Money Matters: An Evaluation of the Air New Zealand OneSmart Card

[Added 8 May 2013: Note that the OneSmart fees schedule is changing from 21 May.  The calculations in this post were based on the original fees schedule. I have made some new comparisons in a more recent post.]

Okay, so this post is not strictly about food, but it's about how you can save money when you need foreign currency, and that has an indirect impact on how much money you have for food, right?

A few days before I travelled to Hong Kong, I received my OneSmart card.  This is the new Air New Zealand Airpoints card which is combined with a Mastercard debit card and it earns you Airpoints when you make purchases on it.  The selling point of the new card is that you can store up to four foreign currencies on it and there are no commission fees and no ATM withdrawal fees (unless charged by the ATM operator).  I had spent far too much money on fees for withdrawing cash from ATMs on my last trip overseas, so I was keen to try this new product out.

Activation

If you don't activate your OneSmart card, you can basically just use it as an Airpoints card.  It's still got your FlyBuys number on it, as well as the Mastercard debit card number.  However, I wanted to use it as a travel wallet!  Plus, they put you in the draw to win $100,000 worth of flights if you activate by 11 January 2012.
[Added 16 Jan 2012: This date has now been pushed out to 29 February 2012, so if you've just got your card, it's not too late!]

You can simply activate online if you have sufficient proof of your identity (e.g. drivers licence) and address (i.e. you are listed in the White Pages).  Unfortunately, I was not listed in the White Pages, so I had to fill in a form, and have my proof of address (in this case a valid credit card) witnessed at a BNZ branch or Air NZ Holidays store.  [Added 12 May 2012: I've been told that just having a valid drivers licence is enough now.]  I had to wait about a day after that before I could see my currency wallets after logging in to OneSmart.  It took another day before I received the email informing me I could complete my activation (which I assume I had already done).

As part of the activation step, you need to provide two security questions with answers, and you will need to answer one each time you log in, after entering your login and password.  This is gets to be tedious after a while, and somewhat redundant given I don't have to do this for my internet banking at ASB, but hey, it's a small price to pay.

Loading money

Once you are an activated member, you can load money into your OneSmart account by transferring money from your normal bank account to the OneSmart account (being careful to include your details).  It can take a business day for this to go through, after which you will see the money in your NZD wallet, less the $1 loading fee.

Exchanging money for a foreign currency

To exchange NZD for a forign currency or vice versa, you go to the "Manage Wallets" tab within your OneSmart account.  You can drag the eight available currencies to and from your Active Wallets list, then click "Wallet Exchange" to transfer money between the currencies in your Active Wallets list.

Selecting the currencies you wish to include in your Active Wallets

Exchanging money between your Active Wallets

Using money overseas

Once loaded with money, you can use your OneSmart card just like any debit card, in stores, restaurants, etc.  However, it is not recommended that you use it to “pre-authorise” payment for hotel stays or car hire (see relevant help page).  If there is not enough money in the wallet of the local currency, an amount will be deducted from the next currency wallet using the corresponding exchange rate, or the transaction will be declined if there is not enough money overall.

You can also withdraw cash from ATMs overseas for free, unless there is a fee charged by an ATM operator.  I tried withdrawing cash at the ATMs of Hang Seng Bank and the Shanghai Commercial Bank while in Hong Kong, and in each instance the transaction was free.

Checking your balance

You will want to check your balance online, as there is a 1 NZD fee for a balance enquiry at an ATM, either in New Zealand, or overseas.

As with your credit card, it can take a day or two before a transaction appears in your Transaction History.  However, the amount shown in the "Overview" tab on your home page appears to be an accurate representation of how much you have in your wallet.  Pending Transactions are shown in your Account "History" tab, above your Transaction History.

The amounts shown in the home page appears to take pending transactions into account

You can view previous transactions monthly or quarterly, although I am not sure how far back the history goes... presumably 6 months, but maybe only 3?
[Added 10 Nov 2012: I can still see my transactions from last December, so at least 12 months, it seems.]

