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When traveling, it’s imperative to have a financial model that works for you, that is secure, and enables you to do your finances as stress-free as possible. After much consideration, we created these 9 tips to securely manage your finances while traveling. We found these 9 tips work the best for us, and are by-far the most secure methods to mitigate the risk of funds being depleted in the event of identity theft.
1) High Yield Savings Account:
This should be your piggy bank and house the majority of your money. Why? The main benefit of storing your travel dollars in a high yield savings means the largest amount of return on your money for simply storing it in an account. In our case, we saved for a year of travel that will yield roughly a couple hundred dollars in interest income. Plus, with a high yield savings, you can take the money out and transfer it at anytime without penalty or fees.
We recommend using Nerd Wallet to find the right high yield savings account for you. The top companies will have the highest ratings and reviews, pay the highest interest rate, and have zero balance minimum to open an account and retain the interest. We’ve heard good things about Ally Bank, Synchrony Bank, and Capital One 360 (formerly ING Direct).
As you can see in the model above with the pink transaction arrows, we fund our individual accounts (checking, credit union) by logging into our high yield savings and pushing funds outbound to our respective individual accounts. Note that we do not log in to our individual accounts and pull money from our high yield savings.
In order to be as secure as possible with managing your finances, it is critical to only have one-way outbound linkages from your high yield savings to your other accounts. This means that funds can only be moved from your high yield savings account, not your other accounts. If you have a tw0-way link, you increase the risk of money in your high yield savings account being moved to your other accounts should those be compromised or hijacked. A common identity theft scenario occurs when a fraudster grabs your ATM card and uses the ID number as an authentication tool to reset your online password over the phone via an automated recognition system. They will then login to your online account, see what other accounts are linked to it, and pull money into the account, thus depleting funds at other financial institutions. Plus, since there is no ATM account or debit card with a high-yield savings account, it’s less likely to be hacked.
2) Primary Checking / ATM | Back-up Checking / ATM
The primary method for making purchases while traveling is cash. The majority of the world works on cash. Yes, depending on where you travel, you may be able to pay with an EMV chipped credit card, if your US bank supports them.
So how do you pay with cash without being dinged for ATM withdrawal fees? The simple answer is to find a checking account that will reimburse you, even if you make withdrawals internationally. Our research indicated that Charles Schwab, (yes that Charles Schwab) offers a no ATM fees, zero minimum balance, and no service fees account called their High Yield Investor Checking Account.
The catch is you must be a US citizen to open the account. If you’re not a US citizen, I’ve read HSBC is a solid bet, as they are an international bank with a lot of ATMs worldwide. Then again, you may want to reconsider HSBC as they’ve been deemed on the naughty list.
Create two accounts, one primary, and one secondary. Use your primary account to withdraw money, and your secondary (backup account) if your first account gets compromised.
Another tip is to only keep a minimal amount of money in your primary account. Generally speaking, keeping less than $1,000 limits your risk in case your account is stolen. Given that ATM cards are tangible and are used to swipe when withdrawing money, this account is the most likely to get hijacked.
3) Friendly Local Credit Union [FLCU]
Your local “at home” account should serve as the base for paying bills, rent/mortgage, student loans, or any other outgoing non-travel expenses. I recommend an FLCU over a big bank for several reasons.
First, your FLCU is a non-profit and its sole purpose is to serve the community, unlike a big bank, which is a for-profit organization hell-bent on making as much money as possible, regardless of how it affects a community. Second, your local credit union is going to be much more responsive and willing to work with you while you’re traveling.
One tip we’ve found is to have your bills setup on auto-payment (except your credit card, see Security Tip #2 below). This way you’ll always pay your bills on time, and you’ll have peace of mind while traveling, and you’ll minimize the opportunity for late fees.
Another tip is to have individual accounts for each of your main expenses. This makes it easy to keep track when payments are made and to ensure you have enough funds in those respective accounts to make payments. Plus, you can add a buffer amount of funds to accounts that are consider high importance and where payments cannot be missed, like a mortgage account.
Security Tip #1:
Keep a reasonable amount of money into your “home” account and only have outbound transfers to various expenses like rent/mortgage or student loans. Any time another account can pull funds from a checking account, it increases the ability for someone else to drain your account via a different avenue, like cash advances or automated phone withdrawals.
