Foreign transactions
Travellers today have an ever-widening choice of ways in which they can pay for service and goods while abroad. These include:
- taking sterling or foreign banknotes with them. This can lead to loss theft, and certain foreign countries have restrictions on the import or export of their currencies;
- taking traveller’s cheques, in sterling or foreign currency or in euros;
- arranging for the advance transfer of funds to a specified foreign bank, or for an open credit to be made available, through their own bank, at a foreign bank;
- using National Girobank postcheques;
- taking Eurocheques;
- using travel vouchers;
- using credit cards or charge cards.
Eurocheques are being phased out as increasingly travellers abroad arrange to take small amounts of currency and settle bills through through their credit or debit cards, drawing further local currency as needed using these cards. Credit cards such as those of Visa and MasterCard ( Eurocard abroad ) are very widely accepted throughout the world, but since transactions can take some time to filter through to one’s bank account, users take a chance on the fluctuations of exchange rates. Charge cards such as American Express or Diners club provide similar advantages and drawbacks (charge cards differ from credit cards in full after receipt of an invoice from the company. Credit is not extended. However, the limit on charge cards-indeed, the company may charge to their account).
With the introduction of the euro as common currency in many EU countries ( and perhaps in time in the UK), financial transactions for tourists visiting a number of European countries will be greatly eased, a fact which is likely to encourage travel to those countries using the euro. Many leading travel agency chains, including Lunn poly, Going place and Travel Choice, operate their own foreign exchange desks, and the post office in Britain has also introduced a foreign exchange desk.
Traveller’s cheques are also still widely used, being readily acceptable throughout the world by banks and commercial institutions. They offer the holder guaranteed security with rapid compensation for theft or loss, an advantage which outweighs the standard premium charged of 1 per cent of face value. The value of the system for suppliers is that there is generally a considerable lapse of time between the tourist purchasing traveller’s cheques and cashing them. The money invested in the interim at market rates of interest provides the supplier with substantial profits. The money interest provides the supplier’s cheque originated in the UK are Thomas cook ( whose’ circular note’ the predecessor of the traveller’s cheque, originated in 1873), and American Express, which first introduced the concept in the 1819, but a growing proportion are being issued by the clearing house banks.
Travel vouchers such as Barkly’s Visa and Citicorp provide for sterling prepayment for travel services like car hire and hotel accommodation. Although prepaid vouchers of this kind have in existence in the travel industry for many years, the credit organizations have boosted their use in the recant years.
Apart from the popular visa and MasterCard, there are a large number of other credit cards issued for the purchase of specific goods and services, such as car hire and hotels. Among these, mention should be made of the Universal Air travel plan (UATP) card used for the purchase of IATA tickets throughout the world (although more commonly in use in North America than Europe). However, with the growth in popularity of the two leading credit card organization, the use of other cards for international credit transactions is now limited. Since agents are required to pay a fee to the card companies when accept them, but credit card sales are increasing at such a rate that no agent can afford to turn this from of business away. Payment by credit card offers the additional advantage to the traveller that funds are protected in the event of the collapse of the agent, operator or airline with which they are dealing.
The large number of foreign exchange facilities available provides the market with a very wide choice, but charges fluctuate considerably, and both rate of conversion and fixed charges need to be compared to judge what represents best value for money. Work is under way to introduce smart cards which have a microchip built into the card storing credit these have been use in France for some years, and have been tested in some supermarket outlets in the UK it is likely that we shall see these in use for travel purchases before very long.