Dollars

Prepaid cards are not eligible for protection under the Financial Services Compensation Scheme

Organising US dollars for a holiday in the States is pretty familiar to many of us: it’s the second most popular destination for trips, according to single trip travel insurance quotes on MoneySuperMarket* And while you may have taken out cash for your last trip, it’s highly likely that you’ll be considering a prepaid card for your travel money this time.

Dollar prepaid cards

Dollar prepaid cards offer the same convenience as a debit or credit card, but charges are typically much lower, as these cards are specifically designed for overseas use. Once you’ve spent the dollars you’ve loaded on to the card, you can top it up whenever you want to and, if you lose it, you can cancel the card and be issued with a replacement or emergency cash.

Lower charges

If you’re one of the 22.82% of people who take more than one overseas holiday per year*, a prepaid card could be even more beneficial for you. That’s because foreign exchange fees can soon mount up when you use a debit or credit card in the USA - but you may be able to avoid these fees with a dollar prepaid card.

Many dollar prepaid cards are transaction-fee free, and some will let you withdraw dollars at an ATM for free, up to a certain limit. But with a debit or credit card you could be charged a foreign currency charge of between 2.75% and 2.99%, which means if you spent $100, you'd pay around $3 extra. On top of this, if you withdraw cash on your debit or credit card, you'll face an additional fee of around 2% to 3% and, with a credit card, you'll pay interest from the day you take out the cash.

This doesn’t mean that a dollar prepaid card is always free to use. You need to be careful when choosing a prepaid currency card, because there are other fees to think about – some cards will charge you when you load funds on to the card, while others will charge an 'inactivity' fee if you don't use it for a number of months. There could also be a replacement fee to pay if you want to replace your card the next year. It’s always advisable to read the small print to make exactly sure it’s the right move for you and your holiday spending plans.

Limit your spending

It’s all too easy to overspend when you’re abroad, and if you take a debit or credit card on holiday you can dip into your overdraft before you know it, or end up borrowing more than you’d planned. The beauty of a prepaid card is that you can only spend the dollars that you’ve put on it, making it especially useful if you’re trying to keep to a budget.

Make currency movements work for you

You can also use your dollar prepaid card to take advantage of favourable exchange rates in the run up to your visit to the States. Try to load your card when the exchange rate is in your favour, so that you get more bang for your buck.

Remember however, that if you load the card with dollars well in advance of your trip and the pound strengthens, you won’t be able to benefit as you locked into the exchange rate at the time. But, of course, if the pound weakens, you will be in a better position, as your dollars will be worth more.

Security advantages of prepaid cards

Taking cash with you on holiday is always risky – it only takes one pickpocket to potentially ruin your holiday. Although travel insurance does often cover cash you carry around on holiday, but it generally caps out at between £200 and £300. This means that if you carry more than the equivalent maximum in US dollars and you were to have your wallet stolen, you would risk being uninsured or only able to claim for the maximum amount.

This concern, coupled with the fact that you can pay with cards almost everywhere in America, means that carrying cash is a risky way to manage your spending.

If you use a prepaid currency card instead, you can cancel a lost or stolen card immediately by contacting the card provider and you may be able to get emergency cash or be sent a replacement card as soon as possible.

Another security concern while spending abroad is the risk of having your card cloned, and your bank account drained while you’re away. A prepaid card limits this risk, because if it were to happen then you’d only lose the balance of the card. However, if you fell victim to this kind of crime, you may find it more challenging to recover the money stolen from a prepaid card.

Some prepaid cards also come with apps that alert you every time a dollar is spent. This is an invaluable tool for the more security conscious traveller, because the instant notifications will warn you when money is being spent – and if you didn’t make the transaction, you may be able to freeze the card immediately via the app.

Compare prepaid dollar cards

With MoneySuperMarket you can compare a range of dollar prepaid cards to ensure you're getting the right one for you. Each card has their own benefits, from fee-free withdrawal limits, to bonus travel money when you load a certain amount.

Make sure you compare the card and transaction fee, and the UK and international ATM fees to get an understanding of what it will cost you to use the prepaid dollar card. You should also compare the exchange rate, to see how many dollars you can get for your budget.

Make sure you read the ‘great for’ points listed with each prepaid card above, as this gives you a great summary of the benefits of each specific card. And pay close attention to the ‘be aware that’ points, as this highlights any potential limitations of the card. When you think you’ve found the right solution for your next trip, always review the details of it before you sign up.

*According to quotes run on MoneySuperMarket between January and May 2018