Whether you’re planning to backpack around the world or are simply going on a package holiday this summer, a prepaid card is the safest way to take money overseas.
Summer is on the way and thoughts are turning to travel and the seasonal getaways that we spend the rest of the year planning for.
But as well as working out how much currency to take on your travels, it’s equally important to think what form your travel money is going to take.
Cash, debit and credit cards remain the most popular form of spending abroad. But there’s a relatively new addition to the travel money market - prepaid cards.
These are payment cards that you pre-load with money; theyand have been around for a few years but are now growing in popularity.
How prepaid cards work
Prepaid cards look like debit and credit cards and come with the same chip and PIN facility so you can pay for goods and services in shops as well as using them to withdraw money from cash points. Most prepaid cards are part of either the Visa or Mastercard schemes, so they are widely accepted.
You pre-load prepaid cards with cash or by transferring money from your debit or credit card. You can pre-load most cards online or by telephoning your prepaid card provider and giving your debit or credit card details.
You can also pre-load cards at a variety of UK retail outlets including the Post Office.
Prepaid cards normally come in three currencies: US dollar, euro or sterling. If you’re travelling to a country that accepts the US dollar then you’ll need the dollar card, if you’re travelling within Europe you’ll need a euro card.
If you’re travelling outside of these areas or will be moving between different currencies, then purchase a sterling card.
They are safer than carrying cash as many providers offer emergency card or cash replacements so if you lose your prepaid card you can still continue your holiday.
Added security benefits – if your prepaid card is lost or stolen it is not linked to your bank account like your debit card, and it has no credit facility like your credit card so your exposure to fraud is limited.
They are a valuable budgeting aid as you are unable to spend over the amount you’ve loaded onto the card.
Many cards come with a companion card, meaning you can share money with friends or family anywhere in the world. And if you run out of money on your travels, family and friends in the UK can top-up your card.
Using a prepaid card avoids the inconvenience of your debit or credit card being blocked by your bank while you’re abroad due to fraud fears.
Watch out for charges
As with any money product, while there are benefits, there are also pitfalls. Prepaid cards usually come with charges in one form or another.
Common charges include card application fees, monthly fees for use of the card, top-up fees, transaction fees which take a percentage of the purchase price, and cash machine withdrawal fees.
Chris Griffiths, head of cards and savings at Confused.com, said travellers should shop around for the best deal before taking out a prepaid card.
“Prepaid cards are a great way to carry money around while abroad but shop around for the best deal and you can avoid many of the charges associated with prepaid cards.
“For example, the FairFX card has a £9.99 application fee but this is waived if you apply through Confused.com.”
“Also, picking a prepaid card with no fees on foreign transactions can often make it more cost effective, as many debit and credit card providers will charge you if you use your card to make a purchase or withdraw cash while you’re on holiday.”