Are prepaid cards best for holiday spends?

If you're jetting off on holiday in the next few weeks, you might be wondering whether to take a wallet full of cash with you, or put most of your holiday spending on a debit or credit card.

Woman trying to close suitcase

Compare current accounts

Start a search

Carrying around lots of cash isn't the most secure option – and many debit and credit cards will charge you for using them overseas. One popular alternative is a prepaid card – so here’s how they work…

What is a prepaid card?

Prepaid cards can be used in the same way as debit and credit cards, but must be topped up with funds in advance. You can then only spend what is on the card, or top it up again. Many prepaid cards allow you to load them up in different currencies – making them handy for overseas use.

Typically, you can pre-load these cards with sterling, euros or dollars (euro cards are for use in the Euro Zone, while dollar cards are for use in the US). Sterling cards can be used be anywhere in the world and your money will be exchanged from sterling into the local currency whenever you use your card – and at the prevailing exchange rate.
So are prepaid cards any good?

The advantages of prepaid cards

A big advantage to using a prepaid card is that it saves you having to carry around significant sums of money while you're on holiday. In the event your card was stolen, you'd only lose the amount of cash on your card.

But prepaid cards are also often cheaper to use overseas than a standard debit or credit card. Many debit or credit cards charge a foreign transaction fee of around 2.75% when you use them for spending abroad.

The same applies if you're withdrawing cash on your card. But, on top of that, you'll also pay a cash transaction charge of between 2% to 3% (minimum charge of £2 to £3). And, if you're using a credit card, you'll also be charged interest from the moment you withdraw your money.

In contrast, some prepaid cards allow you to avoid these fees altogether, while others will charge but at a lower rate.

Another advantage of prepaid cards is that you can load them up with funds when the exchange rate is good, which means you won't lose out if the exchange rate worsens while you're away. And because you can only spend what's on the card, this also helps you to stay within your holiday budget.

The problems with prepaid cards

But prepaid cards aren't perfect and are rarely completely fee-free. As I've already mentioned, some still charge foreign transaction fees and ATM withdrawal fees so it's important to check the small print. What's more, a number of cards also have an application fee, while others will hit you with an 'inactivity' fee if you don't use your card for 12 months.

And although you can top-up funds on your card online, by phone or by text, remember that if you need to do this on holiday, you could have to pay for internet access or for using your phone abroad. And, if you're staying somewhere rural or remote, getting internet access or phone reception could be a challenge.

Prepaid card options

To help you decide whether you think a prepaid card is right for you, we've highlighted some of the best options below, along with the fees you need to be aware of.

FairFX
Cards on offer: The Anywhere card (in sterling), the Euro card and the US Dollar card.

Application fee: The usual £9.95 application fee is waived if you apply through MoneySupermarket.

Foreign transaction fees: None - providing you use the cards in the correct currency. However, this means there is a foreign transaction fee of 1.4% when you use the Anywhere card outside the UK (but this is still cheaper than most standard cards charge).

ATM withdrawals fees: €1.50 for the Euro card, $2 for the Dollar card and £1 for the Anywhere card.

Inactivity fee: None.

Minimum top-up amount: €60, $75 or £50.

My Travel Cash
Cards on offer:
Euro Currency cardUS Dollar Currency card and Multi-Currency card (in sterling). You'll earn 1% cashback when you spend on these cards.

Application fee: None.

Foreign transaction fees: None – providing you use the cards in the correct currency. The Multi-Currency card has a 2.99% fee if you use it outside the UK.

ATM withdrawal fees: None.

Inactivity fee: If you don't use your card for 12 months, there is an inactivity fee of €2.50, $3 or £2.

Minimum top-up amount: €30, $40 and £25. If you apply through MoneySupermarket, you'll get £5 free when you load £600 or more on to one of these cards.

ICE Travellers Cash Card
Cards on offer:
Euro Travellers CashcardUS Dollar Travellers Cashcard and an International Travellers Cashcard (in sterling). You'll earn 1% cashback when you spend on these cards.

Application fee: None.

Foreign transaction fees: None.

ATM withdrawal fees: None.

Inactivity fee: None.

Minimum top-up amount: £50 (or equivalent). There is also a 1.85% top-up fee with the International card.

CaxtonFX
Cards on offer:
Europe Traveller cardDollar Traveller card and Global Traveller card (in sterling).

Application fee: None.

Foreign transaction fees: None - providing you use the cards in the correct currency. However, this means there is a 2.75% fee with the Global Traveller card when used outside the UK.

ATM withdrawal fees: None.

Inactivity fee: None.

Minimum top-up amount: €150, $200 or £100.

You can compare a range of other options on our prepaid card channel.

The alternatives

Providing you're aware of the fees associated with prepaid cards, they can be a very useful way to spend abroad. But if you're not sure they are right for you, there are a handful of credit cards that won't charge you for using them overseas.


The Halifax Clarity Credit Card, for example, has no foreign exchange fees or cash withdrawal fees abroad, though cash withdrawals attract a representative annual percentage rate (APR) of 12.9% (variable) from the day the transaction is made.

There are also no fees for purchases made abroad with the Post Office Platinum credit card, and you'll benefit from 0% interest on purchases for the first three months. Cash withdrawals, however, face a fee of 2.5% (or £3, whichever is greater) and you'll be charged a representative APR of 26.9%. Read more about these cards and further options in Les Roberts' article.

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.

Did you enjoy that? Why not share this article

SAVE MONEY NOW

Other articles you might like

Popular guides