Money Matters: Drawbacks of the Air New Zealand OneSmart Card

[Added 28 March 2018: This post is very old. OneSmart now has instant debit loads, for instance.]

In a previous post, I compared using the Air New Zealand OneSmart card as a travel wallet against other options, such as changing cash at a bank, and getting money out overseas using your credit card.  I found that this branded Mastercard debit card was a good choice, with no commission fees, no ATM withdrawal fees while overseas, and no offshore service margin/currency conversion fee if changing between supported currencies. Although I do still recommend using this card on your holiday, it does come with its share of frustrations as well.

Drawback 1: You can only spend what you have in your account.

The most obvious disadvantage of the OneSmart card is that, unlike a credit card, you have to plan ahead.  Debit cards work like prepaid phone cards: you need to put money on it before you can use it.  If you only have $29 in your OneSmart account, and you want to buy a $30 item, then—surprise, surprise!—that transaction will be declined.

What might be unexpected behaviour is that if you do not have enough money in the local currency wallet, but you have money tucked away elsewhere (e.g. you are making a purchase in Europe, and you don't have enough money in your EUR wallet, but you do have further funds in a USD wallet), then an automatic currency conversion from the other wallet will occur to allow your transaction to proceed.

What to do about it: Make sure you have loaded more than enough money for your use.  Yes, that does mean planning ahead.  You could also keep a credit card handy.  There is the issue of what to do with your leftover money when you have loaded too much - see the solution to Drawback 7 below.

Drawback 2: It takes a business day for the money you have transferred to show up on your OneSmart account.

If you transfer money to your OneSmart account on Friday night NZ time, chances are you won't be able to access that money until Tuesday morning.  That's waiting three and a half days before you can use it.

What to do about it: Keep an eye on what day of the week it is and how much money you have left to spend.  Top up if you have to before you hit the weekend, or you could find yourself using your credit card more than you intended to.

Drawback 3: The transaction history page is difficult to understand.

If you check OneSmart online (and I recommend that you do so regularly), you will see your current balance, your pending transactions and your transaction history.  Technically, you have everything you need: how much each transaction was, in what currency, and whether it was for loading cash, an ATM withdrawal, or a purchase, etc.  But it can be confusing for a number of reasons:

• You can only see your current balance, not what you had in each wallet when a transaction was made.
• Transactions can appear out of order (this is also true on your normal credit card, but there you are shown a running balance).
• Each transaction is shown with a processing date, but this is not necessarily the date when you made the transaction.  Often you will find multiple transactions from the same day being processed at the same time.
• Transactions can change currency from what was shown when they were pending, e.g. if you made a purchase in Euros, but had no money in your EUR wallet, the money will be converted from the first wallet you have money in, so the pending transaction could be shown in NZD (in this case, you will not be able to see the price you paid in Euros while the transaction is pending).  If you transfer money to your EUR wallet before the transaction is processed, the final transaction will be shown in EUR.
• The same purchase can appear as multiple transactions.  I once had a payment split across three different currencies, because I did not have enough money in the first two wallets
• If an automatic currency conversion occurs, you are shown what amount in the original currency was converted to what amount in the final currency, but you don't get to see the exchange rate.
• Often an automatic currency conversion is not exact.  You end up paying a few cents more or less, leading to your balance occasionally showing something like EUR -0.03.  For instance, I withdrew 100 pounds from an ATM in London when I had no funds in my GBP wallet.  To pay for this, OneSmart automatically converted 200.98 NZD to 100.03 GBP.

What to do about it: If keeping a tab on your money in each wallet is important to you, make your own spreadsheet of running totals. I found this especially useful when I began using multiple currencies and suspected errors in the calculations (it turns out I had simply spent more money than I realised). It also allowed me to make notes on transactions when the default descriptions were not very enlightening.

Drawback 4: If you present your OneSmart card for authorisations and deposits, that money will be locked from use.

For deposits (e.g. on a rental car) and authorisations (e.g. for a hotel booking, in case you don't turn up), credit cards have an advantage, because you can still continue on as if nothing had happened.  When you have returned the car or shown up for your hotel stay, the pending transaction is simply cancelled.

