to fund your holiday spending can be a good idea - it's a more convenient way to pay, and it affords you the same
abroad as it does at home.
But if you use a credit card
you could well be hit with supplementary charges, such as foreign exchange fees, which can add on as much as 3% per transaction. You may also find this is the case when using your debit card abroad.
And the additional costs can climb even higher if you withdraw travel money from a foreign ATM using a plastic card that isn't designed for overseas use.
Prepaid cards - ones 'loaded' with funds before you set off - are an attractive option. They can help minimise the hassle of carrying excessive amounts of cash and travellers' cheques and offer a cost-effective alternative to a standard debit or credit card.
So pick up your alligator-skin shoulder bag, slip on your espadrilles and come with us to take a closer look using prepaid cards for your holiday money...
Why choose a prepaid card?
If you take your standard debit or credit card abroad with you there's a good chance you'll be hit with an additional charge of between 2.75% and 2.99% every time you spend on it. This means you could be charged an extra £3 for every £100 you spend on your card.
And, if you're using a credit card, this additional fee is levied on top of your normal rate of interest. Prepaid cards, on the other hand, do away with these foreign exchange fees (also known as conversion or foreign purchase fees), provided you are using a card that's been loaded with the currency of the country you are visiting. On the downside, prepaid cards are generally only available in three currencies: sterling (GBP), US dollars (USD) and euro (EUR). So you might find that, if you use a card in countries that don't use any of these currencies, you'll be charged an additional 'out of currency' fee. For instance, FairFX currency cards charge a 1.4% 'out of currency' fee. But this is still a lot less than the 2.99% charged by many debit and credit cards. Prepaid cards can also offer a way around the dreaded ATM fees, which can make a severe dent in your travel funds if you regularly withdraw cash while away, as some do away with cash withdrawal fees altogether. So make sure you shop around to find the best card to suit your spending needs. Another advantage prepaid cards have over debit and credit cards is that you can load them with money when the exchange rate is good, which means that you won't lose out if the exchange rate worsens while you're away. For instance, if you loaded your prepaid card with euros last July, when the pound was at a high against the euro, you'd have got €123 for every £100 you loaded. But if you loaded your card with euros now, or spent on a debit or credit card while in Europe, then your £100 would just about get you €117. So, if you spent €2,000 while on holiday, you'd have an extra €120 just by taking advantage of a good exchange rate. Obviously, the reverse is also true, which means you could lose out should you load your cash and the exchange rate become more favourable. But prepaid cards aren't without their drawbacks... . The problem with prepaid cards
The first major drawback with prepaid cards is that many of them come with a one-off application fee. Some also carry an additional monthly fee, which is usually around the £5 mark, so you could spend over £60 per year just to carry a prepaid card.
Some providers will also charge a fee each time you load cash on to your card, which is typically around 3% of the amount you are putting on the card. Some charge additional usage fees each time you spend on the card and even levy a dormancy fee if your card is inactive for a certain period of time. Other possible problems include the fact that, in most cases, prepaid card purchases are not protected under the terms of the Consumer Credit Act, nor is your money protected as part of the Financial Services Compensation Scheme (FSCS), meaning that if the bank or building society providing the prepaid card goes bust, you will lose any outstanding cash stored on the card. However, you can avoid many of these fees by simply shopping around to find the best card to suit your needs - but to save you looking, here are some of the best prepaid cards for your holiday money... .
Prepaid cards to take on your travels
If it's a USD or EUR currency card you're after then the
ICE Travellers Cashcard offers free top-ups, free cash withdrawals from ATMs both in the UK and abroad and, not only are there are no charges when making purchases on the card, it actually comes with 1.00% cashback. In addition, the ICE card has no application fees and no monthly fees, and MoneySupermarket customers will also receive a free Hi-Life Diner Card, offering two-for-one dining until November 2013 in restaurants across the UK, when loading a minimum of £500 currency. The my Travel Cash Euro card is also a good option for travellers to Europe and the US as this is free to use, waives ATM fees, application fees and monthly fees, and users can also earn 1.00% cashback on purchases. If you're not going to be making cash withdrawals on your card then either the FairFX euro or dollar currency card could be a good fit as both a free of both annual and transaction fees. If you're travelling to a country that doesn't use GBP, USD or EUR, the Post Office Travel Money Card Plus is free to use and is available in a further five currencies: Australian dollar, Canadian dollar, New Zealand dollar, South African rand and Swiss franc. There is no application fee with this card but each ATM withdrawal comes with a fee of £1.50 Another good option for worldwide travellers is the AA Worldwide (Sterling) Travel Currency MasterCard Prepaid Card as it does not charge for point of sale purchases made anywhere in the world and comes with no monthly fee. The application fee is waived for MoneySupermarket customers who load the card with £100 or more within one month of application. However, the card does come with a £1.50 ATM fee, and the card may not work in any countries the foreign office deems unsafe for UK travellers. In addition to prepaid cards, there are also a number of credit cards designed for travellers and holidaymakers, the best of which can be found in Jessica Bown's article The best credit cards to take on holiday this year. For more information on prepaid cards, click here.
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct. We're free, independent and compare all UK credit cards, as well as offering exclusive deals you can't get anywhere else. Contact MoneySupermarket.com at Moneysupermarket House, St David's Park, Ewloe, Flintshire, CH5 3UZ. © Moneysupermarket.com Ltd 2013.
Rate This Article
Click on a star to rate this article.