Using prepaid cards on holiday

By  Mark Hooson

Prepaid cards are fast gaining popularity as a convenient way to pay abroad. They work much like a prepaid gift card. You load money onto the card and then spend until the balance on the card reaches zero, or you can top it up again using cash, a bank transfer or a credit card.

There’s no credit facility on a prepaid card, so you can only ever spend what’s pre-loaded onto it and you can’t get into debt. This means prepaid cards are also safer than debit and credit cards as should someone steal your wallet and get hold of your card, they’d only be able to spend the amount on it.

Some prepaid cards allow you to load them up with foreign currency and won't charge you when you use them overseas, making them even more ideal for holiday spending.

You also don’t need to worry about your credit history when applying for a prepaid card, as you’re not actually applying for credit.

The downsides

Prepaid cards haven’t been in circulation as long as, say, travellers’ cheques, which unfortunately means the market isn’t too competitive just yet. You should therefore compare cards carefully and keep an eye out for fees such as:

• Card application fees. This is a charge simply for getting a prepaid card.
• ATM withdrawal fees.
• Top-up charges.
• Dormancy fees. If you don’t use the card for a certain period of time, you may be charged a fee.
• Card renewal or replacement fees.

However, as more cards come onto the market, fees are starting to come down.

You’ll also need to know exactly how you can top up your card. Some can be topped up face-to-face, while others allow for top ups over the phone or online. This is particularly important if you’re taking one on holiday.

Our prepaid cards comparison service will help you compare the best prepaid cards for your holiday.