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Last Updated : Aug 14, 2018 05:49 PM IST | Source: Moneycontrol.com

Podcast | Travel and your money

Whether you plan to travel for tourism, studies or business, there is a limit on the amount of money that you can carry along.

Moneycontrol News @moneycontrolcom

It’s independence week in India, and we’re taking a look at travel as an expression of freedom- and why not? Travel allows us freedom to see the world, absorb what we love about it and learn from what we don’t. And the freedom to travel, when we feel like it, is probably right up there on everyone’s list as a definition, if not a significant marker, of happiness.

Welcome to Moneycontrol. Today, we’re going to take a deeper look at the role of money in your travel, and what is the best way to take it with you so you aren’t stranded with empty pockets at the top of the Eiffel tower.

By the way, pro-tip - the lift is free when you go down the Eiffel tower. But getting to the top costs 14 Euros or thereabouts.

Also, pro-tip 2: the French pronounce Eiffel as ‘Iffell’. Good luck with that.

But we’re talking about money today. So let’s look at the many ways you can take your money with you. There are limits to how much cash an individual can carry, there are challenges with forex value, there are issues with your Indian cards when traveling abroad...there are quite a few hoops you’ll be forced to jump through if you saunter off unprepared to Le Paree. Or Thailand. Or Bali. Or the US of A.

So let’s get started.

Whether you plan to travel for tourism, studies or business, there is a limit on the amount of money you can take with you. Now, the limits on the amount of cash we can carry on us when traveling to foreign countries have been relaxed over time. These limits are set by the Reserve Bank of India. In 2018, Indians are allowed to carry up to 10,000 dollars for holidays and up to 250,000 dollars for business purposes. In officialese, those are the amounts “a resident individual can remit or spend foreign exchange freely i.e. without any approval.”

For holidaying abroad - whether you want to catch the scantily clad ladies at the Moulin Rouge with your parents while pretending to not be awkward, or going all the way to Machu Picchu only to have your view obscured by the clouds - you’re going to need some cash in hand. For hotel rooms, for water bottles; for snacks or the visit to an Indian restaurant that serves passable vegetarian fare, shopping for trinkets, perfume testers and faux Louis Vuitton...you know, so we can share our holidays on Facebook.

Anyway, let’s dive into the details a little bit. How much cash can we actually carry on our person? Well, that depends on why you are headed abroad. And we’ll cover these various categories in just a bit of detail, without getting too dense.

According to RBI regulations, if holidaying, an individual can draw foreign exchange up to $10,000 in a year for one or more private visits abroad. Wait, 10,000 per year? Yes, per year. RBI guidelines state that an individual traveling to countries other than Iraq, Libya, Iran, Russia and other Commonwealth nations, can carry only 3000 dollars per trip in cash. The balance amount can be carried in, as per the central bank, “in the form of store value cards, travellers cheque or banker’s draft.” FYI, there are 53 Commonwealth countries.

By today’s exchange rates, 3000$ works out to just over two lakh rupees. This limit was earlier just 2000$, but was increased in 2010. Ten thousand dollars, going by today’s value, works out to approximately 6.8 lakh rupees. According to the RBI’s website, individuals traveling to the countries I just named, including the 53 Commonwealth nations, can take up to 250,000$ with them in the form of currency notes or coins. Wow. That’s a lot of coins to carry, isn’t it? The 250,000$ limit applies to those who are traveling for Haj as well.

On the other hand, If you are heading out of the country on business travel - the legal kind, not so much the Mallya or Mehul Choksi or Nirav Modi kind - say, to a conference or a training course, the Reserve Bank allows you to  carry up to 25,000$ in foreign exchange.

If you are traveling to take up a job outside India, the RBI’s rules allow you to take up to 100,000$ with you. If you are a student going to study outside India, you are allowed by the RBI to draw up to 100,000 dollars per academic year. This limit covers nearly all student expenses, like tuition fee, study material etc. If you need more than that amount, you will need to provide an estimate from the institute you’re studying in.

Let’s get a bit serious for a minute. If someone is traveling abroad for medical treatment, they too are allowed to draw up to 100,000 dollars after declaring the essential details. If you want to draw more than that, the authorities will require an estimate from the doctor or the hospital. A further 25,000$ is allowed as a maintenance expense.

If you are emigrating to a foreign country - okay, I make this mistake often, so there must be a few of you who do that as well...emigrate is to move from your present country. Immigration is when you move into another country. For instance, Donald Trump dislikes immigrants. But he also dislikes emigrants. Like Madonna, who was in the news last week for moving to Portugal.

Anyway, according to a report in the Business Standard, in such a scenario, the RBI allows you to withdraw “foreign exchange for emigration facilities up to $100,000 based on self-declaration, or an amount prescribed by the country of emigration.”

There is also another scheme called the Liberalised Remittance Scheme, or LRS, which allows people to draw 250,000$ for purposes of investment or to pay off loans.

So that’s about the most common types of transactions involving money when traveling out of India. But we are more concerned about our own travel. So keep an eye on the 3000$ limit as well as the provision for carrying more in the form of tore value cards, travellers cheque or banker’s draft. Wait, what? Traveler’s cheques are still a thing? Aren’t they extinct, or at least obsolete?

