Using prepaid travel cards
Prepaid cards are a secure way to access your vacation funds, but watch out for fees and restrictions.
Traveling safely and managing your money along the way is an exercise in balancing multiple risks: theft, loss, high surcharges, and confusing discrepancies.
Our Travel and Money series has discussed various ways to address money and security issues while you're abroad.
A prepaid travel card is generally usable in the place of a debit or credit card. You can withdraw cash at an ATM, pay for purchases, and make travel reservations. And as the name suggests, you prepay these expenses by loading money onto the card.
It is just as secure as a debit or credit card because the prepaid travel card is protected by a PIN and/or signature. In fact, some would say that prepaid travel cards are even more secure because the money is not linked to your bank account and has a limited balance (which limits your exposure).
Where to get one
Credit card companies. Plug in a simple search for "Visa Travel Money Card" and you'll find a number of financial institutions offering prepaid travel cards that are ultimately backed by credit card companies. You can also find American Express or MasterCard travel cards with this search by substituting "AmEx" or "MasterCard" for "Visa" in the search.
Things to keep in mind:
- Although these cards look and act just like credit cards, they operate on your prepaid balance instead of credit.
- You can use them anywhere credit cards are accepted, including at the ATM for cash withdrawals.
- You load money onto the card by direct transfer from your bank account. You can keep loading up the card as many times as you like.
- If the card is stolen or lost, your bank account and credit rating won't be compromised. PIN and signature cross-checks also help to keep your cash secure.
- You load your home currency onto the card, and money is converted with each purchase, using the prevailing rates on the day of purchase.
Things to watch out for:
- Keep an eye on the monthly fees, which can be upward of $2.50.
- You'll probably also get dinged for fees for activation, reloading money, and making your first purchase.
- Every time you use an ATM, you could see a fee.
- If you don't use all the money you loaded on the card (and don't keep the card after the trip), you could pay to cash out your funds (e.g., $20).
- Some vendors and cards require minimum amounts to be loaded on the card before you can use certain features. For example, if you want to use your card at an automated gas pump, you'll need at least $50 on your card.
- The currency conversion charge can be up to 7%.
Travelex Cash Passport. Travelex has its own prepaid travel currency cards called Cash Passport. They include -- but are not limited to -- cards backed by various credit card companies.
Things to keep in mind:
- You prepay for a specified currency in advance, thereby locking in the exchange rate when you load money onto the card (instead of paying the prevailing rates each time you use the card).
- You can use the card anywhere debit cards are accepted.
- Cash Passports are available only in U.S. dollars, euros, or British pounds.
Things to watch out for:
- Similar to prepaid travel cards from the credit card companies, you'll be on the hook for monthly fees with Cash Passports, too -- about $2.50.
- Keep the number of ATM withdrawals to a minimum, because you will pay for it each time.
Overall, I don't use -- or plan to use -- prepaid travel cards, for a few reasons. First off, as a full-time traveler, I tend to juggle many different currencies, and some of these cards seem a little restrictive for my needs. I also don't like the monthly charges and some of the currency conversion fees.
If I didn't own a credit card, I might actually see some value in traveling with one of these prepaid travel cards. However as a devout credit card user, I think I'm pretty well covered (earning frequent-flier miles to boot).
Do you have experience with prepaid travel cards?
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