Do you still need to use cash when you travel overseas? Debit vs credit cards and more money tips

Got any cash on you? I rarely do these days. The supermarket, the petrol station, the cafe - it's all tap and go, and I'm not alone. Going out for a meal with friends, it's cards and cash transfers to whoever pays the bill. Only rarely does anyone have cash on them. So does this apply overseas?

Do I still need cash overseas?

Yes, probably less than you would have needed a few years ago, but how much less depends on where you're going. In most parts of Western Europe or North America a few hundred dollars' worth of local currency could easily last you a week. In southern Europe, morning coffee with a croissant at a cafe or bar, cash is king. Same with taxi fares, tips and shopping in markets. Hotel bills, meals and just about anything else you can usually pay with a card in cities and tourist areas, but in more isolated regions that don't see many tourists local currency is still the go. In other parts of the world, especially the developing countries, you're likely to find more cash-only vendors.

Travelling almost cash-free is a great move. You don't have to carry around a wad of notes, spend time finding an ATM and worry about getting the right change. Better still, pay for your hotel bill, your meals and all other major cost items with the right card and you get a better exchange rate than using cash. "And remember that cash is easy to lose and tricky to insure," says Taylor Blackburn, personal finance specialist at Finder.

Which cards?

To make your travel payments fuss-free you need a chip-and-PIN card, which looks like it has a SIM card embedded, as well as one that allows contactless payments. Look for the Contactless Indicator on your card, four curved lines similar to the signal strength indicator on your phone. You also need to advise your financial institution you're going overseas.

The choice of cards is crucial when you're travelling cash-free, according to Blackburn.

"In Bali, my partner accidentally used a different bank card with one of the big four to withdraw cash and was hit with an ATM fee, a transfer fee and a conversion fee that amounted to almost 25 per cent of the withdrawal amount! Whilst it's certainly less of a hassle to use a card overseas, unless your debit or credit card offers zero per cent international transaction fees, you could be charged currency conversion or foreign transaction fees."

One example is the Latitude 28 Degrees Global Platinum Mastercard. This is a credit card while most others such as the ING Orange Everyday Visa card the Citibank Mastercard are debit cards, and debit cards come with a security problem.

"Credit cards are usually the way to go when you are travelling due to fraud protection," says Blackburn. "It's their money and not yours if the card gets pinched. A good friend of mine had her debit card skimmed when she was in Africa and ended up out of pocket for weeks. If that would have been a credit card, she could have claimed the fraud before it hit her account."

One way to protect your debit card from fraud is by keeping the balance low and topping up with funds from your bank account only when you need it, and most cards allow you to do this via an app or through their website.

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There's also a difference between the way you use credit and debit cards. When you leave a deposit on a hire car or when a hotel asks for your card for a pre-authorisation, use a credit card. Use a debit card and the funds are frozen, and it might take a week after check-out or the return of your hire car before those funds are unblocked.

When driving in Europe it's common to inserting your card at a petrol station's central terminal before filling up, but as well as deducting the fuel payment, the system might also put a lock on an additional amount. This happened to me twice in Italy recently and each time the system froze €100 from my debit card. This was listed as a "pending" charge, but it stayed that way for a full month following the transaction, shaving €200 off my available funds. Lesson learned – I should have used a credit card.

Is this the optimal travel card?

Many travellers have been singing the praises of the Wise debit card, which charges low fees for foreign currency transactions even if you keep your credit in Australian dollars. Most travel money cards require you to exchange your Australian dollars to buy other major world currencies, which you use to pay for goods and services overseas. Deposit funds and you buy euros, Swiss francs or whatever the local currency happens to be. You can also do that with a Wise debit card, or you can keep your deposit in Australian currency. If you have the local currency in your account, the Wise card will use it. If not, it will auto-convert your Aussie dollars at the prevailing currency conversion rate, minus a small fee. That gives more flexibility if you're hopping around from one country to another. If there are any Aussie dollars left on your Wise card when you return from overseas, you can transfer that to another bank account for a tiny fee. On a $1000 transfer, the fee is just 57 cents. Other travel money cards slug you with a hefty charge if you re-convert your foreign currency to Aussie dollars.

So how does this work out on the ground?

On the morning of June 22, a $1000 credit on the Wise debit card would be worth €657.81, £564.90 or $US692.86 at an overseas point-of-sale (POS) terminal. On each of these transactions, Wise is charging a currency conversion fee of $4.38. That's a modest sum, and it compares well with other travel money cards.

By comparison, if you were to use a Qantas Travel Money Card at a POS terminal on the same date, that $1000 would be worth either €31.84 less, £27.95 less or US$26.31 less than on the Wise card.

The Travelex Travel Money card gave you more bangs for your bucks than the Qantas card, while the Citibank debit Mastercard I use was better. But Wise still came out on top.

See also: $60,000 return: Cost of flights soars, booking with points difficult

See also: The countries still making it hard (or impossible) for Australians to visit