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Prepaid credit cards: the do’s and don’ts

Which? Travel magazine’s Chris Gray reveals the do’s and don’ts of using prepaid credit cards on holiday

Prepaid credit cards: the do’s and don’ts
Do your research and you could save money using prepaid credit cards. Image: Sean MacEntee / CC BY 2.0.

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What are prepaid cards?
Prepaid cards are used to make purchases or withdraw cash abroad in place of a debit or credit card. The difference is you have to load the card up with money before you leave. Like traveller’s cheques, your money is safe and replaced if the prepaid card is lost or stolen.

How do they work?
There are three types of prepaid credit card:
1. Currency denominated: These let you load up with one foreign currency at a fixed exchange rate. The advantage is you can load up when the exchange rate is favourable.
2. Sterling: You load up with UK pounds and get the exchange rate available at the time when you use the card. They’re useful if you’re going to more than one currency area.
3. Multi-currency: You load up with several currencies and the card identifies which one to use for the country you’re in.

Are they popular?
Only 11% of Which? members use them. A third of those who don’t, say they thought the fees would be excessive.

Are they expensive?
We compared the cost of buying euros using prepaid cards with widely held and cheap-to-use credit and debit cards in February 2014. Costs for prepaid cards were not as low as the cheapest debit and credit cards, but they were better value than cards such as Barclaycard Platinum Visa credit and Lloyds Bank Visa debit. The cheapest prepaid cards at that time were FairFX, Caxton FX and Travelex.

Are there any pitfalls?
Don’t use the cards for car-hire or hotel-security deposits. If you do, funds to the value of the deposit will be frozen, or ‘ringfenced’ and you won’t be able to use them for anything else — even after you return the car or leave the hotel. Caxton FX ringfences funds for up to 30 days. Some providers didn’t warn us about this even when we enquired about using the card. which.co.uk


Published in the September 2014 issue of National Geographic Traveller (UK)