With summer fast approaching, many Filipinos are now preparing for their trips to their dream destinations.
One of the most common dilemmas of travelers related to expenses? What's better to use — cash or credit?
To answer the question, GMA News Online spoke to two financial experts — China Banking Corp. Senior Vice President Alexander Escucha (AE), and The Ready to Be Rich Guide to Investing author Fitz Villafuerte (FV).
What would be a smarter choice when traveling abroad — cash or credit?
AE: When you travel abroad, always bring a credit card or two, some cash, and as back-up, your international debit card. It's a digital world and plastic is the easiest and most convenient way to buy things in a foreign currency.
Most establishments abroad accept credit cards, even convenience stores, but having some cash on hand avoids a stressful predicament like being in a place that doesn't accept cards, like flea markets or bazaars.
When you're on a business trip, use your corporate credit card so you can track your expenses. When you're traveling for leisure, it's also better to simply charge your dining and shopping purchases.
This way, you can focus more on enjoying the trip and less on worrying about finding a money exchange counter or the nearest ATM, plus you enjoy rewards points, special perks, and depending on your credit card, added fraud protection like SMS alerts for any purchase made. If you don't want to overspend, simply review your charge slips or your credit card SMS alerts to find out if you're already going beyond your budget.
FV: I personally prefer having cash because it's a good way to limit your spending. But be sure to bring a credit card just in case of emergency. If you have multiple cards, you should only bring one for security purposes.
Moreover, when you're out, don't bring all your cash with you. Bring just enough for what you plan to spend for the day and leave the rest at the safety box of your hotel, or in a safe place where you're staying.
Any tips on how you handle your cash and exchange rates?
AE: In some countries, Philippine pesos can't be converted to the local currency, so before you leave, it's better to be ready with some foreign currency. I suggest getting the foreign currency you need from banks of legitimate money exchange booths or have some US dollars on hand.
If you're traveling with a group, pool your money with your companions so your forex transaction will just be one instead of several, and you save on fees.
If you have US dollars, you can bring them to any country and you can probably get better rates when you have your dollars exchanged in the country you're traveling to.
Some establishments abroad accept payments in currencies other than the local currency. For example, if you chance upon a shop in Paris that accepts US dollars, resist the temptation to use your dollars there as you'll lose out on the exchange rate.
FV: What I usually do is I bring US dollars abroad and exchange that with the host country's currency when I arrive. You should do a bit of research where's the best place to exchange your USD but most of the time, the forex at the airport already offer good rates.
If you don't have USD, then have your Philippine Pesos exchanged to US Dollars in the Philippines. Pawnshops that offer forex services are the best place to convert your PHP to USD (and vice versa) in Manila.
Moreover, when your trip is done and you plan to come back to the country, don't convert your money back to USD or PHP. Just keep it for your next trip.
Otherwise, it would be better to convert it back to USD abroad and bring that home, and reserve that for your next foreign trip.
How about credit? Would it be better to pay your credit card dues in peso or in the dollar?
AE: Merchants abroad will ask whether you want to charge your credit card with your home currency, Philippine pesos, or the country's local currency, say, Singapore dollars if you're in Singapore. When you are given the option, choose the local currency.
Although it seems simpler to have your international purchases charged in pesos so you don't have to do the math yourself, avoid it because it's a double whammy.
The merchant converts the purchase from the local currency on your behalf — this is called Dynamic Currency Conversion — but the kicker is, the merchant will charge you for the DCC service and apply an exchange rate that is virtually guaranteed to be terrible, and your credit card will do another exchange rate conversion.
FV: It depends if PHP is going stronger or weaker against USD. If PHP is strengthening, then it's better to use PHP-based cards. If it's weakening, then use your USD-based credit card. Although from experience, there isn't really much of a difference, when your billing statement arrives.
What's more important is that you manage your spending and make sure you don't charge your card with more than what you can afford to pay later. — LA, GMA News