Prepaid travel cards: beat up or bargain?

Prepaid travel cards: beat up or bargain?

If you’re planning an overseas trip you’ve probably noticed that everyone from travel agents, airlines, banks and even the post office are touting a new must-have travel accessory, the prepaid travel card. But do these cards offer any real value for travellers or are they just another way for banks and travel organisations to cash in on the lucrative travel money market?

There are now over 10 prepaid travel cards available to choose from and with the recent news that both Qantas and Virgin will soon be combining a prepaid travel money feature with their frequent flyer cards we felt it was a good time to review the key travel cards to see how they compare with one another on features and price.

First, let’s cover off some of the basics.

What is a prepaid travel card?

A good way to think of a prepaid travel card is as an updated version of the travellers cheque. Just as you would go to a bank to purchase travellers cheques, a prepaid card enables you to purchase foreign currency at a set rate before going overseas. Instead of getting travellers cheques you get issued with a Prepaid Visa, Prepaid MasterCard or Prepaid American Express, which allows you to make purchases or withdraw cash at ATMs while you are overseas.

Prepaid travel 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 if you are travelling to more than one country you only have to carry one card.

Prepaid cards will be connected to either the American Express, Visa or Mastercard networks so you will be able to use the card wherever these cards are accepted.

Types of fees

  • Purchase fee. There is generally a set fee to purchase the prepaid card and fees 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 but some cards do not charge for this.

  • 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.

How travel card exchange rates compare

To show an example of how prepaid travel cards can differ in price we have used a typical travel scenario of a trip to Europe with a stopover in Hong Kong. Our traveller purchases a multicurrency card, and preloads the card with Hong Kong Dollars ($10,000) and Euro (3,000). Our task was simple, which card offers the best exchange rate value?

Here is how much Australian dollars we would have paid for each prepaid card based on our initial load amount at the time of our analysis (05/06/13).

Provider

AUD exchange for $10K HKD

AUD exchange for 3500 Euro

Purchase Fee

Total Cost AUD

OzForex:

$1,379.23

$4,896.47

$15

$6,290.71

NAB:

$1,403.61

$5,016.48

$0 (until June 22 then 1% of load amount)

$6,420.09

ANZ:

$1,402.13

$5,007.15

$11

$6,420.

Amex

$1,398.76

$5,020.80

$15

$6,434.56

Cash Passport:

$1,422.01

$5,020.80

$5

$6,447.81

CommBank:

$1,414.77

$5,040.32

$15

$6,470.09

Aust Post Load&Go:

not available

$4,982.21

0

As you can see exchange rates varied between providers and in our scenario there was a massive $179.38 difference between the cheapest (OzForex) and most expensive (CBA) cards.  It’s also important to note that while the NAB Traveller Card currently has a $0 purchase fee, it would have been $64.20 if it was calculated as a percentage of the load amount. This would have made it the most expensive choice, so the more money you are planning on taking away with you the more important it is to go with a set purchase fee.

Also the Australia Post Load & Go Travel card doesn’t take Hong Kong Dollars so if you were to use this card in Hong Kong you would get charged a 3% cross currency conversion fee on all your purchases which we wouldn’t recommended.

Another thing our analysis highlights is how different exchange rates can be between providers. Some travel cards have better rates for particular currencies. You might find the ANZ travel card is great for Thai Baht but the Commonwealth Bank card has a better rate for USD so it is important to shop around depending on where you are going.

On the road

In addition to the initial card costs and exchange rates, when comparing travel cards it is good to first think about how you’ll be using the card overseas. Because each card has different features you’ll want to choose a card that will give you the best value when you are travelling.

Some of the key things to look out for:

  • ATMs fees. 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. In our traveller’s situation they could be up for as much as $20 HKD (ANZ card) and 2.20 Euro (CBA Travel Card) for each ATM transaction. To limit ATM fees while overseas it is best to make larger withdrawals so that you need to use the ATM less often.

  • Cross currency conversion fees. These range from 0% (CBA travel card) to a whopping 8.45% for the Cash Passport and are only charged when you purchase something in a currency that is not loaded on your card. Let’s use our scenario to explain how this works as it is one of the biggest ways that travellers get caught out with these cards. Our traveller leaves Hong Kong and stops over at Heathrow on their way to Europe. They splurge 150 pounds at the duty free. Now, because our traveller doesn’t have pounds preloaded on their prepaid card, the pounds will first be converted (at the Mastercard or Visa exchange rate) into an available currency (HKD or Euro), and the cross conversion fee will be added on top of the transaction. The best advice is not to use the card in any currency other than what’s loaded on the card.

  • Reloads. One of the great things about prepaid travel cards is that you can reload the card while you are away if you find that shopping a bit too good. Most cards charge a fee based on 1-1.1% percent of the load amount (OzForex don’t charge this fee). You can use BPAY or internet banking to reload more cash but it can take up to three business days to process so just beware you won’t get instant access to your funds. Also BPAY may use a different exchange rate compared with your bank.

  • Default currency. With multicurrency reloads you also need to be really diligent 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,  with the Commonwealth Bank’s Travel Card’s Euro is higher in the default currency order. So if our traveller had this travel card, and they want to buy an extra AUD2,000 worth of HKD while travelling. If they hadn’t changed their default currency to HKD before reload, they would automatically buy Euro, as this currency is higher in the default currency order. They would then need to exchange the money to HKD or keep it in EUR but then be at the whim of whatever the exchange rate is on the day of the transaction.

  • Excess funds and fees. Like foreign cash and travellers cheques one of the pitfalls of a prepaid card is coming back home with foreign funds still on the card. If you travel frequently you might want to keep the funds on the card until your next trip but if that isn’t you, 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 some charge a monthly inactivity fee but you can get around this by doing a balance enquiry at an ATM.

Head to head fee comparison

ANZ Travel Card

CBA Travel Card

Australia Post Load & Go Travel

Cash Passport

OzForex

Travel Card

NAB Traveller Card

AMEX Global

Travel Card

Purchase Fee

$11

$15

$0

$5

$15

1% of initial load

$15

ATM fee

Yes

Yes

Yes

No

Yes

No

Yes

Transaction fee for purchases

No

No

$0.09 per transaction, max $0.99 per 30 days

no

no

no

no

Reload fee

Yes

Yes

No

Yes

No

Yes

Yes

Cross currency conversion

3%

0%

3%

8.45%

5.45% (AUD)

3%

4%

3%

Close fee / inactivity

$3 monthly inactivity

$0 close fee

$0 monthly inactivity

$0 close fee

$0 monthly inactivity

$15 close fee

$4 monthly inactivity

$10 close fee

$0 monthly inactivity

$10 close fee

$4 monthly inactivity

$0 close fee

$0 monthly inactivity

$0 close fee

#1 Default currency

$AUD

$USD

AUD

$AUD