Category Archives: Advice

Practical Money Advice and Tips When Traveling in a Foreign Country

Some practical advice and tips around money when traveling abroad:

Tip #1: Wait until you get to the country before getting any local currency. You generally shouldn’t exchange money at home before you leave for your trip because your home bank will almost certainly offer a worse exchange rate than what you’d get if you had waited until you got to your destination.

Tip #2: Get your local currency from ATMs. Unless for some reason you need lots of local currency in cash and can’t withdraw that much from the ATM due to daily limits (e.g. you need to pre-pay an apartment rental in cash upon arrival or something), you should just withdraw money from an ATM to get local currency. Your bank will generally give you the prevailing exchange rate for the day, while currency exchange counters take a fee (even if they advertise as no fee, their fee is taken through giving you a worse exchange rate). Caveat #1: Most places most people will go will have ATMs; not all places do. But if you’re going to one of those places, you probably don’t need any of my advice.

Tip #3: Use a bank that doesn’t charge you any fees to withdraw money abroad (and ideally one that refunds all ATM fees). One popular choice is Charles Schwab (which is currently offering a $100 incentive for new members). Tip #2 doesn’t make sense if your bank charges you $5 per withdrawal in addition to paying whatever ATM fee that’s charged. Getting ATM fees rebated is particularly helpful in places that charge exorbitant ATM fees (Siem Reap, I’m looking at you).

Tip #4: If for some reason you’re too lazy to use a bank that doesn’t charge fees for foreign withdrawals and rebate ATM fees, check if your bank partners with other banks to see if you can withdraw money fee-free. For example, Bank of America is part of a global ATM alliance with banks like Barclays and Scotiabank, so they don’t charge a $5 non-BofA ATM usage fee (although they still charge a foreign transaction fee of 3%). But really, you should use Charles Schwab.

Tip #5: Get a credit card that doesn’t charge foreign transaction fees. There are so many cards that offer this perk nowadays. I’m partial to Discover and Mastercard, as I feel like they have better exchange rates (based on a very limited sample size).

Tip #6: Get a debit card that has a chip. Almost all credit cards issued in the US nowadays should have a chip, but they’re almost all only enabled for chip and signature. This means that you sometimes can’t use these credit cards in automated machines that request a PIN (e.g. train ticket machines in Europe). But your debit card has a PIN, and if it also has a chip, then you can use it when you must have a chip and PIN card.

Tip #7: Never pay in your home currency aka always pay in the local currency aka decline dynamic currency conversion. When you pay for things by credit card in a foreign country, you’ll sometimes be offered the choice to pay in your home currency or the local currency. Always choose the local currency. If you do the math, you’ll see that the amount they’re charging in your home currency is based off a terrible exchange rate, and even if you choose to pay in your home currency, your credit card still might charge you a foreign transaction fee. I can’t think of any reason why you would want to pay in your home currency (so tell me if there is one! I’m genuinely curious).

Tip #8: To get rid of your local currency at the end of your trip, go to a place that accepts credit cards and say that you want to pay part in cash and the rest on credit. For example, if you need to settle a hotel bill or you have one last dinner, you can often pay part by cash and part by credit card. This lets you get rid of all of your leftover local currency–including coins!

Have any favorite tips or advice on dealing with money in a foreign country?

Need to Send Money to a Foreign Bank Account? Try TransferWise

I’m currently planning a trip to Malaysia this summer. One of the primary purposes of this trip is to spend a couple of days on a durian farm where I’ll just gorge myself on durian. I’m excited. (I’ve also got flights booked on Qatar’s and Etihad’s A380s in first class, so those reviews will eventually appear on this blog).

But to confirm my stay at the durian farm, I needed to transfer money to the durian farm’s bank account. It’s just a guy and his family running this place, so they don’t have any infrastructure to take credit cards or do online payments.

At first, I was at a bit of a loss about how to accomplish this. I initially thought of wiring money, but wiring money is generally pretty pricy, much less wiring money internationally. I use a credit union for my primary banking purposes, and they charge $35 for an international wire. I looked into money transfer services like Western Union, but they too were not cheap.