Transaction history

The transaction display is not very user friendly.  Here is a list of "features" that I would like to see improved:

• The exchange rate is not shown when moving money between currency wallets.  You can work it out to a degree, but you wouldn't get an exact rate due to rounding.  Showing the rate will make it more transparent for comparison with other exchange options.  In the image below, it shows 344.77 HKD converted to 56.11 NZD.  The rate could have been 6.1445 or 6.1446
• The inverse of the conversion rate is given for unsupported currencies.  In the image below, it shows 348 MOP @ 0.1612 resulted in 56.11 NZD.  But 348 * 0.1612 = 56.0976, which should have rounded to 56.10 NZD.  The actual exchange rate used would have been between 6.2016 and 6.2026, not 1/0.1612 = 6.2135.  The actual rate used should be shown in the Transaction History.
• The currency conversion fee (supposedly 2.50%) for making purchase in an unsupported currency does not get shown.  You may not be aware you are being charged a fee if you did not read the Terms and Conditions, and even if you know about the fee, it is hard to see how much it was.  Again, this should really be included in the display.  [Added 10 January 2012: According to the CSR I spoke with, the exchange rate already includes the 2.5% currency conversion fee, which is why I did not see the fee in my transaction history.] [Added 8 May 2013: According to the new fees schedule which will take effect from 21 May, this fee was not charged previously, but will be from then on.]
• Your balance is not shown with each transaction.  You have no idea how much money you had in your account when you withdrew money or made a purchase.  Nor is it shown anywhere in the Transaction History.  You need to go back to your home page to see how much you have in each wallet.  Having a balance by each transaction would be ideal, though a balance at the top of the page would also be better than nothing at all (clicking "View other currency balances" in the top right corner will show your current balance, but then your transactions have disappeared from view, and it is not relevant when you are looking at transactions from a previous month).

Transactions which appear for one purchase made in an unsupported currency

In the Pending Transactions section, prices in the original currency is not shown.  In the example below, I have made a purchase in NZ, but only had money in my HKD wallet.  The price of my groceries in NZD is not displayed.

Pending transaction section

Comparison with exchanging money for foreign currency cash at banks

The exchange rate offered by OneSmart is competitive compared to exchanging money at the major banks in New Zealand. [Added 10 Apr 2013: A couple of readers have pointed out that the OneSmart exchange rate is now significantly poorer than when I first reviewed this.  Please make your own comparisons before use.] Sometimes it's better and sometimes it's worse, possibly because it is refreshed more often than the banking websites, or due to the fact that I wasn't checking at exactly the same time. For instance, right now, 1 NZD gets you 5.9193 HKD on OneSmart.  At ASB, the sell rate is 5.9030 and at Westpac, it is 5.8988.  Four days ago, they were 5.8500, 5.8642 and 5.8872 respectively. You could say the difference is negligible unless you are changing large sums of money, but on top of this the banks charge a 1% commission.

Example 1
Suppose we take the Hong Kong rates from last Thursday, which were more favourable at the banks.  Let's say we start with 1000 NZD.

With OneSmart, you would need to have loaded up your $1000 first, which could take a business day.  You would then see $999 in your NZD wallet (loading fee of $1 deducted).  At a rate of 5.8500, this converts to $999 x 5.8500 = 5844.15 HKD.

At Westpac, which had a better rate than ASB, you might think you would get $1000 x 5.8872 = 5887.20 HKD.  But wait, you forgot to take into the 1% commission, which is $10 if you convert $1000. If you take this into account, you could be converting $990.10 and paying $9.90 in commission, which means you would take away $990.10 x 5.8872 = 5828.92 HKD (though the bank will normally work the other way round so it comes to a nice round number).

Example 2
Looking at it from the other way, how much would it cost to get 5000 HKD in cash?  Again, using the conservative rates favouring the banks, we have:

Method	Exchange rate	Converted amount	Fees	Foreign amount	Total cost
OneSmart	5.8500	854.70 NZD	1 NZD	5000 HKD	855.70 NZD
Exchange at bank	5.8872	849.30 NZD	8.49 NZD	5000 HKD	857.79 NZD

When you take the commission into account, you are better off with OneSmart, though the difference may be greater or lesser depending on the exchange rates.  There are of course merchants that say they not charge commission.  I am not sure what their exchange rates are like, but for instance looking at Travelex online, you would need to order your money a minimum of 3 business days in advance, before collecting it instore.  Although you may find better deals elsewhere, with OneSmart at least you don't need to carry wads of cash around.

Comparison with using your credit card to get cash at overseas ATMs

Using your credit card is great in that you don't need to plan ahead (except for maybe letting your bank know you are travelling, so that transactions do not get declined).  However, you do pay a price for the convenience.  I don't know what other banks charge, but with my ASB Visa card, I end up paying $5 per overseas ATM withdrawal, in addition to paying an offshore service margin of 2.1% on top of loss from currency conversion.  This is particularly problematic if the ATM operator restricts the amount you get out to a low level (when I was in Buenos Aires, this was a maximum of 800 pesos a day, which is around 240 NZD, and you needed cash for store purchases because credit card surcharges were 3-10%).

Apart from paying $5 per withdrawal, which starts to hurt after a while, interest is charged on this immediately, so you want to pay off your debt immediately, or even better, start by putting money into your credit card account, so you owe a negative amount, as it were.

