Written by Head: SA Distribution for International Personal Banking at Standard Bank
Spending in another currency can get expensive and complicated. Not all South African cards are accepted abroad, and those that do come with the caveat of hidden fees tied into every purchase. Any small movement in the rand can also affect the price of purchases, which makes it difficult to keep track of your budget.
“If you are travelling overseas for business or pleasure, or buying something from abroad, you want to make purchases in the currency of that country,” says Erik Olwagen, Head: SA Distribution for International Personal Banking at Standard Bank. “There are always unknown fees involved like forex spreads or admin fees when making a payment in a currency that differs to your account base currency.”
As a result, many of those who regularly travel abroad or make international payments are opting for a global Visa debit card. Over 50% of Standard Bank International’s clients have active global debit cards linked to their current accounts. While a large number of clients have taken up international debit cards, spend dropped off significantly in 2020 on the back of Covid-19 and associated travel restrictions. Rather than leisure, entertainment and travel, there was a substantial change in clients’ purchasing habits towards online shopping and streaming services.
These cards can be issued in either British pounds, US dollars (USD), Euros (€) or Australian dollars (AUD). An analysis by Standard Bank shows that these currencies make up around 80% of all foreign transactions conducted by clients while the other 20% is made up of a mix of circa 50 different currencies considering what Standard Bank clients send from South Africa.
Olwagen says that customers are increasingly realising the benefits of international debit cards not only for spend while travelling but for investment purposes, to make international transfers or online purchases that can be done easily from their mobile app or internet banking platforms.
Protect yourself against currency volatility
“Let’s say you travel to Europe and make payments in Euros with your South African card. If the rand happens to depreciate, you will be paying more for your purchases and it becomes easy to lose track of what things cost,” Olwagen says.
Rather, clients can purchase those Euros ahead of time at a set exchange rate and spend in Euros with their debit card, for example. “It then becomes easier to convert to the original cost of your purchase, because you know that you paid X amount for that Euro, instead of trying to figure out and worrying about how much that glass of wine or sparkling water is going to cost you.”
Better manage your budget
Let’s say you are planning a trip to New York in 2022. There will inevitably be things that you need to pay for ahead of time like accommodation or inbound travel. In the first scenario, you may use your SA cards to make these purchases but there may be excessive fees involved that can impact your budget.
Movements in the exchange rate could also work against your budget. The Airbnb that you may be looking at today could go up in price in the days to follow should the rand depreciate. Rather, you can purchase $1,000 now and deposit that into your international bank account, and use those dollars to pay for car rental, any internal flights, tours or travel, or whatever the case might be with your dollar debit card, in the months to follow.
Make international transfers quickly and easily
There are multiple uses for the international debit card. Olwagen says that many clients from across the continent with children who are enrolled in international schools or universities will make use of an international debit card to settle school or university fees. And if the need arises such as purchasing goods or for last minute emergencies without any hassle or the high costs associated with foreign purchases.
Another benefit is to pay for expenses associated with running a buy to let investment property held abroad.
He adds that it makes sense for those who plan to emigrate to start externalizing funds in the currency of the country in which they plan to reside. “So, if I’m going to move to Italy in the next six months to a year, start purchasing those euros now because you’re going to have to spend in Euros for say a deposit on an apartment or house, or to purchase a car in advance. Whatever the case might be, you do not want to use your rands to cover those expenses.”
Withdraw hard currency abroad
Another benefit of an international debit card is the ability to withdraw cash from any of the circa 1.4 million ATMs in more than circa 200 countries around the world that display the Visa mark. This is as opposed to having to visit a forex outlet to withdraw cash ahead of time and the risk of losing hard currency that you carry around in person.
Imagine travelling to Thailand with a USD debit card. If you need cash, you can withdraw from any ATM or visit a bank to do so. The card is enabled for tap and go, which is becoming an increasingly popular feature, and means you can go to a bank, tap for cash, receive it over the counter and continue with your trip. The tap functionality is not enabled in all countries and retailers, so in some instances you may still need insert/swipe your card and input your pin depending on the amount being spent or the device being utilised*.
There are some other limitations, such as the amount you can spend on any given day and cash withdrawals being limited to three per day. These limitations, which can be increased temporarily to suit your spending needs, have largely been put in place to protect the consumer from fraudulent activity.
“If your card is stolen, you can alert us immediately and we will go out of our way to have a replacement card delivered to wherever you are in the world,” Olwagen says. He adds that a good way of de-risking yourself is by having more than one card stored in different places.
Pay for international subscriptions
As the world becomes smaller thanks to increased connectivity, South Africans can access a range of services from abroad like Amazon Prime or subscriptions to international publications like the New York times.
Olwagen says that many people may not realise that they will be charged for those subscriptions in USD. This means that the bank will apply a foreign transaction fee that you may not be aware of.
The volatility of the rand may also impact the price of that subscription and fees associated with the payment from one month to the next. A USD debit card could rather be used to pay for those subscriptions in USD so that your monthly budget is not impacted by movements in the rand.
In the online gaming world, for example, almost everything is dollar based and some clients will create a USD debit card to make those purchases. This can however be a risky environment where fraudsters like to hang around, and so it might be worth creating a virtual card or using platforms like PayPal where your card details are hidden.
Olwagen advises “to always remain vigilant and to avoid storing or writing down your pin. Rather make use of the functionality on the Standard Bank Mobile App that will display your pin for a few seconds, disappearing thereafter. And remember, the bank will never ask for your card details. If someone is asking, it is likely to be a scam.”
Always protect yourself against fraudsters when using your cards. Read through the common scams and fraud tactics here: https://bit.ly/3C0mDLR
*Visa Debit Card transaction fees apply.