And then I came across TransferWise (warning: that’s my referral link). TransferWise is a relatively new company that gets around some of the traditional fees associated with sending money across borders by making it so that no money actually crosses borders. If you want to send money from bank account A in the US to bank account B in Malaysia (as was my case), rather than directly sending money from bank account A to bank account B, they find other people who want to transfer money in the opposite direction (i.e. from Malaysia to the US) and just transfer the money within each country individually to settle everyone up. Pretty ingenious, if you ask me.

Because the money doesn’t actually cross borders, they can offer much lower rates, and I was able to send my money at the prevailing exchange rates for a fee of only $3. Pretty good if you ask me! The fact that you get the actual exchange rate is a big deal, as many money transfer services advertise low fees but gouge you on the exchange rate.

Anyway, if you find yourself needing to move money across borders, you might want to consider TransferWise. If you sign up with my link, you get your first transfer for free (up to $750).

Remember Your Credit Card Benefits If You’re Stranded Due to Snowmageddon

There’s been nearly two feet of snow in Philadelphia, and all flights into/out of Philadelphia airport were cancelled yesterday. If you’re stranded away from home due to weather, the airline won’t do much for you since it’s a weather-related cancellation (except provide you the opportunity to book hotels at distressed rates, which helps but is not generally that much of a discount). BUT, your credit card might make up the difference!

I’ve written about using my Discover card’s trip delay insurance before. Essentially, provided that you meet certain criteria, your credit card might pay for your meals and lodging for a couple of days if you’re stranded. You need to call your credit card company to get the full details, since it definitely varies by issuer and card, but it’s something to keep in mind that might help!

On Transaction Utility or the Benefits of Feeling Like You Got a Good Deal

Let’s take a hypothetical example. Imagine that there’s a hotel that retails for $500 a night. Alternatively, you can pay 15k points a night to cover the cost. These points are flexible points and could otherwise be redeemed at a minimum value of 1 cent per point as a statement credit. Now, let’s also say that you know that–ignoring the possibility of using points, reference prices, and everything else–you would only pay $100 per night for this hotel. Since you only “value” a night at the hotel at $100, you clearly would not pay $500 per night in cash, but should you pay 15k points per night?

The seemingly obvious answer is no, you should not, because those 15k points are otherwise worth $150, and $150 is greater than your $100 willingness to pay. But I’d argue that it’s not quite so straightforward, and this is partly due to the utility or benefit your derive from making the transaction itself. You can derive utility (i.e. or become better off) from feeling like you are getting a good deal, and this makes the utility calculation much fuzzier.

From a “rational” standpoint, you shouldn’t use 15k points because that would make you strictly less well off in monetary wealth (i.e. you are paying $150 for something you only value at $100). But paying points could make you feel great (e.g. “I’m such a good travel hacker! I’m so smart! I was able to get a $500 per night hotel room for only 15k points!”), and this could be worth the $50 that you’re “giving up” by using points. From that $50, you could get a story that you’ll repeatedly tell others (e.g. through blogging, watercooler chats, humblebragging), you could improve your self-image (e.g. thinking that you’re really good at travel), or you could just feel good that you got something at a discount. All of these are perfectly valid things/feelings to derive utility from, and it’s up to the individual to figure out how much he/she values these feelings.

In the past, I’ve gotten annoyed when people claim things like, “I got 20 cents per mile for this redemption!” when their monetary valuation of the redemption is probably closer to 2 cents per mile, but if thinking that they got 20 cents per mile of value vastly increases their transaction utility, then who am I to judge? Provided that people are conscious that this is one of the tradeoffs they’re making, it’s entirely possible that paying the 15k points for a $500 hotel room that they only value at $100 is the utility-maximizing decision.

Newbie Question: “What Credit Card Should I Get?”

All of them. As many times as you can.

People frequently ask me which credit card they should get (and every time I die a little on the inside because I don’t have any affiliate links to make money off of them). But it’s a question that I find challenging to answer because I don’t think that there’s a single credit card that people should get–people should get them all. The best credit card strategy is to apply for new cards as quickly as you can meet the minimum spend requirements on your previous cards so you’re constantly earning sign-up bonuses. Sign-up bonuses are currently the single best way to earn points in the current environment.