In contrast, once you've loaded money onto your OneSmart, getting money out overseas is free.  There is no overseas ATM withdrawal fee, no offshore service margin.  [Added 8 May 2013: Note this is changing in the new fees schedule effective from 21 May. Only 3 withdrawals per month will be free, and a currency conversion fee will now be charged for unsupported currencies.] You cannot withdraw money in person at a bank, but I have never found the need to do that.

Example
With OneSmart, you are getting money out of the appropriate wallet.  A withdrawal of 2800 HKD (so you get a nice distribution rather than all big notes) results in exactly that amount coming out of your HKD wallet.  If you had forgotten to put money into your HKD wallet, but had money in your NZD wallet, I believe a conversion would be done on the spot.

A withdrawal of 2800 HKD using an ASB Visa card, using a conversion rate of 5.8800 would require 2800/5.8800 = 476.19 NZD.  On top of this you would pay 2.1% offshore service margin, i.e. 0.021*476.19 = $10.00, as well as a $5 fee for an overseas withdrawal.  That's a total of $15.00 in fees, and presumably you would be getting money out several times during your trip.

Method	Exchange rate	Converted amount	Fees	Foreign amount	Total cost
OneSmart	N/A	N/A	0 NZD	2800 HKD	2800 HKD / 478.63 NZD (assuming rate of 5.8500 when money transferred into HKD wallet)
Credit card at overseas ATM	5.8800	476.19 NZD	15.00 NZD	2800 HKD	491.19 NZD

OneSmart is undoubtedly superior for getting money out at overseas ATMs, even if it does mean you need to do a little forward planning to transfer money over from your bank account.  This is especially true if you managed to lock in a good exchange rate when you moved money into the appropriate currency wallet.

Comparison with using your credit card to make a purchase overseas

So getting money out at an overseas ATM using your credit card is costly.  What if you are purchasing something from a store that will accept credit cards?  With ASB you can earn 1 True Rewards Dollar for every NZ$100-$150 you spend, depending on whether you just have the normal credit card, or a Gold or Platinum card.  With OneSmart, you earn 1 Airpoints Dollar for every NZ$100 you spend overseas.

Example 1 - making a purchase in a supported currency
With a credit card, you would need to pay an offshore service margin (2.1% at ASB), which does not apply to OneSmart.  Although you can earn reward points, the Airpoints you can earn with OneSmart would be as good or better.  Suppose you are purchasing an item worth 500 HKD, and that you have a Platinum credit card for the most reward points.

Method	Exchange rate	Converted amount	Fees	Foreign amount	Total cost	Reward earnt
OneSmart	N/A	N/A	0 NZD	500 HKD	500 HKD / 85.47 NZD (assuming rate of 5.8500 when money transferred into HKD wallet)	0.85 Airpoints Dollars
Visa Platinum	5.8800	85.03 NZD	1.79 NZD	500 HKD	86.82 NZD	0.85 True Rewards Dollars

Example 2 - making a purchase in an unsupported currency
We took a day trip to Macau, and I was able to try using my OneSmart card there.  The Macanese pataca is not one of the currencies supported by OneSmart.  In this case, OneSmart charges a 2.50% currency conversion fee (higher than the 2.1% offshore service margin on your credit card) and you would have effectively converted your currency twice, if the money is coming from a foreign currency wallet.

Suppose you are making a purchase worth 500 MOP.  Using your OneSmart, it would always convert this to NZD first, since MOP is not a supported currency.  When I was there, 1 MOP = 0.1612 NZD, from which I assume 1 NZD = 6.2022 MOP, which is a better rate than the one used for a credit card purchase on the same day.
[Added 10 Jan 2012: According to the CSR I spoke with, the exchange rate already includes the 2.5% currency conversion fee, which is why I did not see the fee in my transaction history.]

Method	Exchange rate	Original amount	Fees	Purchased amount	Total cost	Reward earnt
OneSmart (no money in NZD wallet)	6.2022 [MOP] 6.1445 [HKD]	80.62 NZD 495.37 HKD	2.02 NZD 0 NZD	500 MOP 80.62 NZD	80.62 NZD 495.37 HKD / 84.68 NZD assuming rate of 5.8500 when money transferred into HKD wallet	0.81 Airpoints Dollars
Visa Platinum	6.1790	80.92 NZD	1.70 NZD	500 MOP	82.62 NZD	0.81 True Rewards Dollars

In general, I would say it is better to use your OneSmart card for making purchases in a supported currency, but stick with your credit card in an unsupported currency, unless you have some money in your NZD wallet to avoid a double currency conversion.

