Guide to prepaid currency cards
Prepaid cards are one of the newer payment options on the UK market. They work in a similar way to credit or debit cards, as customers simply enter their PIN or use contactless technology to pay for goods. However, prepaid cards are not linked to bank or credit accounts and they have to be preloaded with cash.
This method of paying has proven to be particularly popular overseas as an alternative to carrying cash or travellers' cheques. However, not all prepaid cards are suitable for travelling, so it's best to look out for specific prepaid currency cards to avoid any unnecessary transaction charges.
How do prepaid currency cards work?
Prepaid currency cards are easy to use. The card is loaded with cash online, in store or over the telephone and can then be used to make used to make purchases in the same way as a debit or credit card.
Prepaid cards are issued by Visa, MasterCard and Maestro, so can be used wherever there is the relevant logo, in millions of locations, globally. Only the cash pre-loaded onto the card can be used and once the balance reaches zero, any further payments will be declined.
Prepaid cards share certain elements, such as loading fees, exchange rates, transactions fees and so on, which should be compared for suitability, when choosing a card.
Prepaid travel cards are available in a variety of currencies, so it's important to choose one that is suitable for the particular travel destination. They are available in either single or multiple currencies.
What currencies are prepaid cards available in?
Single currency cards are available as either the Euro or US Dollar. However, some prepaid cards have a multiple currencies; which are ideal for people who are frequent travellers, back-packers or those who go on worldwide trips.
The most common currencies are Euro, US Dollar, Canadian Dollar, South Africa Rand, New Zealand Dollar and Australian Dollar, but other currencies are now becoming more widely available.
If money is spent on a prepaid currency card in the wrong country, an overseas transaction fee will likely be applied; similar to when a standard UK prepaid card is used abroad.
When loading the card, pound sterling will be changed into the chosen currency, at the card issuer's exchange rate. Some prepaid currency cards will offer a fixed exchange rate at the time of application. It can be worth loading the card at this time, particularly if the rate is expected to change in the near future.
Other cards will use the exchange rate at the time the prepaid card is used to make a purchase.
What are the benefits over simple currency?
Prepaid cards can protect against the threat of theft and fraud on holiday. Prepaid currency cards can be a preferred method of payment rather than carrying large quantities of cash.
Should any cash be stolen while travelling it's unlikely it will be recovered, unless it is protected by travel insurance. Whereas, with a prepaid card, only the money loaded onto it can be lost. Most prepaid card providers also offer fraud protection.
It may be easy to overspend on holiday, but a prepaid card can help budget more effectively. A specific amount can be loaded onto the card for each day, week, or even the entire trip. However, there's no chance of running out of cash completely as the card can easily be re-loaded.
Prepaid currency cards vs. credit or debit cards
A prepaid currency card is independent of any other accounts, so it's not possible to access any credit facilities. This means that most prepaid cards do not require a credit check, allowing people with poor or no credit history to use them.
There can be an issue of security with credit or debit cards. Should either card be stolen, the cardholders account could be misused, unless the cards are cancelled in time.
Due to additional fees and foreign usage charges, credit and debit cards are often expensive to use abroad, and not only do prepaid cards have preferential exchange rates, they often have lower fees and charges.
When applying for a prepaid currency card, it's worth considering how the card will be used in order to establish what fees to watch out for. Compare the market deals, as prepaid cards have different fee structures.
To get the best value deal on overseas spending, it's worth taking the time to read the small print and research the market thoroughly.