Travelling to an exotic destination? You’ve probably packed your clothes, shoes and sun-tan lotion. But have you planned the details of your money and how to cover key expenses? The last thing you need is to worry about falling short of money or having to figure out the best way to exchange currency without being ripped off. The ideal plan is to go prepared. We cover some of the rudimentary money matters to bear in mind before travelling.

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Carrying cash or cards? Do the maths before you travel

As a first step, get acquainted with the local currency at your destination and estimate how much money you’ll need to cover your costs. At the very least, you should have enough on you for transportation and basic meals. For all other expenses, if you are considering cash payments, understand the value of the money. Several countries’ currencies are very low in value against the dirham. In Nepal for example, a bottle of water that costs AED5, would cost you 139 Nepalese Rupees based on current exchange rates. Paying for it in cash would require carrying plenty of local currency bills in your wallet. If, on the other hand, you prefer using credit and debit cards, you’ll have to know how widely accepted they are.

Here is some important information to know before deciding on cash or cards:

  • Find out if there are any limits on importing or exporting foreign currency from and to your destination.
  • Figure out the ATM and point of sale banking network of your destination. Some countries are yet to come onto the global ATM network, so you may need to carry all your money in cash and travelers’ cheques. You may also find that several outlets are not equipped for credit card payments.
  • Find out if there are any ATM cash withdrawals limits at your destination
  • Discover all the costs associated with card payments
  • Read about safety at your destination. In some countries, carrying lots of cash can be a very dangerous endeavour

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Understanding each payment method

Once you’ve determined all the factors above, you’ll have a better idea of the payment options to carry with you including cash, debit and credit cards. You can also consider travelers’ cheques or a combination of all payment methods.

Converting currency

If you’ve decided that you are going to carry cash with you, it is generally better to convert the money at your home country, before getting on the plane. This is because you could get a better exchange rate by checking with several reputed currency exchange houses.

If you intend to exchange money in your destination country, avoid counters at airports as you may not get a good deal. Tourist hotspots that have a line-up of exchange houses could possibly offer better rates given the competition.

Using ATMs

You can also withdraw money from ATMs using the cards issued from UAE banks. You will most likely incur network charges and the exchange rates may not be efficient. Banks that have a wider network will usually charge lower fees, making it a wise decision to check with all banks that you bank with. Sometimes using ATMs works out cheaper.

Travel Debit Cards

Alternatively, you can use travel debit cards such as gocash, which can be loaded from the UAE and let you withdraw money from any ATM. Travel debit cards ensure a fixed exchange rate that is agreed upon while loading the card. Such cards let you stay within your travel budget and offer several options to recharge the card including online, phone or SMS banking. But, check the recharging commission and the process to get the remaining balance back from your card upon your return.

Credit Cards

While withdrawing cash from your credit card is an option, it is probably the least favorable. This is because banks typically charge hefty foreign exchange fees and interest on such withdrawals. FX fees range from 1% to 3% depending on the issuing bank. As an alternative, you could opt for point of sale payments using your credit card. You can actually earn reward points using your credit cards while travelling, particularly when making large purchases. A number of banks such as Mashreq, NBAD, FGB and UNB are offering handsome rewards on overseas purchases. Check the charges on your credit cards to pick the most cost-effective option.

[Related: How your credit card may get overdrawn]

Travelers’ Cheques

Travelers’ cheques though cumbersome can actually be a blessing in disguise, being the most secure way of carrying money and easy to replace if lost or stolen. However, you need to look out for the exchange rate and commissions while drawing travelers’ cheques. Another downside is that they are no longer widely accepted. Thomas Cook remains one of the most widely accepted brands. Buy a mix of denominations to make shopping and dining out easy.

Paying for purchases

Some merchants give you the option to pay in the local currency or in the currency of your issuing bank. Before paying, check the exchange rate that they will apply. Otherwise the transaction may actually become more expensive than you bargained for.

Many card providers also offer emergency cash or card replacement services, which can get you out of a soup in case you lose your belongings or are robbed.

Even if you run out of cash, you have more than one option at hand. You can ask your friends and family to send money through instant cash transfers like Western union or Xpress Money, top up your travel debit or use credit cards.