smaller expenses close to home to consider. Will you pay a house sitter? What about boarding a pet? Will you park your car at the airport or pay for transportation there and back? How much will you spend on gifts for family and friends?

These things can add up quickly and should ideally be part of your travel budget. It's much better to account for them now than to find yourself coming up short later.

Handling money—before and during

Dealing with money in a foreign country can be complicated and thinking ahead can save you money. Here are some things to help you get a better deal:

  • Get a no-foreign-transaction-fee credit card—Many banks and credit card companies charge foreign transaction fees, which can be up to three percent. Don't pay more than you have to. There are several companies that offer travel cards without this type of fee. You can easily compare card features at sites like creditcard.com or nerdwallet.com.
     
  • Use an ATM for cash—When traveling abroad, it's often easier to pay with cash. You’ll get a better exchange rate at an ATM than at a currency exchange service, but always use a bank ATM for added security. Some banks won’t charge a fee (or they will refund it), but if you are going to be charged an ATM fee for each withdrawal, take out a larger amount at one time rather than a series of smaller withdrawals. If you prefer to have some cash on you when you first arrive, get a small amount of the local currency through your bank.
     
  • Beware of dynamic currency conversion—While you'll generally get the best exchange rate by using your debit or credit card, always ask for the bill in the local currency. It may seem like a convenience when a vendor or hotel offers your bill in dollars—called dynamic currency conversion—but you'll likely get a much worse rate.

The cost of staying connected

We take our smart phones for granted here at home, but things like roaming and data charges and international calls can cost a small fortune once you're out of the country. Make sure you understand the international service your cell phone provider offers and how to avoid unwanted costs. An alternative is to simply buy an inexpensive cell phone with a SIM card at your destination.

Perplexing financial differences

From tipping to taxi fares to Value-Added Taxes (VAT)—every country will present you with different customs and ways of handling money. The VAT, a consumption tax on purchases, can be particularly puzzling to American travelers—and costly. In the EU, it can represent from 15 to 27 percentof an item's price. Fortunately, as a traveler, you can apply for a refund if you have the right paperwork. The details vary by country, so do a bit of research. There are many travel websites that offer advice on how to handle different rules and practices to make sure you're not being taken advantage of financially.

An ounce of prevention

Ready to go? There are a few more things you'll want to do—just in case:

  • Look into purchasing travel insurance – Before you pay for your trip, consider purchasing travel insurance.  Policies differ, but are generally most useful for trip cancellation or interruption or to cover emergency medical expenses outside of the U. S. (Note: Medicare will not cover you).  Some credit cards include limited insurance for cancellation, so check that before you purchase additional coverage.  For more details, see travelinsurancereview.net
     
  • Contact your credit/debit card company—Some credit card companies no longer require it, but it can't hurt to let them know the dates you'll be traveling and what countries you'll be visiting. There's nothing more uncomfortable (and potentially scary) than having your credit cards denied.
     
  • Make a list of your credit cards—Be sure to include the international customer service number. But don't carry it in your wallet! There are also toll-free numbers listed on the Visa and MasterCard websites.
     
  • Photocopy your passport—This will make it much easier to replace if your passport is stolen. If the worst happens, you can find information about replacing passports at travel.state.gov.

I'm all for having new adventures, but thinking a bit in advance will help ensure that both you and your husband have a fabulous time. Bon voyage!

Have a personal finance question? Email us at askcarrie@schwab.com for future topic consideration.

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