Should you use a prepaid or credit card on holiday?

Prepaid cards are packaged up as a great option for your overseas holiday spending – simply load the card with cash and you’re good to go (with the added reassurance you won’t bust your budget).

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But given some of the great credit card deals designed for overseas spending, not to mention the fact your debit card can do the same job, is a prepaid card really necessary? Read on to find out.

Using an existing debit or credit card

With ATMs, retailers and restaurants readily accepting your regular debit card at almost every popular holiday destination, why bother with a prepaid card? Similarly, if you’ve already got a credit card, what’s the point in taking out a new one just to see you through your holiday?

Actually, it’s not that simple. Unless your existing debit or credit card is designed for overseas spending, you’ll have charges slapped on every time you use it abroad – resulting in a more expensive holiday than you thought.

Foreign transaction fees (also known as ‘loading fees) charge around 3% of what you spend in every transaction. And if you pull cash out of an ATM, you’ll be charged between 2% and 3% (or a minimum of £2 or £3) each time.

The ATM fee applies whether you’re using a debit or credit card to withdraw cash. But with the latter, you’ll also start accruing interest the second you take it out. So, even if you clear your whole balance in your next statement, you’ll be charged interest – and typically at a higher rate.

Not only that, any purchases or cash withdrawals you make on your debit or credit card can be subject to a poor rate of exchange, meaning that your pound effectively buys you less.

However, there’s a number of ways you can avoid most, if not all, of these charges – starting with prepaid cards.

How does an overseas prepaid card work?

A prepaid card works in much the same way as a debit or credit card, allowing you to spend wherever VISA or MasterCard is accepted. The only real difference is that you have to load it with cash before you can spend.

This is no bad thing, though – loading it with enough cash to get you through you holiday not only means you can budget effectively and avoid racking up unnecessary debt, it also prevents fraudsters going on an unlimited spending spree should the plastic fall into the wrong hands.

And, so long as you choose the right prepaid card and load it with the correct currency, you should be able to bypass any of the fees associated with other cards.


If you are travelling within Europe for example, the CaxtonFX Euro Card offers free ATM withdrawals and comes with no foreign transaction fees on any purchase you make. The card is free to apply for and free to top up (in euros obviously).

CaxtonFX will take an initial £10 deposit from your debit card on application, but this will be refunded in full the first time you top up. Swap cards again when you land back home though, as it will cost to use this card  in the UK.

For a full range of Euro currency cards check out our comparison page.


Heading Stateside

If you’re travelling to the USA, it follows that you’ll need to get a US dollar currency card. In this case, the my Travel Cash US Dollar card is free to apply for and load (providing you put on at least $40). When you get there it won’t levy charges on over-the-counter purchases nor for taking cash from the ATM anywhere in the dollar zone.

What’s more, you will currently get unlimited 1% cashback on all purchases you make (which could take some of the sting out of overspending) and, if you apply through MoneySuperMarket, you’ll get $10 free when you load £700 or more.

For a full range of US dollar currency cards check out our comparison page.


If your travels take you anywhere outside of the euro or dollar zones, you’ll need a multi-currency prepaid card which you’ll have to load up in pounds. The Kalixa General Travel card is free if you apply through MoneySuperMarket and won’t charge any subsequent fees for purchase or ATM withdrawals.

The my Travel Cash multi-currency card is also entirely free on all fronts (so long as you load at least £25). But, if you want to withdraw pounds from the ATM you’ll be charged at 2.99%. As with the US dollar version of this card, you’ll get an unlimited 1% cashback on everything you spend and, if you apply through MoneySuperMarket, £6 free when you load £700 or more.

For a full range of multi-currency cards check out our comparison page.

Prepaid cards: things to watch out for

When shopping around for a prepaid card, here’s a few things to keep in mind.

- If a prepaid provider allows you to top up using a credit card (and some don’t) you will pretty much always be charged for it. So look for a card that offers free debit card tops ups and never use your credit card to reload.

- When you buy your currency with your debit card which will then be transferred to your prepaid plastic, you’ll be charged at the prevailing exchange rate of the day. The prepaid provider may use the exchange rate employed by MasterCard or VISA, or its own one. Either way, find out what it is first. If it seems high, it could be cheaper tomorrow.

- Prepaid cards have a limited shelf-life, usually of two or three years, and any money you have on the card when it expires will be lost – so try to clear the card by time its expiration date rolls around.

- Finally, spending on a prepaid card isn’t the only way you can bypass foreign transaction fees – you could open a new current account or take out a credit card designed for overseas spending.

For example, the Halifax Clarity Credit Card is probably the best plastic of all to take with you abroad. It’s free to use anywhere in the world – whether you are spending over the counter or withdrawing cash. And if you do overspend it comes with a relatively low APR of just 12.9% (variable).

The best debit card for overseas spending is attached to Norwich and Peterborough’s Gold Classic current account. It charges no fees for overseas spending or cash withdrawal fees wherever you are in the world. But you will need to pay at least £500 a month into the account or keep it in the black to the tune of £5,000 to avoid the £5 per month fee.

Remember that overseas retailers and ATMs may levy their own charges which are totally separate to the debit, credit or prepaid card you are using.

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.

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