Note: This post will focus on New Zealand residents and how to best navigate the options available to New Zealanders. If you’re from another country, try these blog posts from some fellow nomads: Canada: Best Canadian bank for overseas travel by Wandertooth
USA: How to avoid bank fees while traveling by Wandering Trader
Australia and UK: Best banks for world travelers with lowest ATM fees
As a New Zealander, finding the right bank, credit, and debit card options for travel has been quite a frustrating affair. Banks in larger countries are faced with higher competition and are forced to give their customers bundles of perks, while in NZ the banks enjoy a nice little oligopoly which leaves us at the mercy of a few big players.
What that means is we never enjoy double and triple frequent flyer point deals, large signup bonuses, zero foreign transaction fees and ATM fee refunds. However, what we can do is arrange our money in a way that will keep our bank fees as low as possible.
In this post I’ll be sharing how I’ve managed to keep my bank fees down while enjoying free and easy access to all my money on the road.
Note: This is a long post with a lot of numbers. If you don’t care for the analysis and just want to know what cards/accounts to get, you can skip straight to the bottom.
Problem #1: ATM withdrawal fees
I mostly access my money overseas by withdrawing cash from ATM’s. It’s the most convenient and you usually will get the best conversion rate this way. However, if you don’t set it up right it can be expensive. Here’s an example of when it doesn’t work out so well for you:
Let’s take a look at this.
I wanted to withdraw 10,000 Philippine pesos, which is around $265 NZD. At the time of this withdrawal, the interbank exchange rate (the ‘real’ rate that banks use) was around 38:1, and I was given 38.34, so that’s actually really good (at a money exchanger, you’d lose 2-3% off that at least).
However, let’s look at the fees here:
Service Margin Fee: This is basically a fee they charge for withdrawing foreign currency, and will usually be between 1-2%. In my case, the fee is 1.1%, or $2.93.
Overseas ATM Fee: This is a fee charged for using an ATM outside your banking network. It usually ranges between $5-$10. In this case, it’s $7.50.
Local ATM Fee: This is a fee the local bank will charge for using their ATM when you’re not a member of their network. As you can see, I wanted 10,000 pesos, but got charged 10,200. That extra 200 is the usage fee (around $5.50).
So for one $265 withdrawal I’ve been charged $3 in service margins, $7.50 by ASB and $5.50 by the local bank whose ATM I’m using. That’s a total of $16 for one withdrawal. If I do that once a week it’s going to add up to around $700 a year – not cool.
So, how do we avoid this? Two ways:
The Global ATM Alliance
This is a joint venture between several international banks which allows clients to make free overseas ATM withdrawals. In New Zealand, the only current member is Westpac.
They have an electronic account that has no monthly fee and no transaction fees, as long as you cancel your paper statements and don’t go into the branch to do anything. Once you have an account with Westpac, you can withdraw money from any alliance member’s ATMs in the following countries:
- Bank of America (United States)
- Barclays (United Kingdom, France, Spain, Portugal, Pakistan, Gibraltar, Ghana, Kenya, and other countries in Africa)
- BNP Paribas (France)
- BNP Paribas Ukrsybbank (Ukraine)
- Banca Nazionale del Lavoro (Italy)
- Deutsche Bank (Germany, Poland, Belgium, India, Spain and Portugal)
- Scotiabank (Canada, Mexico, Chile, Peru, Guyana, and the Caribbean)
- Westpac (Australia, New Zealand, Fiji, Vanuatu, Cook Islands, Samoa, Tonga, Papua New Guinea and Solomon Islands)
- Westpac Banking Corporation (Australia, Fiji, Cook Islands, Solomon Islands, and Vanuatu)
- Westpac New Zealand Limited (New Zealand)
- Westpac Bank – PNG – Limited (Papua New Guinea)
- Westpac Bank Samoa Limited (Samoa)
- Westpac Bank of Tonga (Tonga)
- ABSA (South Africa)
You’ll see above that the Global ATM Alliance doesn’t cover all countries, and most annoyingly has no banks in the Asian continent. That’s a serious bummer since Asia is one of the most popular travel destinations for Kiwis. Luckily though, ANZ has branches throughout Asia and other parts of the world, and if you’re an ANZ customer you can withdraw from their ATMs without paying fees. I don’t have much experience with this, but if you do have any trouble with it just know that you’ve got them on record 😉
They have a “Go” account that has no monthly fee or transaction fees, as long as you cancel your paper statements. And as a bonus, they’re the only bank in New Zealand with credit cards connected to the Qantas/Oneworld Frequent Flyer program.
You’ll be able to find their ATM’s throughout Asia, the Pacific Islands, and a few scattered through Europe and the US as well. You can find all of ANZ’s ATMs here.
