An overview of prepaid cards for holidaymakers

05 March 2010 08:38:25

Prepaid cards can be useful for holiday budgeting.

Holidaymakers are slowly but surely turning to prepaid cards to aid their financial management and give them easy access to their money while overseas. The cards allow tourists to spend without carrying large amounts of cash or incurring hefty bank fees and are also an excellent budgeting tool. However, many people still do not fully understand the idea behind them or how the cards could be of benefit.

How they work

Consumer watchdog Which? describes the concept behind prepaid cards as similar to that behind a pay-as-you-go mobile phone. The user decides how much they want to spend on holiday and then transfers that amount onto their prepaid card. The only way the cardholder can spend more than they have loaded is to top their card up with additional funds. Furthermore, users who choose to load foreign currency onto their card are no longer at the mercy of fluctuating exchange rates, as the rate is fixed at the time of loading.

Benefits of prepaid cards

Prepaid cards carry a number of benefits, including the aforementioned ability to control expenditure and avoid overseas credit card and cash withdrawal fees. The cards are widely accepted, as they are usually issued under the Mastercard, Visa, Visa Electron or Maestro brands. Cardholders can rest assured that any financial loss in the event of their card being stolen will be minimal. The thief would need the appropriate pin number in order to complete a shop transaction and the maximum amount that could be stolen would be the remaining balance on the card. To further minimise risk, holidaymakers can pre-load a limited amount before jetting off and then load further instalments over the phone or online while they are away.

Getting a card

Consumer credit has become increasingly hard to obtain in recent months, but there are no such problems with prepaid cards. Getting hold of a card is easy, thanks to the fact that the provider does not need to look into an applicant's credit history prior to approval. For instance, prepaid card provider Caxton FX claims to deliver its currency cards within five working days and the cards can then be activated online and immediately loaded from the user's debit card. Consumers applying for a Virgin Prepaid MasterCard are advised to allow up to 15 days for their card to arrive, while the FairFX Currency Card should be in applicants' wallets within seven to 10 working days.

Things to be wary of

As with most financial products, there are a number of catches that customers should be aware of when comparing prepaid cards. The cards are subject to charges, which vary between providers and may include a fee to buy the card in the first place, charges to load money onto the card and transaction or monthly fees. Some cards also charge for lack of use, while others operate a cancellation fee.

According to Which? there are some good prepaid cards on the market, but the consumer watchdog recommends "looking carefully at the terms and conditions and avoiding those that impose any standard charge other than a fee for making UK and overseas cash machine withdrawals".

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