When it comes to planning a holiday or trip overseas most of us assume that we’ll save money by prepaying our travel costs. This goes for everything from hotels, car rentals, flights and sightseeing tours. But what about our money? With travellers cheques nearing extinction and identity theft and credit card fraud of real concern to travellers, banks have been pushing their latest product offering, the prepaid travel card, as a globetrotting must have.
So, how do prepaid travel cards stack up? Does it pay to prepay or are prepaid travel cards just clever marketing by our banks looking to cash in on the popularity of prepaid travel dollars?
With two new multicurrency cards hitting the market recently (NAB Traveller Card and the OzForex Travel Card) and rumours of more prepaid cards on the way, we’ve gone on an archeological dig of each major multicurrency card’s PDS to see how they compare against each other and whether travel cards offer real value for travellers, or just profit for the banks.
First, let’s cover off some of the basics.
What is a prepaid travel card?
Just as you would go to a bank to purchase foreign currency or travellers cheques, a prepaid travel card enables you to purchase foreign currency at a set rate before going overseas. Instead of getting cash or a travellers cheque, you get issued with a Prepaid Visa or Prepaid Mastercard, which allows you to make purchases or withdraw cash at ATMs while you are overseas.
Prepaid cards work in much the same way as credit cards and debit cards. The only difference is that the credit limit of a prepaid card is the amount of money you put (prepay) on the card and the exchange rate is fixed.
Types of prepaid cards.
There are two main types of prepaid travel cards. Single currency cards and multicurrency cards. Multicurrency cards allow you to preload several currencies onto the one card so you don’t have to carry around multiple cards if you are travelling to more than one country.
Prepaid cards will be connected to either the American Express, Visa or Mastercard networks.
Types of fees
- Purchase fee. This is generally a set fee to purchase the prepaid card and can range from $0 – $15. Sometimes this fee can be a percentage of the initial load amount.
- Reload fee. This is a fee charged by the bank or provider if during the trip you want to add extra money to the card. The standard fee for this is between 1- 1.1% of the reload amount
- Cross currency conversion fee. This is a fee charged when you make a purchase in a currency other than one that is on your card, and this can sting. It can be high as 8.45% per transaction.
- ATM fees: You can withdraw cash using a prepaid card but some cards will charge you a fee for the privilege.
- Account fee: Some cards will charge a monthly inactivity fee and others will charge a fee to close the account once you come back from your trip.
For our comparison, we used a typical traveller scenario. Our traveller was taking a 4 week trip to the US and then on to Europe. They purchase a multicurrency card, and preload the card with $2500 USD and 2500 Euros. Our task was simple, which card offers the best value?
Here is how much Australian dollars we had to fork over based on our initial load amount at the time of our analysis.
|Provider||AUD exchange for
USD 2500 &
|Purchase Fee||Total Cost|
Exchange rates varied between providers and in our scenario there was a $50 difference between our best exchange rates (OzForex) and our worst (CBA). But when we compared all currencies available – you can have up to 7 currencies on most prepaid multicurrency cards – we didn’t find a standout card provider that had better exchange rates across the board for all currencies available so shop around depending on where you are going!
What was more surprising than the exchange rate difference was just how big the gap was between the cards that charge a set purchase fee and those that charged based on your load amount. As you can see from our scenario, the more cash you’re planning on taking the more important it is to go with a card that has a set purchase fee.
Now you could be thinking, I’ll just get the Ozforex Travel Card because it’s got the best exchange rates. But it’s not quite so simple. Each prepaid travel card has ‘unique’ features (more on those later) so it’s really about choosing the best card for your travel and money habits. We’ll explain some more.
ATMs. Now, all prepaid travel cards will allow you to withdraw cash from overseas ATMs. But the Cash Passport Card and the NAB Traveller Card are the only two prepaid cards that don’t charge you for ATM withdrawals. If our traveller was to make 8 ATM withdrawals in the US and another 8 in Europe then with the other prepaid cards (that cost less at the initial load) you are now looking at approx $US18 and 20 Euros in ATM fees.
The other interesting quirk with prepaid currency cards is cross currency conversion fees. These range from 2% (CBA travel card) to a whopping 8.45% for the Cash Passport. Let’s use our scenario to explain how this works. Our traveller leaves the US and stops over at Heathrow on their way to Europe and splurges 150 pounds at the duty free. Now, because our traveller doesn’t have pounds preloaded on their prepaid card, they will be charged a cross currency conversion fee. The pounds will be converted (at the Mastercard or Visa exchange rate) into an available currency, and the conversion fee added on top. Confused? You’re supposed to be. This is one of the biggest traps that users of prepaid cards fall into and it will eat away at your cash, fast.
Cross currency conversions also apply if you don’t have enough money in one currency to pay for an item. Say for instance our traveller only has USD200 left on the card and they buy something for USD300. Because they have Euros on the card it will take the remaining amount from Euro card balance. They will pay that day’s exchange rate from EUR to USD100 plus a conversion fee on top.
Now what happens if those boutiques in Paris are just too tempting and you want to put additional money on the prepaid card while you are away? Well it’s pretty simple. Most cards you can use BPAY or internet banking to reload more cash but it can take a day or two to process.
And with multicurrency reloads you also need to be really diligent on the road and have your currency defaults set up correctly (prior to buying the currency and reloading), otherwise you could be stung with cross currency conversion charges or additional exchange rate costs. Multicurrency prepaid cards have what is called a default currency order and each bank / provider’s default list is different. For instance, the Commonwealth Bank’s Travel Card’s # 1 default currency is USD. So if our traveller had this travel card, and they want to buy an extra AUD2,000 worth of EUR. If they hadn’t changed their default currency to AUD or EUR before reload, they would automatically buy USD, as this currency is higher in the default currency order. They would then need to exchange the money to EUR or keep in USD but pay the cross currency conversion fees.
All prepaid cards incur a reload fee of between 1 – 1.1% of the reload amount plus conversion charges, except the OzForex Travel Card. This is the only card that has free reloads. This can work for you in a number of ways. You don’t have to commit to a big spend prior to your trip, you can reload as you spend or as you get paid, without having to pay extra fees each time.
Like foreign cash and travellers cheques, another pitfall of a prepaid card is when you come back home with funds still on the card. You’ll need to convert them back into Aussie dollars which means, yes, you’ll lose out on the exchange rate again. Some cards like OzForex and Cash Passport will also charge you a closure fee of $10 and the ANZ Travel Card has a $3 monthly inactivity fee.
Head to head fee comparison
|ANZ Travel Card||CBA Travel Card||Cash Passport||OzForex
|NAB Traveller Card|
|Purchase Fee||$11||$15||$5||$15||1% of initial load|
|Cross currency conversion||3%||2%||8.45%
|Close fee / inactivity||$3 (inactivity)||$0||$10||$10||$0|
|#1 Default currency||$AUD||$USD||$AUD||$AUD||$AUD|
Con or not?
Prepaid travel cards can be handy if you want to lock in your exchange rate before you travel so that you know how much you’re spending or if you’re really that concerned about credit card fraud.
Yes, prepaid travel cards are more convenient than carrying around foreign cash or travellers cheques but globetrotting must haves, we’re not convinced. A good travel credit card or debit card that has low overseas ATM fees and foreign exchange commissions should serve you just as well on your overseas jaunt.