Prepaid travel cards explained
Buying a prepaid card for your travels saves you having to carry around wads of cash when you’re on holiday.
You simply buy one and load it with money before you set off. A prepaid card isn’t a credit card, so you can’t run up debts on them. You have a choice of currencies you can put on the card – pounds, euros or US dollars – depending on your destination.
If you’re travelling around Britain or going to a country where euros and US dollars aren’t the local currency, you should choose a sterling prepaid card. Whenever you use it abroad, the amount will be converted into the local currency at the current exchange rate set by the card company and taken off the card.
For travellers going to one of the 17 countries on the Continent within the Eurozone, a euro travel prepaid card is the right choice and if you’re holidaying in America choose a card loaded with dollars. In this way you know what the exchange rate is at the start of your trip.
Prepaid cards carry the MasterCard or Visa logos and are accepted by cash machines and retailers who are signed up to these card scheme networks in the same way as debit and credit cards.
Why use a prepaid travel card?
It’s safer. A prepaid card is similar to having cash on you but it’s safer than carrying around too much or leaving it in your hotel even if it’s in the room safe.
This is the main advantage of carrying one of these cards as your money is safe if the card is lost or stolen. All you have to do is contact the card company to have the card blocked so that it can’t be used by anyone else. Depending on the issuer and where you are, you may even be able to get it replaced quickly or at least get a new one when you return home. Some prepaid card companies will give you cash in an emergency to tide you over until you return home.
Prepaid cards are popular with parents to give to their youngsters when they’re on holiday. It’s a good way to teach them to spend responsibly as they can’t overspend.
It helps you budget. It’s easy to get carried away on holiday and spend more than you wanted to when you are relaxed and enjoying yourself. Prepaid cards make it easy to stick to a budget as you can’t spend more than you’ve loaded onto them. Nevertheless, it’s a good idea to have a credit card as a back-up to use in an emergency.
You know the cost once you preload them with the local currency. There’s often a minimum amount you can put onto the card at the outset, so it’s worth checking. Other cards, such as debit and credit cards, use the exchange rate on the day to convert your spending back into pounds. If you see the foreign currency rate fall in the weeks before you go away you can buy a prepaid card loaded with currency immediately to take advantage of any weakness.
Who are they good for?
Prepaid cards are popular with parents to give to their youngsters when they’re on holiday. It’s a good way to teach them to spend responsibly as they can’t overspend. Make it clear to them that’s their spending money for the trip, then it’s up to them if they blow it all in the first few days or eke it out over the time you’re away.
Since there’s no credit checks, teenagers can apply for one themselves if they wish and they don’t need to have a bank account.
They’re good for people who are worried about pickpockets or losing money on the beach.
Since the majority don’t allow you to borrow on them, they are handy for those on a tight budget. Many prepaid card companies give you a better exchange rates than buying foreign cash from a bank or bureau de change either here or in your holiday destination though do check whether there is a foreign exchange loading fee.
A few cards even give you cashback on your spending or when you first take out the card.
What to watch out for
You may want to top up your prepaid card while you are away. Find out how easy it is to do this before you go. You probably won’t want to make an expensive overseas call, especially if you’re using your mobile, so compare the various ways to add money to the card. Many cards allow you to top them up by text, over the internet or via your debit or credit card.
Check out the fees for applying for a card and using it while you are abroad by comparing the different charges detailed on our tables. There can be fees for getting the card, a monthly fee and another for using it to spend with but many of the top prepaid cards on our comparison tables don’t make any of these charges. Others will waive the application fee – or refund it - if you load a reasonable amount on at the outset.
Sometimes there is a percentage charged on the amount you spend with the card so if you’re intending to use it mainly for shopping and paying for meals in restaurants go for one that’s free.
Prepaid cards are not eligible for protection under the Financial Services Compensation Scheme