Comparison with transferring money to a foreign bank account

Maybe you visit your destination so often that you actually managed to set up a bank account there.  OneSmart (with its $1 loading fee, maximum transfer value of 10,000 NZD) would be cheaper than making a telegraphic transfer to your overseas bank account (which has a $20-$25 charge at major banks).  Note there are limits on how much you can withdraw daily (1,000 NZD or local equivalent per 24 hours).  And you can't put money into your bank account (where it can earn interest) from OneSmart.  We are only talking about spending money here, right?

At the end of your trip

You've now finished your holiday, and you've spent less than you budgeted for on your OneSmart (well, you can't spend more than you've loaded, and it's pretty hard to have it bang on).  Do you take out as much cash as you can from the nearest ATM while still overseas and bring the cash back to New Zealand to exchange? Or do you leave the money there to deal with later, knowing you will be charged a $1.95 Account Inactivity Fee after three months?

Since you never go into a negative balance with OneSmart, you can avoid fees simply by having no money available for fees to be deducted.  However, that can be difficult to achieve, since ATMs only allow you to get out discrete amounts.  ATMs in Hong Kong let you get out multiples of 100 HKD; ATMs in New Zealand won't give you anything smaller than a $20 dollar note.  So you will always be left with a little bit, unless you have planned your purchases very well.

If you are someone that travels often, you could use the money for your next trip.  All you need to do to avoid the Account Inactivity Fee is to make a transaction on your OneSmart at least once every three months (and make sure you don't leave money in your NZD wallet, or you will be charged a Monthly Account Fee unless you load 500 NZD or more per month).  This lets you watch the exchange rates and move sums of money around your Wallets when they are favourable too.

But maybe you are not planning to travel again in the near future.  Or perhaps you would rather have the money earning interest at a bank.  Or maybe you just know you will forget to make a transaction.  You can't transfer the money back to your bank account, so if you don't want to use it up by paying for your groceries or buying things online, you will want to take the money out in cash.  Withdrawing cash at an ATM in New Zealand incurs a $1.50 fee, so let's look at how the exchange rates compare.  Right now, ASB will buy HKD in notes at 6.5493, Westpac at 6.5388. OneSmart shows the inverse of the rate as 0.1599, which I take to be a rate of 6.2539.

Example
Suppose you had 900 HKD left at the end of your trip.  You could get all of this out at a Hong Kong ATM just before you leave, and exchange it back at New Zealand without paying a commission (we'll use the better rate from Westpac below).  Alternatively, you can just try to use your OneSmart at an ATM back at New Zealand, which would incur you a $1.50 fee.  Make sure you have checked your balance online first, as checking it at the ATM will cost another $1.00.

Method	Exchange rate	Converted amount	Fees	Final amount	Net amount
Use OneSmart at ATM in NZ	6.2539	900 HKD	1.50 NZD	143.91 NZD	142.41 NZD
Exchange at bank after getting cash at overseas ATM	6.5388	900 HKD	0 NZD	137.64 NZD	137.64 NZD

Although there is a fee associated with withdrawing money at a local ATM using OneSmart, its better exchange rate means you would end up with more money than exchanging money at the bank.  Due to the limitation of ATMs, you would only be able to withdraw 140 NZD, leaving a small amount left on your card, which you could use on a very small purchase at the supermarket, or simply let it get taken in fees, happy that you have already saved a lot getting cash out overseas.

I would probably not bother trying to get the money out in cash, but simply leave it there for the next trip.  Just remember to make a transaction on your OneSmart card at least once every three months, to avoid the Account Inactivity Fee, and don't leave money in your NZD wallet, to avoid the Monthly Account Fee.
[Added 31 May 2012: Apparently, a transaction does not have to be a purchase.  You could also load more money or simply do a small currency conversion.]

Other features

I mainly wanted to use my OneSmart card as a travel wallet.  It comes with other features which I have not tried out yet, including:

• text and email alerts for every transaction
• ability to top up your Airpoints Dollars
• check-in for domestic flights using ePass
• ability to transfer funds to other OneSmart accounts using your mobile

Conclusion

Although bringing cash and credit cards with you on holiday will always be useful, OneSmart can save you a lot of money, as long as you are aware of all the fees that could be charged and take steps to avoid those situations. It is particularly good for withdrawing cash at overseas ATMs, though I would also use it for making purchases while on holiday.  You do need to plan ahead and load your money before you need it, and the display of your Transaction History online could be improved, but these disadvantages are more than offset by the cost savings.

[Added 14 Nov 2012: I've now written a post on what to watch out for when using your OneSmart card.]
[Added 8 May 2013: The new fees schedule effective from 21 May 2013 is less attractive, as are the exchange rates from OneSmart these days.  Please see my more recent comparison.]
[Added 21 May 2013: Did you know about the new fees and terms before they took effect?]