Cross Border Fee
A Guide to Oversea Spending: Choosing the Right Strategy for Your Personality
Planning a trip is exciting, but how you handle your finances abroad can make a huge difference in your travel experience and savings. From juggling foreign cash to swiping a credit card, every method has its own pros and cons. The best strategy isn’t a one-size-fits-all solution; it depends on your travel personality.
Let’s break down the different types of travelers and the financial strategies that fit them best.
(A) The “Old-School” Traveler
This is the traveler who loves the feel of foreign cash in their hand. They visit a local currency exchange counter before their trip, hoping to lock in a good rate.
Your Strategy: Using cash exclusively for your trip.
The Pros:
Tangible control: You know exactly how much you have and spend.
Budgeting: It’s easy to stick to a daily budget with a fixed amount of cash.
“Rate arbitrage”: You might exchange at a low rate before your trip and feel you’re “winning” if the rate drops while you’re abroad.
The Cons:
Poor Rates: Currency exchange counters rarely offer the best exchange rates, often including a hidden fee in the rate itself.
No Perks: You miss out on the valuable cashback or air miles from card spending.
Low Liquidity: Any leftover currency becomes a burden, especially if you don’t travel to that country frequently. You’ll likely lose money again when you convert it back.
(B) The “Savvy Spender”
This traveler is all about convenience and getting the best rate without paying extra fees. They use specialized travel debit cards.
Your Strategy: Relying on multi-currency debit cards like Wise, BigPay, or GXBank for their competitive exchange rates and fee-free transactions.
The Pros:
Better Rates: These cards typically offer close to the interbank rate, which is the best rate you can get.
Convenience: It’s a cashless, hassle-free way to pay.
Promotions: You can often benefit from promotional campaigns that offer extra cashback or bonuses.
The Cons:
Pre-loading Required: You must preload funds from your bank account before traveling. This requires planning and a stable internet connection.
No Credit: Since it’s a debit card, you can’t access credit or earn points on your spending.
Potential Fees: If you use a credit card to reload, you might incur a small convenience fee (around 1%), which defeats the purpose.
(C) The “No-Fuss” Card User
This traveler wants a card for convenience but doesn’t want to overthink their choice. They pick a credit card based on an attractive welcome gift or a short-term promotion.
Your Strategy: Applying for a credit card for its immediate gratification (e.g., free luggage or cashback) and using it casually for travel.
The Pros:
Simplicity: It’s a straightforward approach with no need for in-depth research.
Hassle-Free: You have a card to swipe and a line of credit available.
The Cons:
Missed Opportunity: You miss out on the long-term benefits of a strategic card choice, such as superior air miles or cashback.
Wasted Value: You’re likely paying a cross-border fee (typically 1%) for every transaction without getting much in return.
(D) The “A-Mile-A-Minute” Points Chaser
(i) Cardholder with 1% cross border fee: This traveler is obsessed with maximizing their rewards. They are willing to pay a small fee if it means earning valuable air miles for their next flight.
(ii) Cardholder with 0% cross border fee: This is the most strategic and reward-driven traveler. They seek the best of both worlds: great mileage and no fees.
Your Strategy:
(i) Using a credit card that offers excellent mileage or points conversion, even with a standard 1% cross-border fee.
(ii) Applying for premium credit cards that offer both a high mileage return and a 0% cross-border fee.
The Pros:
High Return: You are actively earning miles on every single purchase, turning your travel expenses into future travel.
Long-term Gain: The value of the miles earned often outweighs the 1% fee.
Maximum Savings: Every ringgit you spend abroad is optimized for rewards without any deduction. (For 0% cross border fee cardholders.)
The Cons:
Paying the Fee: You are consciously paying a 1% cross-border fee on every single transaction. For a high-spender, this can add up quickly.
Exclusivity: Many of these elite cards have a high annual income requirement, making them inaccessible to the average person. However, as you rightly noted, this is not a weakness but a privilege reserved for those who are financially capable.
Which Path Should You Take?
To help you decide, consider your travel habits and financial goals:
If you are a light traveler, the Type B approach is probably best. Using a specialized travel debit card is simple, convenient, and gives you the best rates without any fuss.
If you are a high-spending, frequent traveler, and you meet the income requirements, the Type D with 0% cross border cards approach is the clear winner. You get maximum benefits with no fees.
If you are a frequent traveler who doesn’t meet the income requirements for premium cards, the Type D strategy is an excellent compromise. You will still earn valuable miles that more than make up for the 1% fee.
If you travel rarely and value simplicity over rewards, Type A or C are suitable, but you’ll be leaving money on the table.
Ultimately, the best strategy is the one you are most comfortable with. Happy travels!