Overseas shopping sprees either online or in person have been wonderfully affordable over the past couple of years, thanks to the strong Australian dollar making US and European prices seem really cheap. But now the Aussie is weakening those prices may not stay a bargain forever.
To shop smarter overseas, consider these points:
1. “Free” postage
There’s really no such thing as free postage. The cost has to come from somewhere. So what you’ll often find is that prices on free shipping sites are higher than on sites that charge for shipping, or there are last minute “handling” charges that creep in. Another thing to watch out for is volume, as some courier services will charge based on the size of your package, rather than its weight.
2. Poor rates
One thing to bear in mind is that when you’re shopping online with your credit card, you’re almost certainly not getting the best rates. Even when the Australian dollar was above parity with the US dollar, most banks were exchanging for less. The “Interbank” rate that you’ll see quoted is the rate that banks use amongst themselves: the rates they’ll offer you will be far less competitive.
3. Hidden fees
International transaction fees are often applied when paying for goods in a foreign currency, which in some cases can exceed 3% of the purchase cost. On top of this can be an additional conversion fee, of around 1%.
4. PayPal peril
PayPal may seem like a safe and convenient way to pay, but its fees can be among the highest, depending where you shop and if you use your credit card or funds already in your PayPal account. When a credit card is involved, Cross-border Personal Transaction fees can be as high as 7.4%, plus a fixed fee, plus a currency conversion fee.
5. Locking in
One better value option for buying online is to use a travel card that lets you store different currencies on it. You can load it up when rates are good, and then spend directly in that foreign currency, not having to worry about further conversion fees, or paying any more if the exchange rate continues to fall.
6. Looking ahead
No one has a perfect crystal ball to predict where the dollar is headed. But overwhelming market consensus suggests it will go down rather than up. That means the current rates may be the best for a while, so if you’re planning future overseas purchases, or an overseas holiday, it might be worth buying your currency now.
The good news is that with US prices so much lower than Australian prices, the dollar has some way to fall before overseas bargains are gone altogether. The mark up on items such as Nike shoes can be so high (over 50%) that they’ll still be cheaper than local items for some time to come.