Currency cards 'a risky business'

[NM]

From news.com.au:

THE introduction of another "travel card" comes with the warning that locking in your exchange rates can be as fraught with danger as locking in the interest rates on your home mortgage.

The Commonwealth Bank this week released its Travel Money Card in conjunction with MasterCard. Like other banks' travel cards, it allows you to buy foreign currency and put it on a debit card that can beused to buy goods and services while travelling.

I guess its all about gambling which was exchange rates will go, just like people do every day with interest rates and fixed rate loans.

 

[oz_mark]

I guess its all about gambling which was exchange rates will go, just like people do every day with interest rates and fixed rate loans.

As the article says "But you should ask the same questions as you would before you decided to fix your mortgage". Although most people on this board seem to find that the AUD collapses when they go OS, so maybe fixing it is a good idea

The ANZ has a similar product: ANZ Travel Card

 

[`X']

I used the ANZ product last time i went to the US and it was fantastic. Yeah you have to gamble with your rate but isnt that what all currency exchange is about. You always have to try and pick the best time to buy. At the moment im watching it daily for the ANZ rate to go over .80 so i can purchase. if it goes up more after that... thats my gamble.

its the same with Flights... its always a gamble. Do i wait or do i buy!

 

[oz_mark]

I used the ANZ product last time i went to the US and it was fantastic. Yeah you have to gamble with your rate but isnt that what all currency exchange is about. You always have to try and pick the best time to buy. At the moment im watching it daily for the ANZ rate to go over .80 so i can purchase. if it goes up more after that... thats my gamble.

Indeed it a gamble either way. Fix a rate and you are gambling it is not going to get better. Don't fix a rate, and you are gambling that it won't get worse.

 

[serfty]

Indeed it a gamble either way. Fix a rate and you are gambling it is not going to get better. Don't fix a rate, and you are gambling that it won't get worse.

I still reckon, aside from currency fluctuations, the Wizard and that NAB product are around the best available.

Today the ANZ will sell you 0.7743 (current cross rates at 0.7989) and also charge an $11 fee. So USD1000 will cost AUD1290.

Any reload also attracts an additional 1.1% fee.

 

[`X']

yeah the CBA one is a $15 buy fee on the card and $15 every time u want to change the currency.

ATM fees were higher on the CBA card i think as ANZ has different fees depending on the Currency (last i saw it was $2 per withdrawal in USD)

 

[coco50]

I used the ANZ product last time i went to the US and it was fantastic. Yeah you have to gamble with your rate but isnt that what all currency exchange is about. You always have to try and pick the best time to buy. At the moment im watching it daily for the ANZ rate to go over .80 so i can purchase. if it goes up more after that... thats my gamble.

its the same with Flights... its always a gamble. Do i wait or do i buy!

You ought to compare this rate with the Travelex online rate and see if it's better. I always prefer to take cash with me.

 

[AI-Exper]

Indeed it a gamble either way. Fix a rate and you are gambling it is not going to get better. Don't fix a rate, and you are gambling that it won't get worse.

I disagree that you are gambling. You are fixing your costs overseas.

 

[odysseus]

I disagree that you are gambling. You are fixing your costs overseas.

Fixing, or locking in a rate does give you certainty, but as there is no need to fix, and you could be better off, by locking in you are typically choosing that certainty over what could be better (or worse).

Similarly, locking in a fixed rate on a home loan should also only be done if you have confidence that you won't be worse off. You may lose, but you shouldn't do it without considering any potential downside.

 

[equus]

Similarly, locking in a fixed rate on a home loan should also only be done if you have confidence that you won't be worse off. You may lose, but you shouldn't do it without considering any potential downside.

Sorry, I believe you have that back to front in the comment about home loans. By locking in, you can't be worse off than what you choose at the time you lock - and you need to be comfortable with what you pay at the rate locked in (or get, for a currency exchange).

If you don't lock in, you may have been able to be better off by waiting, but you could also be worse off if things go the other way. By locking in, you can never be worse off (that's the point), just potentially unhappy later that you may have been better off if you had gambled and won.

As you said about the currecny exchange, locking in is about certainty - which means you know where you will be - and you can't end up better or worse. The risk is that you could have ended up better off, but don't.

 

[`X']

You ought to compare this rate with the Travelex online rate and see if it's better. I always prefer to take cash with me.

Travellex charge a 1% fee to get the card started so on a large sum (like last time i did it would of been over a $60 for card purchase). ATM fees were higher then but i think they are the same now.

So in this instance ANZ still has the cheaper product with an $11 card purchase fee.

 

[oz_mark]

I disagree that you are gambling. You are fixing your costs overseas.

I guess we could argue semantics, but you could lose out by fixing your costs overseas!

 

[odysseus]

Sorry, I believe you have that back to front in the comment about home loans. By locking in, you can't be worse off than what you choose at the time you lock

No, but as per the quote, I was saying that you should be confident you won't be worse off than if you hadn't locked. That was part of a theme that it is a gamble, hence why I said the possibility of losing the upside should be considered. This can be applied in the same way to fixing of any product, whether a home loan or currency exchange rates.

 

[JohnK]

Indeed it a gamble either way. Fix a rate and you are gambling it is not going to get better. Don't fix a rate, and you are gambling that it won't get worse.

Personally I think cash, or the Wizard Mastercard anywhere other than Thailand, is still the way to go. I am not a lucky gambler and I would hate to pre-purchase currency and then see a better exchange rate overseas where as it is much easier to accept if the AUD falls when I am overseas....

 

[coco50]

Travellex charge a 1% fee to get the card started so on a large sum (like last time i did it would of been over a $60 for card purchase). ATM fees were higher then but i think they are the same now.

So in this instance ANZ still has the cheaper product with an $11 card purchase fee.

I wasn't talking about buying any kind of card. With Travelex online you buy foreign currency. The online rate is substantially better than the OTC rate with Travelex and (I suspect) any bank. There are no commissions with Travelex online so therefore it has to be better than any card. You choose when to establish a contract with Travelex. The only downside is that you have to carry cash. Last year I did this with very little hassle for two months throughout Asi, Europe and North America

 

[coco50]

I still reckon, aside from currency fluctuations, the Wizard and that NAB product are around the best available.

Today the ANZ will sell you 0.7743 (current cross rates at 0.7989) and also charge an $11 fee. So USD1000 will cost AUD1290.

Any reload also attracts an additional 1.1% fee.

On 25.6.09 when serfty made this post, the Travelex online rate was AUD 1.0000 = USD 0.7740 and if you had bought online USD (in cash) you would have had to pay AUD1291 for USD 1000 which is comparable. At today's online rate with Travelex it is 0.7870 USD for AUD 1.0000 which means it would only cost you AUD 1270 for USD 1000. It depends on whether you want to pay commissions or whether you want to hold cash. The Travelex site has a very useful tool called FX tracker which graphs rates thus showing trends and helping you time your purchase - reducing the gambling element. Note that there are no fees or commissions with online purchases of cash with Travelex