A `travel money` portfolio

Long-distance travel is a booming business. In fact, the World Tourism Organisation estimates that last year, more than 880 million people travelled to a foreign country. And in light of both the upturn in international tourism figures and overall economic indicators in recent months, UNWTO forecasts the growth in international tourist traffic to be 3-4 per cent in 2010.

But greater distances require greater planning, especially when it comes to having ready access to funds while on the road. With the ubiquity of charge and credit cards and ATMs, many people often overlook the risks they face on long journeys. They can be easily lulled into a false sense of security.

Diversify

Our experience shows that travellers, 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.

Among suggestions for a balanced travel money portfolio are charge and credit cards, debit cards, travellers cheques, and cash.

Charge and credit cards provide a convenient form of payment that is readily accepted the world over. They also allow the traveller to defer payment and, depending on the financial institution, often provide favourable exchange rates.

However, while some financial institutions can replace a card quickly — usually within 24 hours — it may be difficult to get a card replaced if the traveller 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 travellers 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 travellers check on the availability of compatible ATMs in a destination — especially if travel is to a remote area —- and fees charged by the traveller`s local financial institution for international transactions.

Travellers cheques

We find that a lot of seasoned travellers use travellers 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 travellers to budget their money. You can look at your wallet or purse and see what you`ve spent and what`s left. Travellers cheques can also be easily replaced.

American Express, which is a leading issuer, promises replacement of lost or stolen travellers cheques virtually anywhere in the world usually within 24 hours. And you don`t need to worry if you have leftover cheques at the end of a trip since they don`t have an expiry date. You can keep them, cash them or put them back into your bank account.

Travellers cheques come in a number of currencies, though US dollar cheques are widely accepted at banks.

Finally, there`s cash. Travellers 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 will 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. It doesn`t have the traveller`s name on it.

Just as you wouldn`t invest all your savings in one stock or bond, you shouldn`t tie up all your travel money in one form of payment.

The author is Director, GlobalPrepaid, American Express.