Credit cards can be very useful allies when working and travelling overseas as a digital nomad. As well as being good 'safety nets' to use in financial emergencies (e.g. having to fly home immediately), credit cards can provide remote workers with a number of handy extras, such as zero per cent interest on overseas purchases and free travel insurance. As useful as they might be though, credit cards are limited in what they are able to achieve if/when taking the road less travelled by. To be sure, credit cards of all kinds (even American Express!) tend to become less and less relevant the further away from the beaten track you veer.
This means that, if you want to prosper as a digital nomad in all parts of the world, you'll need to ensure you have the means to effectively fund yourself wherever you may go - and that means making sure you always have access to some cold, hard cash.
So what is the best way to keep plenty of the local currency in your sweaty but ever-so-secure money belt while on the road?
Well, you generally have three options.
Carry large sums of cash
It wasn't that long ago that, aside from travellers cheques (remember them?), keeping a lump sum of cash upon your person was pretty much the only option available to nomad travellers who wanted to fund a prolonged period of overseas travel. This basic strategy involves converting most of that lump sum into leading currencies like dollars or euros and then changing those amounts into local currencies whenever you cross a border or get low on cash. When the lump sum itself gets low, you can simply go to a large/capital city, organise a money transfer and start again with a new one. In many ways, this is a pretty good strategy as it:
- affords you access to hard cash 24/7, and;
- ensures you don't need to rely on any banks or ATMs.
Suffice to say, there is one pretty big downside to this strategy: you're likely to be left in dire straits if your lump sum gets lost or stolen. Being charged ludicrous exchange rates at airports/city centre bureaux de change, and getting short-changed by local currency vendors in remote locations are other potential hazards associated with this strategy.
Use debit cards
Retail Banking Research - a London-based strategic research and consulting firm – predicts there will be approximately 2.9 million ATMs across the world by 2015. This means that, in theory at least, you can use your bank account debit card to take out enough cash to last you a fair while (and let you explore remote areas) whenever you drift into pretty much any city, large town, or busy airport on your working travels. Unfortunately, there are two aspects which shoot two pretty large holes in this strategy: overzealous banks and ludicrous charges. Overzealous is perhaps a little unfair as this refers to the fact many banks require card holders to give them advanced warning of any overseas activity to ensure all overseas transactions are accounted for. Of course, this makes life quite difficult for you if you don't keep to a set itinerary and/or move from one country to another on a semi-regular basis. This is perhaps a little superfluous anyway as many banks charge quite high fees – typically two per cent on the amount you take out as well as charging currency exchange costs - on every single transaction. Some cards also add a fee of around £1.50 on top of this.
Make use of a prepaid card
Prepaid cards are one of the most recent 'funding adventures abroad' innovations. These handy options - available from the likes of Thomas Cook, Travelex, ASDA, Yorkshire Bank, Sainsburys and Co-op – are a great alternative to carrying cash and using debit cards as they enable you to load up your card up with money and then spend it, either like a credit card or by taking money out of an ATM. The great thing about these prepaid cards is that, as well as charging only negligible fees, they can be topped up with funds from your bank account online whenever your balance starts to get low. Naturally this makes them a good fit for digital nomads as transferring money online is a breeze for individuals who spend much of their day on the Internet. Other advantages include:
- not having to give the card issuer advance warning of use,
- not being able to edge into any kind of overdraft, and,
- not having to worry if your card gets lost or stolen (you can get a replacement one for around £10).
I have used all three of the above strategies whilst working and travelling abroad. Of the three, I would say using debit cards is undoubtedly the least beneficial as being charged for every transaction and having your ATM privileges frozen because you haven't given the bank notice of which country you'll be in is not handy when you're endeavouring to maintain a regular income stream on the road.
Although carrying large sums of cash is very liberating (and quite empowering) it really is quite a risky way to go, especially if you're keen to visit places where bandits and violent crime are perennial concerns.
I used a prepaid card from Travelex (Cash Passport) the last couple of times I worked and travelled overseas and I must say it worked very well. All I did was take all of the earnings deposited into my bank account each month from my freelance web-based writing and load them onto my prepaid card once every 30 days (“pay day”). A day or two after I had done this, I would find an ATM and withdraw an amount of money which I deemed to be enough to live off for the next 2-4 weeks. The only fee I had to pay was a one off two per cent reload charge. In general, this worked out to cost me a lot less than shelling out on commission at bureaux de change or paying high/plentiful transaction fees every time I wanted to use a debit card.
Image courtesy of Not Wed or Dead