For example, the Chase Sapphire Preferred–which seems to be the gateway travel credit card for many people–currently offers 40k points after spending $4k within the first three months of having the card. This isn’t even the best the offer has been (it can go up to 50k points, ignoring the 5k points you can get for adding an authorized user). But that means that for the first $4k you’re spending on the credit card, you’re essentially earning at least 11 points per dollar spent. Or the Citi AA card which offers 50k miles after $3k in spending. That first $3k spent is earning over 17 miles per dollar. You’re not going to get anywhere close to those numbers on ongoing everyday spend.

In addition, by applying to credit cards as quickly as possible, you’re also resetting your clock on when you can then churn those cards. Chase cards are churnable 24 months after receiving the sign-up bonus, so applying for and meeting the spend earlier means that you have to wait less time to earn the bonus again in the future. Granted, there are some banks that are cracking down on this, but this game always evolves, so you should take advantage of opportunities as they arise.

Now, I’m a bit of a hypocrite because I’m not really following my own advice: I haven’t been applying for as many new cards as I could be, but this is mostly driven by the fact that I’m sitting on more miles than I can redeem so I haven’t been too focused on earning. But I’ve accumulated many of those miles from applying for (and subsequently closing) lots and lots of credit cards.

Frequent Flyer Miles Aren’t for Everyone

And by everyone, I mean most people.

Don’t get me wrong–I love my miles, and they’ve enabled me to do lots of awesome things that I’m super grateful for. But for the average person, focusing on frequent flyer miles doesn’t make much sense.

In my mind, there are two main reasons why you should collect miles:
1) You value premium cabin travel
2) You have a lot of flexibility, mostly in terms of time, but also in terms of where you’re willing to go

In the first case, frequent flyer miles are the obvious choice, given that you can get access to first class or business class travel for a much cheaper price using miles than by paying cash. In some cases, it’s even cheaper to buy frequent flyer miles using cash to book an award than paying for the ticket in cash outright (I’m looking at you, Alaska Airlines). This is the main reason why I pursue miles.

In the second case, frequent flyer miles generally can get you where you need to go, provided that you have flexibility in your dates and a willingness to take perhaps circuitous routings to get there. That being said, frequent flyer miles can be awesome in that they can allow you to visit many more places than a normal cash ticket would. United roundtrip awards are a great example of this, given that they allow you to have one stopover and two open jaws, which means you can potentially visit five different places on a single ticket (assuming you count your origin as a place).

But most people don’t fall under either of these buckets. I have gotten so many requests IRL along the lines of, “I want to go to Paris in June and need four tickets and just want to fly in economy class and it has to be on these exact dates because I want to maximize my vacation time and I want to take nonstop flights–how do I do this using miles?” And the answer is you don’t. You pay cash for that ticket because what you’re asking is completely unreasonable from a miles perspective. And if you’re going to be paying cash for that ticket, then you should be accruing points on a 2% cash back card instead of a miles credit card.

Of course, you should still collect the miles that you’ll naturally accrue by flying, but you shouldn’t keep spending on your Chase United card or Chase Sapphire Preferred or Citi AA card or whatever unless you have a good reason to, since you’ll almost always be better off with 2% cash back.

 

So British Airways Sent Me An Email Saying My Account Was Compromised…

And this was their explanation:

This appears to have been the result of a third party using information obtained elsewhere on the internet, via an automated process, to try to gain access to your Executive Club account.

We understand this was login information relating to a different online service which you may have also used to access your Executive Club account.

This is complete BS. While yes, I realize that it’s common for people to reuse passwords, I use a password manager to generate unique passwords for each of my online accounts, so it’s impossible for “login information relating to a different online service” to have provided access to my British Airways account (well, okay, it’s not completely impossible, but I can’t imagine that there’s an underlying predictability in the randomness of the passwords generated by my password manager that allowed hackers to generate the password that I would have used for my BA account).

Of course, it’s much more convenient for them to blame someone else rather than admitting that they themselves were hacked, which is what they’re doing.

Two thoughts on online security:
1) You really should use a password management system. Reusing passwords is kinda a big deal. It can’t always help you (like in this case), but it does give me confidence that none of my other online accounts were hacked since I haven’t used my BA password for any other accounts.
2) You should use two-factor authentication for any service that offers it. For example, email, Twitter, Facebook, financial accounts, etc.

Okay, I’m done preaching and ranting.

A (Shameless) Way to Charge Your Devices While Traveling

I don’t always travel in premium cabins and stay in super nice hotels; in fact, I often fly in coach and stay in hostels or the equivalent. And oftentimes, that means that charging your devices can be a strategic game. For example, it’s still rare for all coach seats to be equipped with electrical outlets, which can be problematic on long international flights.