Well, yes, and no. These were useful back in the day when plastic money wasn’t so widespread. We’re talking pre-internet, pre-ATM times. Travellers' cheques are pre-printed, fixed-amount cheques that were used in lieu of cash when traveling abroad. Because of the pre-assigned value, they never bounced. The bank that issued traveler’s cheques provided security against lost or stolen checks. These are accepted in a lot fewer places now and have been replaced, to a large extent, by everyone’s favourite way to carry money abroad -  the travel money card, or what we call in India the forex card.

Forex cards are the easiest way to carry your money abroad.

But first, you’re probably wondering, what about your own debit or credit card. Well, you can use them but your Indian credit or debit card will most likely be charged for every swipe. Yes, every swipe of your card will be charged a conversion fee. What this means is, your Indian credit card is free to use within the country, but when used outside the country, you will pay your bill in the currency of the place you swipe the card in. For every such transaction, a conversion fee is applied, which is usually around one to two percent on the foreign currency exchange. Then there is the foreign transaction fee. This is what you pay the network, like Visa or Mastercard, for using the card in a foreign location. This is usually between 1.5 and three percent of the transaction value. Obviously, three percent added to every time you swipe your HDFC, or ICICI, or SBI, credit card when in Europe could quickly add up to a lot. The same applies to your debit cards as well.

For example, say you spend 50 euros at the champagne bar on the third floor of the Eiffel tower, and swipe your Indian card. You could end up paying the conversion fee of around 3 percent, or the foreign transaction fee of 3 percent, or both, depending on your card and bank.

The easiest way of avoiding extra credit card fees when you make payments abroad is to get yourself a forex card.  Forex cards allow us to add, store and transfer currency electronically when travelling abroad. They can also be used as ATM cards, should you ever feel the need withdraw foreign currency. Essentially, Forex cards are like debit cards, and are generally provided by either Visa or MasterCard, which makes them safe and acceptable for payments all over the globe. As I researched this topic, the latest claim was over one million commercial establishments around the world.

Now, here’s the interesting part. Forex cards are of two main types - multi-currency and single-currency. The names are pretty self-explanatory. Ono a single-currency forex card, you can load one foreign currency. Like the Dollars when you’re going Stateside. Multi-currency cards are useful when traveling to Europe or Southeast Asia. For instance, you can add, say 2 lakh rupees to your card, as split that into Euros, the Swedish Kroner and the British Pound. And most of these cards allow you to transfer the money from one currency to another, so you’re never stuck. Another area of concern is currency fluctuation. One day, the rupee is 68 to a dollar, two days later it is 69.5. Fortunately forex cards fix the exchange rate to the value of the currency on the day you buy the card. If you load 100$ in the card, the value will remain 100$ no matter the fluctuations in the market. And, mercifully, these cards can automatically transact in the local currency. And since these are like debit cards, you can make online purchases even when you’re on the move. Spotted a good deal on Amazon UK while traveling from London to Bristol? Buy in the local currency and have it shipped.

Now, I don’t want to come off sounding like an advert for forex cards, but rest assured I’m not shilling for forex cards. They are clearly a great option when traveling outside the country. The best part? When you return home, any money lying unused can be encashed. That’s a pretty nifty deal, if you ask me.

Heck, there‘s a reason so many popular youtubers and travel bloggers swear by forex cards when heading abroad. That, and working part time when traveling, but we Indians aren’t really into working when vacationing, are we?

Coming to portioning your expenses when traveling out of India, some estimates indicate that a large chunk of your expenses are usually cashless in nature. Hotels, food, shopping and tickets, can be paid for through your card. This accounts for nearly 70% of travel expenditure. So, the smart thing would be to carry 30% of your expenses in cash. The Financial Express recommends - “Ideally, this amount should be anywhere between 20 and 30 percent of the overall currency that you’re carrying abroad. But (that) largely depends on your itinerary... whether or not the destination...you’re travelling to is digital transaction-friendly and make your estimations accordingly. “

As more than one social media travel expert put it, only carry as much cash as you are okay losing. Wait, is that glass half empty, or half full?

 So, to wind up this travel segment: if you want to feel free and enjoy your travel as you soak in the sights, sounds and experiences of the world, do these four things before you set off, to ensure a hassle free trip.

First, get a prepaid forex card. Speaking of forex, here’s some extra advice. Do not exchange currency at airports. The British newspaper Telegraph noted that “Airport outlets consistently offer the worst rates for British travellers. It follows the same theory as buying fast food at a festival.” Ian Strafford-Taylor, CEO of FairFX, told the Telegraph that some of the exchange rates are “nothing short of extortionate.”  Note to self: extortionate is a great word. Will use it more often. Thanks Ian.

Second, carry enough cash. Remember, only as much as you’re okay to lose, but no more than 30%. And when settling bills, go local. If you are offered the choice of paying in the local currency, opt for the local currency.

Third, carry an international debit or credit, but use it only as an emergency backup. And try not to draw cash from a credit card when traveling abroad.

Number four, never keep all your money and cards in one place. Spread them around so that you never lose them all at once. I know this is basic, but common sense is usually sacrificed at the altar of luggage packing.

So go forth and see the world, intrepid wanderer. Tick off the bucket list. And may your Facebook and Instagram photographs fill your friends with envy. And yeah, don’t get ripped off.
First Published on Aug 10, 2018 10:46 pm
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