On debit cards like the OneSmart, however, these transactions will put a certain amount of money on hold.  And simply returning the car or paying for your hotel does not mean you have access to those funds again.  You have to wait for the pending transaction to expire, which, according to a hotel that authorised the first night's stay without really warning me, would take 10-14 working days (that's 2-3 weeks of not being able to use the money, by which time your holiday might be over!).  The actual pending transaction I saw in my OneSmart account was marginally better, expiring after 9 days.

What to do about it: Watch out for authorisations and deposits, i.e. where merchants ask for your credit card details with little intention of taking the money.  Where these are requested, give them your normal credit card instead.  You can still pay for your hotel or car hire using your OneSmart though.

Drawback 5: Credit and debit cards do not work everywhere.

The OneSmart card has served me well.  It has worked with every ATM I have used it with, and I have never been charged fees by an ATM provider either.  However, a workmate was not so lucky.  He loaded his OneSmart up with all the money he planned to use, and went to Japan with no cash.  Too late, he discovered that Japan is a very cash-based society, and most ATMs there do not accept Western credit cards, including Visa and Mastercard; ones that display the logo often work only with credit cards issued in Japan.

What to do about it: This is not a problem with the OneSmart card, but with foreign credit cards in general. Do your homework. Research your destination ahead of time, and bring some cash with you just in case.  Eventually, my workmate worked out that in Japan he could get money out at ATMs in the 7-11 convenience stores between certain hours, and this seems to be true of ATMs in postal offices as well. [Added 27 January 2013: having returned from Tokyo recently, I can say that 7-11 ATMs work even at 9pm at night, whereas the ATMs at another convenience store (Lawson's) clearly stated that foreign credit cards are not accepted.  A random ATM I found at a subway station let me get out as little as ¥1,000 (around NZ$15), which was better than the 7-11 ones which had a minimum of ¥10,000 (~ NZ$150).]

Drawback 6: Those pesky fees...

As with all banking products, there are fees involved with using your OneSmart card.  I think they are entirely reasonable compared to, say, using your normal credit card overseas, but you should still acquaint yourself with them so you can avoid them as much as possible. [Added 8 May 2013: The new fees schedule effective 23 May is less attractive than it used to be.  I take another look in a newer comparison.] [Added 22 May 2013: And I vent by displeasure at the lack of notice given for the changes.]

What to do about it: Read through the OneSmart fees schedule. To avoid the Monthly Account fee, do not leave money in your NZD wallet for more than a month.  To avoid the Account Inactivity fee, make a transaction at least every three months, for instance by moving a small amount of money from one wallet to another.  Don't query your balance at an ATM, but rather check it online.  And so on and so forth... [Added 22 May 2013: The new changes removes the Inactivity Fee, but applies a reduced Monthly Account Fee regardless of where your money is sitting, so you cannot avoid it simply by moving your money to a foreign currency.]

Drawback 7: You can't transfer money back to your bank account.

The thing that people seem to be the most surprised or frustrated by, when they first use their OneSmart card, is that when they return home from their holiday, there is no easy way to get the leftover money out again.  You can't transfer the money back to your bank account.  There's a fee for getting cash out at an ATM in New Zealand using your OneSmart, and you can't withdraw less than $20 anyway.  And unless you are going to use it soon, your money is wasting away there, not collecting interest, not to mention there is the potential for fees to be charged unless you do something about it.

What to do about it: Depending on your situation, you could deal with your leftover money in a number of ways...

1) No trips planned anytime soon:
After your holiday, use your money up with your OneSmart card wherever you normally use your credit card.  Use it to pay for your groceries, your petrol, your online purchases, dinners with your friends.  At the Countdown supermarkets, the self-service kiosks have a "split payment" function, where you can specify the exact amount to charge to a card, so you don't even need to go to the trouble of trying to make your items add up to a particular number.

2) Friend is about to go on holiday:
Alternatively, if you have a friend who is about to go on holiday, who is planning to use their OneSmart card, you could give your money to them (click on the orange "Send Money" button underneath your balance in the top right corner).  All you need to know to do this is either their OneSmart account number or their mobile number. This not only saves you the trouble of having try to use the money up yourself, it also saves your friend the (pretty minimal) $1 load fee.  Currently, there is no fee for OneSmart account to OneSmart account transfers done online.