Once you’ve got yourself both an ANZ and Westpac account, you should be able to enjoy free ATM withdrawals throughout a good portion of the world. However, for the few countries that those two banks don’t cover, you may need a prepaid travel card.
Prepaid debit cards/travel cards
You may have noticed quite a few ‘travel’ Mastercards available in New Zealand lately. They basically allow you to pre load different currencies (around 9 different ones) onto a Mastercard debit, meaning you can make purchases/ATM withdrawals in those currencies without paying the foreign exchange fees. Some also offer free ATM withdrawals.
The 3 main ones are the Air NZ Onesmart, The Travelex Cash Passport and the Loaded for Travel card. I’m going to compare the fees, features and the different exchange rates they give us on a single day (I’ll be using July 22, 2014 as a comparison date). Let’s take a look.
The Air NZ Onesmart card is a Mastercard debit card by Air NZ. Let’s take a look at the rate:
$1,000 gives us $838.60 USD, and considering the interbank rate is 0.8672, that’s a pretty big spread (around 2.8%). However the Onesmart does give you other perks, such as earning Air NZ Airpoints on your purchases and 3 free ATM withdrawals a month. Fees are pretty much nil, other than a $1 monthly fee. Getting the card is free.
Travelex Cash Passport
The Cash Passport is available from Travelex and also from ANZ and Westpac. Here’s the rate:
That’s much better than the Onesmart, which only gave us $838.60. It also offers free ATM withdrawals, but has a bunch of other fees that I’d prefer not to pay ($10 initial load fee, 1% subsequent load fee, $4 monthly inactivity fee, $10 closure fee). Looking at that you’re already guaranteed $20 in fees to simply open and close an account.
Could be better than a Onesmart though, depending on how often you plan on using it.
Loaded for Travel card
The Loaded for Travel card is the prepaid travel card offering from NZ Post/Kiwibank. First let’s check out the rate:
That’s the best so far. However, you’ll be paying $12 just to get the card in the first place and $6 for every ATM withdrawal. That already makes it a bad choice in my opinion, as ATM withdrawals from your EFTPOS card will only cost around $7-$8 anyway. They also charge a $1 monthly inactivity fee, and then a fee when you wish to close the card. That’s a lot of fees, and you know how much I hate fees.
Which card you should get will depend on how you plan on using it, so let’s compare them in detail:
|Onesmart||Cash Passport||Loaded for travel|
|Exchange rate margin||2.8%||1.9%||1.4%|
|Load fee||Free via internet, or $4||1%||1% ($10 max)|
|ATM withdrawal fee||3 free per month||Free||$6|
|Inactivity fee||None (but monthly fee applies)||$4 per month after 12 months||$1 per month after 12 months|
Onesmart has the lowest fees by far, and allows you to earn Airpoints, but the exchange rate is very poor (this will definitely add up over a lot of withdrawals).
The Loaded for Travel card offers the best exchange rate, but has high setup and closure fees and charges $6 per ATM withdrawal. Seeing as the main reason we wanted the card was to avoid ATM withdrawal fees, this one’s out.
The Cash Passport has free ATM withdrawals, an OK exchange rate and no monthly fee, but costs you $10 to both open and close an account.
If you must get one of these cards, I’d probably go with a Cash Passport if you plan on using it a lot, or a Onesmart if you only want a backup (I personally have a Onesmart).
Summary for minimising ATM fees:
- Get a Westpac account and use Global ATM Alliance banks for free ATM withdrawals.
- Get an ANZ account and use their branches for free ATM withdrawals (good for Asia).
- Use a prepaid Mastercard as a backup (Cash Passport or Onesmart are best).
Problem #2: Credit card fees
Now that we’ve got ATM fees covered, let’s move onto credit card fees. You’ll want to use a credit card on the road that doesn’t charge foreign transaction fees. Here’s why:
For this particular transaction, I purchased a $111 USD air ticket on Cambodia Angkor Air.
On that date the interbank rate was 0.875, and they gave me 0.873. That’s good. But you’ll also see I got charged fees of $3.18; around 2.5%. Factor that in and the ‘real’ rate I got was 0.851. Still ok but any fee is a bad fee. I personally do not want to add 2.5% to everything I buy, just because I’m using plastic.
Unfortunately there is currently no bank in New Zealand that offers a card without foreign transaction fees, so this is unavoidable (however if you live in Aussie, I would recommend grabbing yourself a Bankwest Zero Platinum Mastercard or a 28 Degrees Mastercard – both have no annual fee and no foreign transaction fees).
My approach then is to only use my credit card where I can pay in NZD (and only if the rate is good).
