Jet lag aside, almost nothing can dull that post-vacation glow more than a huge credit card bill packed with inscrutable foreign transaction fees.
In April, Lise Boissiere, a frequent traveller, decided she’d had enough of those unexpected buzzkills. Boissiere, who lives in London and works in human resources, decided to follow friends’ advice and open a multicurrency account. These types of accounts allow travellers to exchange their money at more favourable rates and with little to no transaction fees. They can then hold the money in various currencies and spend it using their phone or a card in the currency of whatever country they’re visiting.
Boissiere signed up for Revolut, one of the most popular online providers of these accounts, and was approved in six minutes, she said. Now she uses the Revolut app to pay for everything from croissants in France to Ubers in Spain. “It’s been transformative,” Boissiere said. “I could have saved myself lots of money by using it sooner.”
Tourists travelling abroad have long struggled to weigh the advantages and disadvantages of credit cards, debit cards and currency exchanges – worse rates and lower fees versus better rates and higher fees. Now, multicurrency accounts are changing the calculus.
Even though some credit and debit cards waive foreign transaction fees, multicurrency accounts often have more favourable exchange rates, said Ted Rossman, a senior industry analyst with the financial advice service Bankrate.com in New York. At the end of January, US$10 would get Revolut users S$12.29, while Visa customers would get S$11.43. But once Visa’s typical three per cent foreign transaction fee was factored in, they would get S$8.01.
Multicurrency accounts really stand out in contrast to cash, Rossman said. “Those exchange rates can be much worse, especially at airports and in tourist centers,” he said. “I think that’s the legacy model they’re looking to displace.”
Revolut, which currently has 26 million users, is only one of the services that offer these accounts. Other options include Wise (formerly TransferWise), Chime and Monito, as well as more traditional institutions like Citibank, HSBC and East West Bank (though the bigger banks may charge steep monthly fees and have high minimum balance requirements).
Online services like Revolut and Wise have ceilings on how much you can withdraw from ATMs at no charge, and there are limits on how much and when currency exchanges can be made with no fees. These accounts also may not have the fraud and dispute protections of standard credit and debit cards.
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Thinking of making one of these accounts part of your next trip? Here’s what you need to know:
HOW DO MULTICURRENCY ACCOUNTS WORK?
These accounts, which may be used for personal or business purposes, let travelers hold, spend, transfer and toggle between multiple currencies. If you’re using Revolut, for example, you can link your bank account through Apple Pay or Google Pay, load the currency of your home country into your account, and exchange it into 29 currencies – including US dollars, British pounds, euros, Japanese yen, Swiss francs, Canadian dollars and South African rand – whenever the rate is favourable. You can add funds to a Revolut account in 17 currencies via bank transfer or debit card as well as with Apple Pay or Google Pay. Other Revolut users can also send you money through the app.
You can spend the money in most multicurrency accounts with either a phone tap or a physical card, which is available at no charge. When you’re making a purchase abroad with Revolut, the app or card defaults to the local currency. If you don’t have enough of that currency in your Revolut account, the service will exchange on the spot at the lowest rate. You can also make a currency exchange via the app at any time to take advantage of an especially favourable rate.
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HOW ARE THEY DIFFERENT FROM REGULAR CREDIT OR DEBIT CARDS?
Many debit and credit cards charge a fee (three per cent is standard for US and Canadian credit card companies) to use overseas. The multicurrency accounts charge no foreign transaction fees (unless otherwise stated) and use the lowest exchange rates possible. (The services make money on subscriptions as well as the fees that merchants pay on transactions, among other things, Rossman said.)
WHERE CAN THEY BE USED?
The majority of multicurrency accounts can be used wherever Visa or Mastercard is accepted, said Michael Bodansky, the head of corporate communications for Revolut, which is based in London. Currently, anyone living in most areas of North America, Europe, Japan, Singapore or Australia can open a Revolut account. The service is planning to expand to customers in New Zealand, Brazil, Mexico and India soon.
HOW DO YOU SET UP AN ACCOUNT?
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WHAT ARE THE FEES?
They vary by the plan you choose and your country of residence. In the United States, Revolut’s standard plan, for example, has no monthly fee and includes exchanges of all currencies up to US$1,200 per month at no charge on weekdays, and with a one per cent on the weekends. (If you want to use the app abroad on a weekend without paying a fee, you can transfer into a new currency on a weekday.) If you exchange more than US$1,200 per month, there is a fee of 0.5 per cent for additional transfers. You can also make unlimited withdrawals from ATMs in the Allpoint network, and up to US$1,200 per month without fees outside the network, though the ATM’s owner may still impose a fee. After that, Revolut charges two per cents on withdrawals.
Wise – which also has no monthly fee for the base plan and offers 49 currencies – charges a minimal ATM fee depending on where your card was issued. For example, if a Wise account was opened in the United States, you may make two withdrawals of up to US$100 total every month with no fees, but after that, Wise charges US$1.50 per transaction plus two per cent of the total amount withdrawn plus whatever fee the ATM’s owner imposes.
WHAT ARE THE CONS?
One major potential drawback is that most credit cards come with fraud and dispute protections, while multicurrency accounts may not, said Wei Zhang, a section chief at the Consumer Financial Protection Bureau, a federal agency. And not all the companies that offer multicurrency accounts are licensed banks, though many do team up with banks to offer FDIC deposit protection of up to US$250,000. Finally, you have to be mindful of how much you withdraw from ATMs to avoid racking up fees, and be aware of the days you’re using the app to avoid weekend exchange charges.
By Danielle Braff© The New York Times Company
The article originally appeared in The New York Times.