Security Tip #2:
Do NOT setup your credit card for automatic payments. Instead, log in and make your payments manually. This will force you to check on your account periodically, where you’ll naturally review your expenses and discover fraudulent charges. You may just find that the 600” TV from Amazon was not something you purchased. If you find something suspicious, you’ll able to file a fraudulent dispute with your credit card company before you’ve already lost your precious cash (see #8 Credit Card(s) below for another example).
4) Mortgage / Rent Payments
Setup your mortgage and/or rent payments to be automatic. As I’ve stated, simplicity while traveling is a must. You don’t want to be worried about missing a payment, not to mention the additional fees you may incur. We have found it’s easiest to auto withdraw our monthly mortgage payment from our mortgage account at our FLCU. We load this account via our renters’ payments, which are sent to us electronically (see #7 below for more information).
Did you know if you pay your mortgage an additional 10% each month payment, you’ll have paid your house off in 21 years and not 30? Don’t believe me on the importance of compound interest? Check out this article in The Truth About Mortgage that explains more.
5) Student Loans
In our case, we have student loans that need to be paid while traveling. Just because we aren’t working normal 9-5 jobs doesn’t mean we can skip our payments. We also set this up to be automatic to avoid any missed payments. This can be especially important if have auto-pay setup with a lender. Most lenders will offer a discounted APR if you setup auto-pay with your account and don’t miss a payment. You don’t want to give anyone a reason to charge you more interest.
Initially, I found success reducing my monthly payments by refinancing with Social-Finance. Zero fees, zero pre-pay penalties, and at least one percent lower APR. Jen, on the other hand, had a different experience with SoFi. She did not qualify to refinancing because her income did not meet their maximum requirements. In our mind, those making less money should qualify for refinancing, but banks don’t tend to look at people as a whole.
When I tried to refinance further with SoFi, I found that because I now had private loans, I no longer had the option of income-based payments and they didn’t care whether I made a certain amount of money or not. I had to pay the same amount no matter what.
Luckily, my friend Diane founded an amazing company called Rooted Investing. Diane liquidated all of her retirement funds so that she could use the money to invest in her community, and take banks out of the system. She bought out my student loans, reduced my rate by half, and together we agreed on a payment plan that works for both of us.
Depending on your career, (non-profit, government, teacher, etc.), you may be eligible for loan forgiveness after 120 consecutive payments. In my experience, refinancing saved us a considerable amount on monthly interest. If SoFi sounds like a good option for you, you can use our referral link.
A-u-t-o-m-a-t-i-c-! Set your bills up to be paid either through an automated clearing house online auto-payments, or billpay if online payments are not an option. Yes, our local trash company just joined AOL and doesn’t take online payments, so billpay via our FLCU will suffice.
Get rid of as many bills as when traveling. Netflix? Share an account. Cell Phone? See if you can lower your monthly minutes or unused data. How about cable? Just get rid of it and stream via Roku, Google Chromecast, Amazon Fire, or Apple TV. The point is, try it minimize your expenses when traveling.
Since we are traveling for an extended period of time, we opted to rent our house out to pay our mortgage and earn a bit of passive income. Our renters pay us electronically and we automatically move this money monthly to our mortgage account at our FCLU. We recommend Venmo, Dwolla, or Paypal as great tools for receiving and sending funds electronically.
If possible, setup your electronic payments source (Venmo, Dwolla, or Paypal) to automatically push funds to your FLCU account. Do not pull funds from your electronic payments source via your FLCU account. This prevents a thief from be able to extract any funds from your electronic source should your FLCU account be compromised.
8) Credit Card(s)
Last but not least, we use our credit card as often as possible. As noted, many places do not take credit cards, however, if they do, we are happy to earn rewards. Did you know that credit cards offer the best possible exchange rate? Most travelers will tell you that rewards and low exchange rates are one of the best tools for extending your funds.
Our travel credit card of choice is the Chase Sapphire Preferred. There’s a lot of information out there on rewards credit cards. Trav over at Extra Pack of Peanuts has done extensive research on rewards cards and offers tips on maximizing points.
When we need to pay our credit card, we fund it through our FLCU general checking account, which is funded from our High Yield Savings account. Why not fund directly through our High Yield Savings? Having a middle layer separating your primary funds and your credit card payment channel prevents a thief from being able to wipe out your funds to payoff your credit card if they run up a high balance and/or use-it for a cash advance.