The Travelcene Guide to Managing your Money while Travelling
For travellers, dealing with money whilst on the go is one of the biggest hassles of travelling. This begins at the money changer as you wander amongst competing shops in order to find the best exchange rate. Once overseas, not only do the new notes and coins look foreign, its often hard to quickly ascertain between similar looking notes and coins when its time to pay. Yet another challenge comes with the need to carry large wads of cash with you whilst traveling and the anxiety that comes with it.
We've gotten multiple questions from readers about how to travel with large sums of cash whilst staying safe and have even been asked about whether one can travel without cash. Whereas in the past there were products like prepaid visa debit cards or prepaid cash cards, these options were offered by dodgy companies and travellers would be unsure of whether they would actually work.
However, with recent developments in Fintech, we now think that there is finally a good option to transition to cashless travel as a way of easing the burden and anxiety of carrying an entire holiday's worth of money around. Well, the trick is actually not to change that much in cold hard cash and instead, take advantage of the recently developed multi currency account.
This method is not the same as simply using a foreign-enabled credit card. While at the point of payment credit cards and multi-currency accounts work in the exact same way, the former imposes an extremely high currency conversion fee (2-3%) which comes on top of the existing foreign exchange spread the banks earn.
Essentially, what these products do is that they allow you to convert some of the Singapore Dollars in your current bank account into any of the 11 foreign currencies available under the scheme before you leave for your holiday/buy anything online. Hence, when you do pay for food or shopping in foreign currencies, the bank does not need to convert your outstanding charge into SGD but can simply just deduct the money from the balance you already have.
For example, before leaving for Hong Kong, I could decide to convert some of my SGD into HKD. As such, when my flight lands, my expenses would be charged in the local currency if I were using these multi-currency accounts (and deducted from my HKD balance) instead of first being converted into Singapore Dollars and then charged from there. Think of it as an international debit card but without any transaction fees whatsoever.
How does this help me?
1. You get to choose what foreign exchange (FX) rate you get to transact at
2. The facility means that you do not incur foreign transaction fees on your overseas purchases which can be quite high depending on which debit or credit card you are using
3. Avoiding the occurrence of DCC scams*
4. A potentially interesting arbitrage, wait-and-see opportunity depending on the market
What’s in it for the banks?
They'll usually earn the spread on the actual market rate and the exchange rate they provide to you which though can sometimes be more harsh than money changers (do your due diligence), we think that the convenience MCAs offer to travellers is well worth it.
*DCC 'scams' occur when foreign restaurants, hotels, clubs or anyone really decides to charge your card in SGD instead of the local currency as this means that they earn more. Why is this the case? By selecting to pay in SGD instead of the local currency, a) you get a horrible exchange rate and b) there are extra service fees added.
Mighty FX is a recently released tool by UOB which is essentially its version of DBS’ multi currency account. We've covered Mighty FX’s release and provisions when UOB first launched MightyFX in conjunction with its enhancement to the Krisflyer UOB product - read about it here.
Other than the Krisflyer UOB account, MightyFX can also be linked with most UOB current accounts and cards like the UOB One product. For the latter, UOB will issue a separate Mighty FX debit card which HAS to be used in order for Mighty FX to work its magic overseas. For the former, just use your existing Krisflyer UOB debit card.
While there’s nothing intrinsically special about Mighty FX vis-a-vis DBS’ MCA, we think that it IS the better product if it is used in conjunction with the Krisflyer UOB account.
In doing so, not only do you earn miles on your overseas transactions, overseas transactions DO NOT incur foreign transaction fees in the process. Trying to earn miles through foreign spending is often a catch-22 for many travellers. While credit cards routinely offer higher earning rates on foreign spending (UOB's miles card, the Privimiles offers 2.4mpd), this comes at the expense of extra foreign transaction fees and unfavourable exchange rates.
Therefore, while the Krisflyer UOB's 0.4 mpd is quite pathetic in comparison to its other cards, we think that it still makes sense to use the card as other credit cards like the UOB Privimiles are charging FX fees (over 2% in some cases) which would render the extra 1/2mpd a fool's wager.
To sweeten the deal, UOB also offers multi currency account holders (with the Krisflyer UOB product), 200 miles for every 1000 SGD converted into any of the 10 currencies.* Furthermore, the bank has stated that your foreign currency balances still contribute to how the bank determines your account’s MAB.
*Do make sure that you convert in blocks of 1,000. Eg. If you need to convert 3000 SGD, do so 3 times in blocks of 1,000 to earn 600 miles as if you did 3000 in one transaction, you would only get 200 miles. You may only earn a maximum of 800 miles a year from the facility as UOB caps the earning amount.*
The Mighty FX facility will allow you to transact in 10 foreign currencies, namely the AUD, CAD, CHF, CNH, EUR, GBP, HKD, JPY, NZD and USD.
DBS Multi-currency account
The DBS multi currency account links your existing DBS Visa Debit Card to the FX facility to allow you to convert your existing SGD balance into any of the listed foreign currencies. The account also allow you have DBS’ autosave service run in parallel with the foreign exchange facility.
There are no monthly account fees for the service but there are fall-below fees ($7.50) if the average balance in the account falls below the minimum balance of SGD 3000, this is waived for account holders under 29 years old.
The DBS multi currency account allow transactions to be carried out in 12 foreign currencies namely: AUD, CAD, CNH, EUR, HKD, JPY, NZD, NOK, GBP, SEK, THB and USD
Which to choose?
Deciding between the two rival programs ultimately lies with which bank you've already been banking with. If you already have long standing relationship with your bank, the 'best multi currency account' is the one you're already comfortable with.
Nevertheless, DBS MCA does seem to be more attractive from a usability perspective as it gives you access to more foreign currencies. This would come in handy if you’re travelling to Norway (NOK) or Sweden (SEK) and very importantly (for a lot of Singaporeans I suppose) to Thailand (THB). Not to be over shadowed, MightyFX grants access to Swiss francs (CHF).
Not to be outmatched, the unique miles earning proposition of the MightyFX/Krisflyer-UOB also presents travellers with a good value proposition. This is especially the case as your mileage accrual is all centralised in a single account.
Ultimately, deciding between the two rival programs should probably lie with which bank you've already been banking with.
An exciting cashless future
If you've always thought that making a trek down to Raffles Place to get your foreign currency, and then lugging the entire wad of cash around with you was an archaic way of doing things, you're in for a treat. Travelling cashless means that you don't have to keep searching Google for 'buy euros best rate' anymore if you just follow our guide. Thankfully (and finally), thanks to the Fintech revolution, we’re now able to reduce the pain of these less glamorous aspects of travel.
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