3) You are planning to go overseas again soon-ish:
If you purchased foreign currencies at a very good exchange rate, or if you can't be bothered getting your money out because you are planning another trip soon, you can, of course, opt to simply let your money sit in your OneSmart account.  See my solution to Drawback 6 about avoiding fees.

Drawback 8: You probably know more than the customer service staff.

It's sad but true: half the time I have rung up the customer service centre, someone has given me the wrong information.  This is true of many other organisations too, of course, so if I'm not in a hurry, I tend to write them an email.  It gives them time to think, you don't have to spend hours on the phone, and you have a written record of what was discussed.

Here are some untruths I have been told over the phone...

• Myth 1: To avoid the Account Inactivity Fee when you have $0 in your NZD wallet but a positive balance in another wallet, you need to load some money at least once in a three-month period.  Reality: You just need to make a transaction, whether that is loading cash, purchasing goods or changing money from one wallet to another.
• Myth 2: If you see a pending transaction disappear without going onto your transaction history, you are no longer liable for the purchase you have made.  Reality: In the unlikely event that the pending transaction expires before it has cleared, it looks as though the value of your purchase is returned to you and there is no record of the transaction visible anymore.  You can spend the money that you see (including the amount that was released from the pending transaction), but when the expired pending transaction finally clears, your account will go into a negative balance.  Unfortunately, if a currency conversion had to be done automatically (e.g. you made a purchase in NZD but you only had money in your HKD wallet), then the exchange rate will be calculated anew, possibly using a less favourable rate.
• Myth 3: You would have received an email letting you know when your account was activated.  Reality: I keep all my important email, and I never received such a notification.  I did however work out my activation date based on when I presented my ID at an Air NZ Holidays Store as part of the activation process, and the fact that I had managed to load money into my account two days later.  It turns out you don't need to know what your activation date is anyway, as you will see in Myth 5.

Amazingly, what you read on their official website might not be true either.

• Myth 4: You can only load up to $1,000 at a time. Reality: This has now been corrected to $10,000 on their FAQ page, but for the best part of a year, their old FAQ page displayed the mistaken value.
• Myth 5: You will be charged a Monthly Account Fee if you have not loaded at least NZ$500 in the last month, and it is now the end of your activation month.  According to footnote 1 in the fees page, "month" means "each period of one month starting on the date you Activate your OneSmart Account. For example, if you Activated your OneSmart Account on the 7th of the month, you would need to load NZ$500 or more between the 7th of this month, and the 6th of the next month to qualify for the Monthly Account fee waiver." Reality: The Monthly Account Fee appears with the description "Subscription Fee" in your transactions. I was charged this fee on the 28th, and challenged it as my activation date is actually on the 16th, and I had made sure I had no money in my NZD wallet, until a refund came through just on the day the fee was charged. I had to fight for a refund, and a CSR tried to convince me that the fee is charged in monthly periods from the Account Creation Date (which he claimed was on the 30th) rather than the Activation Date.  I have subsequently been told by a different CSR that all accounts are charged on the 28th, regardless of when you activated.
• Myth 6: There is a 2.5% currency conversion fee charged for unsupported currencies. Reality: I have not yet seen this charged [Added 8 May 2013: however this fee will be applied in the future according to the new fees schedule].

What to do about it: You can take the conservative approach, e.g. make sure you don't keep money in your NZD wallet for more than a month without loading more money, or you can learn how things work by trial and error, as I did.  If there is a problem (e.g. you were charged a fee when you shouldn't have been), then write an email to the help desk if you are happy to wait for a response.  Otherwise, make sure you have all the relevant information when you ring up, so you can argue your case effectively.  If that still fails, try calling again later.  A different CSR may be more clueful.

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So was it worth it using the OneSmart card, given the issues I've mentioned above?  Well, I can't tell you exactly how much I've saved, but from my twenty cash withdrawals from overseas ATMs alone, I have avoided paying 20 x $7.50 = NZ$150 in fees already (yes, that credit card cash advance fee has gone up at my bank!)  True, I would have gotten cash out less often otherwise, but I liked the fact that the OneSmart card made me feel free to withdraw smaller amounts of money more frequently. [Added 8 May 2013: according to the new fees schedule, only 3 international ATM withdrawals per month will be free.] Whether the extra time investment you need to use the OneSmart card is worth the savings it provides, is up to you to decide for yourself.  Happy travels!