Let’s take a look at how it works. This is an Agoda booking sheet for a hotel in Bangkok:
Their prices are USD listed ($88.55), however they also give me the option to pay in NZD ($102.25).
If I choose to pay in NZD, I’m getting a conversion rate of 0.866, compared to the current interbank rate of 0.867. That’s very good, and much better than what Kiwibank will give me if I pay in USD and let them convert it (it was around 2.5%, remember?)
Therefore I make all my online bookings in NZD (assuming the rate is good), which eliminates foreign transaction fees and allows me to save my ATM withdrawn cash for other stuff.
Summary for minimising credit card fees:
There is no ‘good’ travel credit card in NZ (that I know of). Just use whatever card you have, and use it only when you have to or when you can pay in NZD (and make sure you check the rate!)
Problem #3: Foreign exchange fees
The next fee and probably the most annoying one is the foreign exchange fee. I’m sure you’ve seen many signs like this outside foreign exchange booths:
The difference between the ‘buy’ rate and the ‘sell’ rate is known as the spread, and is how these guys make money. Basically they buy your NZD from you at a cheap rate and sell it at an expensive one. The bigger the spread, the more you’re getting ripped off.
So how do we get the best rate?
Generally it falls in this order:
- Credit cards (the best)
- ATMs of big banks
- ATMs of small banks (or those random traveller ATMs)
- Money changers in the city
- Money changers in the airport
- Money changers that advertise “zero commission”
The takeaway here is get local cash from ATMs where possible, when you run out use your credit card, and as a last resort exchange some cash at a money changer (avoiding the booths in the airport).
Also, when using your credit card and the vendor/ATM asks if you would like to pay in NZD, say no. 99% of the time they will be making a (very) big markup on the rate, and it will be cheaper to just let your credit card handle the conversion for you. You will find this practice to be very popular in airports. If you’re curious, you could ask what the dollar amount will be and then do a quick currency conversion on your phone (I use the Oanda app) to see how much they plan on taking. I’ve only once been offered an acceptable rate (but still not good enough to take) and that was at a hospital.
What do I use?
Ok, so that was a lot of info. Only now do I realise what a ridiculous amount of time I’ve spent researching this over the years. But it’s also helped me save a bit of money, and here’s the general strategy I use to access my money overseas:
- I have a Westpac Electronic Account (no fees), which I use to withdraw the bulk of my spending money from alliance ATMs (also no fees).
- I have a Air NZ Onesmart card, which I use sparingly and to withdraw money in countries with no alliance ATMs ($1 monthly fee, 3 free ATM withdrawals per month). However I am considering a move to Cash Passport and opening an ANZ account (as I’m starting to spend a lot of time in Asia these days).
- I have a Kiwibank Low Fee Airpoints Mastercard, which I use for all my online NZD payments (such as bookings on Agoda, Hotels.com, and Skyscanner). The annual fee is $25 – this is the cheapest Airpoints Visa/Mastercard available in NZ. However, if you don’t care for Airpoints, most banks have a zero fee card you can apply for.
- I have an Air NZ American Express, which has no fees and has a better Airpoints earn rate than my Kiwibank Airpoints card.
- I carry a small amount of USD, and change $50 here and there whenever I am running out of free ATM withdrawals and need some cash to take me through to the next month.
Between these options I manage to keep my bank fees reasonably low, earn a few frequent flyer points and not have too many cards to manage. The biggest fees I pay are when I change money on the Onesmart card, and as I use this quite sparingly it doesn’t hurt too much.
What should you use?
If you’re heading to Asia, get/use an ANZ account – they have ATMs throughout Asia which will allow you to make free ATM withdrawals.
If you’re going to a country within the Global ATM Alliance, get/use a Westpac account and withdraw all your cash from alliance ATMs.
And if you’re going somewhere where both of these options are unavailable, then:
For a longer trip (say 1 month+), you might want to invest in a Cash Passport or a Onesmart card, which will allow you free ATM withdrawals in any country. For a shorter, 1-2 week trip just carry USD and if you need cash, make a big withdrawal on your current Eftpos card (and take the hit with the fee).
Remember, as long as your Eftpos card has a PLUS symbol on the back, you can use it at any ATM in the world marked with a PLUS symbol (most are):
Some will belong to the CIRRUS network instead (I believe Westpac does), in which case you’ll have this logo on the back of your card and will look for the same logo on ATMs:
It might all seem pedantic, but those fees do really add up. During my travels I’m guessing I’ve paid the banks anywhere between $500-$1,000, just for the simple pleasure of having access to my own money that I earned and worked for. Don’t let the banks siphon away your hard earned cash, that should be yours to spend on your travels!
Like I said, we’re not spoilt for choice down here in NZ, but we can do a few things to keep those bank fees as low as possible.