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Newsletter 05/2017

Sponsors Updates | Travel Card that will save you money


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Dirhams, Euros or Dollars? How would you like to pay for that?

At this time of year one of the main topic of conversation with many expats is where are you going for your summer break? We are lucky in the offshore market that the majority of expats can afford travel overseas and escape the heat. Many will go to Europe, some of us will head back home to the winter of Australia and some may go to the cheaper destinations of Asia. The fact is many people have at least a holiday planned and you need to allocate some of your hard earned Dirhams to pay for it.

The way we spend money on a holiday has changed over time

If you cast your mind back perhaps 20 years ago you might have taken travelers cheques on your trip, around 10 years ago these were phased out and debit and credit cards became more popular and common.  These days for myself I use a combination of cards and cash to try and save some money on the foreign exchange we all pay via using our cards. In holiday mode we sometimes forget how much those purchases cost us when you convert them back to Dirhams. The additional bank charge for that nice hotel you are staying in Europe or the money you spend buying something in Australia on your UAE credit card can be as high as 5% of the purchase price.

These charges begin even prior to you going to the airport, we are in the age of comparison websites and online deals for hotels, flights and car hire.  This means that before we leave we may have already paid the bulk of our holiday up front and although the website may say dirhams the true cost of the hotel will be in the local currency.  The conversion will either be done through the comparison website, the hotel itself or by the banks, unfortunately this means that the cost will be passed onto the consumer.  Using a proper currency card means that you have the option to effectively pay at source and avoid the currency charges even before you have left.

It is worthwhile doing the sums and perhaps cast your mind back to when you were travelling last and you forgot to take cash with you, decided to use your card at the hotel or take cash out of the ATM (some parts of the world cash is still king!). Once you did your 100 USD transaction you would have received an SMS from your UAE bank to say you spent 380 AEDs, did you think that it was a poor exchange rate? The fact is your local bank card that you would use daily here is not going to be your best travel friend whilst you are cruising around Europe or spending USDs in Asia. There are usually two fees that the banks charge; one is the foreign exchange fee, known as the forex fee, which is a % of your transaction and the difference in the rate of exchange you get versus the market rate (spread), the other is a bank transaction fee which is a flat fee. So for example if you are planning on spending say 20,000 AED on your holiday (Hotels, travel, food, presents and drinks) the fees associated with spending that money overseas could be as high as 1,000 AED.

Evolution in Banking:

There have been many changes in the banking sector over the last 20 years and it continues to adapt almost weekly with technology becoming more readily available to consumers, which can help expats save money if we use it wisely.

The first was the rise of the currency brokers who save you money on sending funds back to Australia to pay down mortgages (if you do not use one yourself you are just giving money away to the banks) these brokers already have a well-defined market and cheaper cost base and are taking a very profitable market away from the banks.

The second and perhaps more recent change has been the rise of the prepaid travel cards. This is effectively you loading your Dirhams onto a Visa or MasterCard and then converting into to your required currency(s) before you go and then spending those funds locally which saves you a lot of money.  This is effectively an electronic traveler’s cheque, some of the uses I see for Aussie expats to use these cards:

  • COST SAVING: As explained previously – saving money on any purchases here or overseas that are in a different currency.  Saving on the bank fees and foreign exchange fees.
  • VERSATILITY:  If you travel to Europe you can load Euros and then you can convert the funds to GBP if you then travel to the UK in the same trip. With a lot of currency cards you can load one currency for one trip and then if you do not spend it you have to wait until your next trip to that country to use it.  With the change in technology this is not the case and within one card you will be able to move different currencies at a touch of a button with no cost.
  • SECURITY - If you are travelling to Australia why would you not load your AUD spending money from AED onto this card rather than using an Australian account? Think about it, if your Aussie card is linked to say your offset mortgage account and it gets compromised would you want them to access what is on the card or what is in your offset account?
  • ONLINE – We can now use some of these travel cards for our online purchase prior to holidays. The common perception is that these are solely for when we are away.  Now these cards can be used back in your current residential currency simply by converting the currency back.  Whenever there is a different currency to dirhams online or in travel there is the opportunity to save money on the foreign exchange by using these cards.

There are many providers of these prepaid cards however what you need to look for is something that can also operate as a sort of emergency funds like an offshore bank account.  However unlike an offshore bank account you do not generally need to hold a large min balance.  This could come in handy in case someone was to die as an example as these accounts sit outside of the UAE and subsequently Sharia law, this means that your spouse can have access to funds to continue with day to day while the  accounts are frozen and estate resolved by the authorities. This is an additional benefit for those in the region and another handy application of this new technology.

What we can offer:  The Vault:

As a company we have identified this as a key concern for our client base, as a result of this we developed something that uses the core principles of pre-paid travel card, designed for expats, made it better and more user friendly.

Our services provides:

-          Multi-Currency – One Card (USD/EUR/GBP/CHF – coming soon AED & AUD)

-          Free switching between currencies (up to 5% savings)

-          User friendly via app store (Android or Apple)

-          Free Offshore Bank Account – No minimum balance

-          Tax planning for your move back home to Australia

-          Superannuation Review / Consolidation

-          Financial Advice

Before you go travelling this summer look into setting up one of these cards and when you get asked on your trip “Do you want to pay in Dirhams, Euros or Dollars? You will already have the right currency on your card.

Craig Holding |

Managing Partner | Acuma, ABCD Member

Want to learn more? Join us at an information night on Wednesday 7 June at Emirates Golf Club. There is no cost to attend but we would appreciate your registration.

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