Travel Reference
In-Depth Information
Her story is an example of why you
always
should travel with a backup bank account. You never think
it will happen to you, but when it does, you'll be thankful you were prepared.
I also put spending caps on my accounts by simply calling the bank before I go overseas and asking them
to limit my withdrawal amount. This limits the damage thieves can do if my card does get stolen. Addition-
ally, I put a second user on all my accounts (a parent or trusted friend) so that if there is a problem with one
of my accounts, there is someone who can call up and help troubleshoot any issues in case I'm not able to.
ATM fees can really add up. If you're traveling for a year, you will probably take out money from an
ATM twice a week. Fees vary around the world, though on average you end up paying $5 USD per with-
drawal. That is $10 USD per week, $40 USD per month, or $520 USD per year. Even if you only use the
ATM half that time, that's still $260 USD per year. Most travelers I know go to the ATM even
more
than
twice a week, which only increases the amount of fees they pay. Why give banks money you need for travel?
You did a lot of work saving up your money; don't waste it by giving it to a bank.
Opening an Online Savings Account
The second thing you want to do before you go away is open an online money market savings account in
order to earn interest. Before leaving for your trip, you saved a pile of cash, which you will slowly drain as
you go around the world. What do you do with all that money you saved up?
Even though you might not be working, you can still earn money by having your savings earn interest.
According to the finance website Bankrate.com, most traditional “brick and mortar” banks (think Bank of
America or your local credit union) pay less than 0.30 percent interest. At that rate of interest, you'll be
home long before you even notice any uptick in your bank balance. Online money market accounts offer
much higher interest rates because they lack many of the overhead costs traditional banks have. Though
rates are really low right now because of the ongoing economic crisis, the average rate online as of Septem-
ber 2012 is 0.75 percent interest. That's not very much, but it's better than earning 0.30 percent.
Let's say you saved $18,250 USD for your trip (that breaks down to $50 USD per day for a year if any-
one is still counting). If you put your extra money into an online money market account at 1 percent interest,
you will be
gaining
$182.50 USD per year. Now, since you will be taking money out on a regular basis, I'd
say a more realistic number is $120-130 USD.
In order to maximize the interest I earn, I keep only two weeks' worth of living expenses in my checking
account at a time. When I need more money, I transfer it from my savings. That way my money has more
time to earn interest for me instead of sitting in a checking account earning nothing.
It might not seem like $120 USD would make a big difference in traveling, but in some areas of the
world, especially in developing countries, you only need about $25-30 USD per day to survive. You are
looking at close to an extra week of travel you wouldn't have had otherwise, which makes $120 USD in free
money sound a lot more appealing.
The following online banks offer high-interest online savings accounts:
Ally Bank:
ally.com/bank/money-market-account; interest rate: 0.90 percent, no fees or
minimums
Bank of the Internet
(USA): bankofinternet.com/bofi; interest rate: 0.80 percent, no fees
or minimums