In addition, while most of the devices I bring with me are equipped to handle 230 volts (i.e. my cell phone and laptop chargers), my toothbrush charger is not. This generally doesn’t matter on shorter trips as my toothbrush lasts about 2 weeks on a single charge, but comes up when I’m traveling for longer periods of time.

So what should you do if you’re out of juice on an international flight and you don’t have a power outlet at your seat? Or if you need to charge a device that’s only rated to handle 120 volts? Answer: go to the bathroom.

Yes, I did this once

Yes, I did this once

Airplane bathrooms are equipped with electrical outlets. I’m not entirely sure why, but they’re a potentially unknown power source if you’re flying in coach. Granted, it’s a somewhat selfish thing to do if the flight is full and there’s a long line for the bathroom. In my defense, the above picture was taken on a Malaysia Airlines flight that was maybe 20% full, and I could have sat in the bathroom for the entire flight and no one would have cared.

If you’re staying at a hotel, the bathroom is also the most likely location to find an electrical outlet that provides 120 volts, as many hotel bathrooms are equipped with switches to go between 230 volts and 120 volts (this is for electric razors). I also now generally travel with one of those mini portable chargers that you can get for less than $15.

Why You Should Follow The Money

Whenever I’m trying to understand why things are the way they are, I often find it useful to try to follow the money, so to speak. By following where money goes and to whom, it often becomes clear why people/companies act the way they do.

A prime example in the points/miles blogosphere is why there are so many posts talking about certain credit cards on a subset of the blogs. The answer? Because these bloggers get paid money when people click on their links and apply for the credit cards that they advertise. Money is flowing from the credit card issuers to the bloggers. Thus, when evaluating the content of said blogs, it is often useful to ask yourself whether or not these bloggers have your best interests at heart, given that they make money when you apply for credit cards using their links.

On the flip side, most of the points/miles blogs out there don’t make money from credit card affiliate links, largely because they don’t drive enough traffic/applications to them. Does this make those blogs inherently more trustworthy? No, not necessarily, but I think sometimes people unfairly attack these blogs under the pretense that they’re making money via credit card links when they’re actually not.

Another example: a couple of years back (in 2010/2011), there was a company called Envaulted that offered 1% cash back if you gave them access to your credit card purchasing history (by providing your credit card website login credentials). This was in addition to whatever rewards your credit card already gave you. Supposedly, they were going to use that information to then sell to advertisers which advertisers would pay premium dollars for since they would be super targeted since they knew what you already spent money on.

A lot of people were skeptical, but I milked as much as I could out of it at the time because the flow of money was venture capitalists to Envaulted straight into the pockets of customers. I also knew that this business model wasn’t sustainable, so the company probably wouldn’t last in its original incarnation (they did pivot to other sorts of offers for a while, but then they shut down their website abruptly while lots of people had large balances of unredeemed cash back). Essentially, they ran out of funding and weren’t able to prove out their business model, so they had to call it quits.

Compare this to Amazon Payments. Amazon Payments was the goose that kept laying golden eggs, and people were quick to blame bloggers when it finally died. Honestly, bloggers weren’t the problem. The consumer product of Amazon Payments was a money loser for Amazon for years, but they didn’t really care because they’re Amazon. The money flowed from Amazon’s coffers straight to people like us, but 1) the losses were relatively constrained because of the $1,000 per month per person limitation and 2) Amazon is such a behemoth and they’re notorious for losing tons of money on new products that even a “big” blogger posting about Amazon Payments and getting lots of people to sign up isn’t enough to materially make Amazon change its strategy. In fact, I’m pretty sure that a large part of the reason why Amazon Payments was shut down was because it wasn’t popular enough, so it didn’t make sense for Amazon to keep losing money on a product that wasn’t reaching the kind of adoption that they wanted.

This tactic of following the money is often useful in our hobby because our hobby is now so dominated by credit cards and financial institutions, but it’s also a good tactic for understanding things like politics. But beware that you shouldn’t believe everything that you read on the internet, so even if people are writing about money flows and it seems reasonable, it’s entirely possible that they got everything wrong (like my examples in this post could be completely false, but obviously I don’t think they are).