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International Trip on Your Mind? 5 Smart Money Tips for the New-Age Traveller

Athreya Aishwarya Ramesh
Image source: Freepik

Many resolutions in life centre around travelling more and gaining memorable experiences. However, the one thing we can all agree on is that travelling is seldom cheap. Meticulous planning and saving are imperative to manage travel expenses, but the question to ask yourself is, “Do I want to cut down on my travel expenses or the itinerary?”.

Itineraries help you cover everything you’d want to do or see and also give an idea of what the trip would cost. So, if you’d rather cut down on expenses than your itinerary, here are some useful tips.

  1. Saving vs. investing for travel

The first thing you need for a foreign trip is money (assuming you already have a passport!). The idea is to set a clear financial goal in advance, like raising Rs. 2 lakh by the end of the year for an international vacation. A clear goal would dictate your choice of investment instruments and the quantum of savings allocation. Also, it might be a better idea to invest at least a portion of the money rather than let it earn a meagre 3-4% in a savings account.

And as far as investments instruments are concerned, you have a number of choices. You can either go for a fixed deposit (if you have a lump sum) at earn 5-7% interest or invest every month in a recurring deposit account for similar returns.

You can also choose to invest in a mutual fund SIP (Systematic Investment Plan). Here are some options that you’d do well to consider:

  • Liquid funds – A good option if you’re planning to travel in the next 6 months. Liquid mutual funds invest in commercial paper, treasury bills, certificate of deposits, etc. with maturities between 60 and 90 days. They carry moderate risk and can earn up 6-8% p.a.
  • Short-term mutual funds – Ideal if you’re planning to travel within the year. Investing for 6 months to 1 year can earn interest upwards of 6-7% p.a. at low risk.
  1. Use an air miles credit card to book flights

Air miles credit cards, also known as travel credit cards, offer accelerated miles on selected spends. Depending on your card, you can earn up to 10x miles per eligible spend. Accumulating and redeeming miles can bring down the price of your flight tickets among a host of other travel perks like seat upgrades, discounts on select hotel bookings, etc. Plus, travel credit cards mostly have their own set of privileges like complimentary free lounge access, travel insurance, and concierge services. However, do note many travel cards involve paying an annual fee. Also, some spends fetch more points than others. So, reading the fine print is important.

What’s on offer: Banks partner up with domestic and international airlines and hotels that allow you to redeem the points earned through eligible spends. Popular airline partners include Air India, British Airways, Thai Airways, Qantas, and Etihad Airways.

How it works: Convert your accumulated miles to the Frequent Flyer Program (FFP) of your chosen airline and then use the miles at checkout when booking tickets. Note that conversion fees apply for this step

  1. Be smart with picking your stay

Your stay is the second most expensive part of your itinerary, and there are a number of wise decisions to reduce this expense.

Check latest credit card offers on hotel bookings: Keep track of your credit card’s travel offers and make the most of it. You could also convert your miles/points to travel vouchers or other hotel offers in the rewards catalogue.

Convert your air miles to hotel partners’ points: This is an expensive proposition, though, for two reasons – hotel partnerships often include high-end chains and the conversion ratio for hotel points is higher than that for frequent flyer miles. Also, your stay options are limited.

Bonus Tip: If you’re travelling alone or with a few friends, instead of booking a hotel room, check out cheaper private rooms in hostels. Also, most hostels don’t require you to pay anything until you check-in.

  1. Convert travel bookings to EMIs

Flight tickets and hotel reservations are certainly the biggest expenses in your travel plan. So, you may consider cutting down the expense stress by converting the bookings into equated monthly instalments (EMIs).

What’s on offer: Book your travel online instead of going to a travel agent. Popular travel websites offer a “No Cost EMI” option that requires no down payment and have no processing fee or hidden fees. Again, read the terms and conditions beforehand.

The catch:

  • No Cost EMIs are not available on all tenures. They are mostly applicable on the shortest tenure (usually 3 months).
  • Longer tenures charge interest starting from 12% p.a.
  • In most cases, the EMI option is only available on credit cards and not debit cards. Debit card EMIs may incur additional fees and charges.

The loophole: If you think you cannot repay the ticket price within the ‘No Cost EMI’ tenure options, try this. Pay the entire expense with your credit card and then convert it into an EMI with your card issuer/bank. However, this step is useful only if your bank charges a lower EMI interest rate than the travel website.

  1. Spending abroad

This can be a bit tricky. When you’re overseas, should you use cash, a forex card, debit card, or credit card? Also, remember that the merchant can charge a separate fee for card usage instead of cash. Here’s a bit about each card so you can judge for yourself:

Forex Cards: Because of the number of currencies, you can transact with simultaneously, this is convenient if you’re travelling to multiple countries in a single trip. However, forex cards can be costly because of charges such as:

  • Cost of buying the card
  • Cost of loading money into the card each time
  • The day’s forex conversion rate.

Debit Cards: Debit cards are the cheapest foreign transaction option but they also have their share of charges. Every international transaction and ATM withdrawal will incur a cross-currency mark-up fee of around 3%-plus.

Credit Cards: You can use a credit card if you don’t have funds for the trip. The card can be used for POS and online transactions. Have a plan to repay the amount after your return. Mind the charges:

  • Foreign transaction fee of around 3.5%
  • ATM withdrawal fees, but beware of the high interest rate which is applicable immediately, without the interest-free period applicable to non-ATM transactions on your credit card.

Upside:

Current trip perks: Enjoy complimentary airport lounge access, travel insurance, and complimentary green fees on golf.

Future trip perks: Earn the highest reward points on foreign currency transactions, which you can redeem to knock off the travel expenses on your next trip!

Travelling is no longer a hobby; it has become a lifestyle. If you want to keep up with this lifestyle, budgeting your finances will not only multiply your savings but also your trips abroad! But, it’s crucial you plan for your trip-linked expenses months in advance, and save and invest accordingly to meet this financial goal in time. Wish you all a happy journey!

The author is Content Editor, BankBazaar.com