These days I always have travel insurance, but what has gotten used more often is travel banking insurance.
No, I don’t actually have a policy that protects my bank accounts, but I do always have multiple banking back-up plans for my money when I’m traveling around the world and living abroad.
Traveling without any cash is pretty tough, especially outside the very richest countries, but you’re not likely to carry around your whole travel budget in a money belt. So when you are away from home you rely on ATMs, online banking, automated bill payment, phone transactions, and other methods to keep things humming at home and where you are now.
So what happens when something goes wrong?
A lot of things can go wrong. What is your plan for when one of these happens to you?
– Your debit cards get eaten (or left behind) in an ATM machine
– Your debit card stops working or you lose it and have to order a new one
– Your credit card gets denied or put on hold for suspicious activity from your travels
– Your credit card gets physically stolen or is used by a cyber thief
– You’ve been using Apple Pay in Europe but your phone gets stolen or lost…while you’re in rural Montenegro
– Someone needs to send you a wire transfer of $200 but your bank will charge $25
I’ve had several of these happen to me before and the cyber thief one happened to my mother-in-law last month. People get scammed all the time. Or they get robbed. A pickpocket strikes while they’re walking around Vatican City. They lose their card. Strange charges they didn’t make show up and the card has to be canceled.
Or your bank can unilaterally impose new fees that you don’t want to accept. The first time we moved to Mexico, Regions Bank refused to remove a brand new $5-a-month fee from my wife’s checking account unless she set up a new direct deposit that would come through automatically each month. Since she was out of the country and not working for a corporation, that wasn’t going to happen. Instead of keeping this customer of 10+ years, a customer who has a husband with linked accounts, they told her there was “no way” they could remove the fee.
Thankfully she had a travel banking back-up plan: a fee-free account at Capital One 360 that also doesn’t charge the $5 or more ATM withdrawal that many traditional banks do. So she moved all her money to Capital One and closed the old brick-and-mortar account of 10 years. Plus now she still has a back-up plan: a shared Fidelity cash account we both can use that reimburses ATM fees altogether.
How to Achieve Travel Banking Protection
Back-up banking plans ensure that you won’t be temporarily broke at any point. If you’re traveling as a couple, this is far easier. You can easily have two accounts and split your savings between them. Don’t consolidate your accounts into a shared one with the rationalization that you’re sharing the same budget anyway. You want a second account in case something goes wrong with the first one. Sooner or later, you’ll need it.
You need more than one credit card too. Even if you are trying to be one of those responsible people who never buys something unless you’re paying real money for it, you still need a credit card for travel. Some companies won’t accept debit cards at all and if you rent a car with one, you’d had better have a few extra grand because they’ll put a hold for that much on your account. Also, using a debit card online is much riskier than booking with a credit card: you can be on the hook for the whole amount if there’s some kind of fraudulent charges or you don’t get what you were promised. You have much more recourse with a credit card.
Plus here’s another justification: you can get lots of free flights and hotel rooms just from the sign-up bonuses on these cards. Then keep using it and you’ll earn more points on top of perks. Charge things to a card, pay the bills off, and save yourself more than $1,000 a year in travel costs.
Naturally, you want to keep as much of your money as possible and not hand it over to banks repeatedly by paying ATM fees and foreign transaction fees. If you get the right debit card from a brokerage company or credit union, you can avoid the fees on both ends. If you run any kind of online business or you’re a freelancer, you’ll also want a Paypal account because many companies pay that way and a Transferwise account for foreign wire transfers with low fees. Here are some more details on your ideal banking choices.
When my cards have gotten eaten or left behind, when a thief has skimmed my credit card info and gone on a spending spree, I’ve been prepared with a back-up as well. I’ve got three debit cards and three credit cards with me when I get on a plane, at least one of each in a place that’s separate from the rest. That may look like overkill when I pack them, but sooner or later I’m glad I have them. Someone once charged more than $4,000 on one card of mine in a single day after I used it twice in Tulum. So I had to cancel it and was very glad I had a back-up.
If all your money is in one bank account and you are only carrying one credit card as you travel around the world, you are tempting fate. Add one more thing to your to-do list before taking off: enough accounts to have your own travel banking insurance.
Oh, and maybe pack some pickpocket proof clothing while you’re at it. That’s not travel banking but it’s a travel money insurance policy to hold onto what’s valuable.