The eight money traps to avoid when travelling overseas

  • 09/04/2022
How to avoid money traps and save a fortune while travelling overseas.
Photo credit: Getty Images

If you're one of the many New Zealanders thinking about travelling internationally for the first time since the COVID-19 pandemic hit, a little research and simple planning ahead could save you a lot of money.

Many destinations have local scams and tricks designed to get as much money out of foreign tourists as possible.

But not all scammers lurk on the street at tourist hotspots - some of them are instead global corporations looking to profit off a traveller's ignorance or laziness.

"We're witnessing a critical moment for travellers as Kiwis prepare for the great 'travel comeback'. Borders are reopening, normal flight schedules have resumed and wanderlust has reignited. However, from the moment you disembark the plane, you're often paying through the nose for convenience," said Tristan Dakin, New Zealand country manager for Wise (formerly TransferWise).

"But with some forward planning, you can avoid most travel rip-offs."

Dakin has provided Newshub with the following eight money traps to avoid on an international trip.

Leaving it too late to check your passport 

If your passport is due to expire in less than a year, you may need to renew it before you travel. There's nothing worse than booking flights for a holiday abroad before realising your passport has expired and needing to scramble to arrange it before you fly. 

If you need to apply for a passport, make sure to do so with ample time before you're scheduled to leave. This allows time in case your application isn't accepted the first time. If you need to apply for an urgent passport, be aware the price doubles and will cost you $382 for a single adult application. 

Getting the wrong travel insurance 

It's no surprise travel insurance is more important than ever right now. But travellers should take extra care to look at their insurance policy to fully understand the terms and conditions, especially the exclusions that may apply. 

Some travel insurance providers offer selected cover for epidemic and pandemic diseases including COVID-19, offering provision to claim for cancellation and medical expenses should they contract it after purchasing their policy.  

However, it does not cover general travel disruption as a result of COVID-19 including mandated lockdowns, border restrictions and travelling against the New Zealand Government's advice. 

There are limitations to travel insurance but it's still vitally important to have one before you venture out. Many countries are loosening their quarantine and social distancing rules, which means there's an increased risk of contracting COVID-19 while you're visiting crowded tourist spots.

Buying foreign currency at the airport

No matter where you are in the world, the airport is the worst place to exchange money.

Once you're in an airport terminal and need to change New Zealand dollars for Thai Baht or Euros for Vietnamese Dong, foreign exchange bureaus know they have little to no competition and will charge you through the roof.

To avoid getting ripped off, shop around for the best deals before you go to the airport. Don't fall for "commission free" or "great rates" claims.

Instead, check the currency conversion rate on Google - the further away you are from that number, the worse the deal. 

Using your bank card overseas

Using your normal debit or credit card abroad is likely to result in extra charges being added to your account.

For example, New Zealand banks charge anywhere from 1.4 percent to 3.5 percent for overseas transactions, meaning a $100 purchase will cost between $101-104. They also charge a margin on the exchange rate which means these small charges add up, especially if you're paying for everything by card.

There are bank card alternatives which provide better value for money such as the Wise Card. These allow you to spend money in dozens of currencies at the same rate you see on Google, with no markups or hidden fees. 

Falling for the dynamic currency conversion scam

When you purchase something overseas in-store or withdraw money through an ATM, you may be presented with the option of paying in the local currency or your home currency. This is known as "dynamic currency conversion" and it's designed to exploit - not help - you. 

Paying in New Zealand dollars might sound like a good plan but it allows the merchant to convert the purchase from the local currency on your behalf, which means the exchange rate is guaranteed to be so much worse compared to your card provider.

In the UK, you can be charged 10 percent per transaction if you choose to pay in your home currency. 

The golden rule is always pay in the local currency of where you are.

Transferring money using your bank

Sending money between countries can be expensive if you use your bank. This pretty much rings true for whichever countries you're sending money to and from. 

New Zealand banks charge anywhere between $13 and $20 for international money transfers. In addition to high fees, they charge a markup and a margin on the exchange rate, which means you won't be getting any bang for your buck.

One way to circumvent these fees is by using online money transfer services which are quicker and cheaper than banks. Look online for a real-time exchange rate comparison tool which displays the fees and exchange rate charged by banks and other money transfer services. 

Not checking your mobile roaming rates

Most telcos charge extra if you use your phone outside your home country, and charges can be high if you don't plan ahead. The cost of outbound calls can be exorbitant, and some also charge for incoming calls. However, the real money suck is data usage. 

Pay-as-you-go data charges while travelling range from 50c and $3 per megabyte, but some can go as high as $15. Check the rates with your telco before heading overseas or look at purchasing a local SIM card to reduce the risk of bill shock. 

Buying excess insurance at the car hire desk

Hiring a car can be a convenient way to get around a destination, but pay special attention to the extra charges on the basic costs.

Car hire insurance usually comes with a much higher excess than on standard car insurance - up to several-thousand dollars. While "excess insurance", which reduces the driver's liability to zero in the event a car is damaged or stolen, is worth having, car hire companies charge a fortune for policies they sell when picking up the car.

You'll get a better deal if you buy standalone cover before you travel. For example, look for comprehensive travel insurance policies which also include car rental excess insurance.