Prepaid travel cards: hot ticket or just another travel scam?
With travellers cheques nearing extinction, carrying cash is all too unsafe and credit card fees a real issue for travellers, banks have been pushing their latest 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?
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.
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 cost||Purchase Fee||Total Cost|
- Cards loaded with USD$2,500 and EU2,500
- Rates and fees correct as at 14/06/2012
Exchange rates varied between providers and in our scenario there was a difference of almost $50 between the best option (OzForex) and the worst (Cash Passport). But when we compared all currencies available – you can have up to 7 currencies on most prepaid multicurrency cards – we didnâ€™t find a standout card provider that had better exchange rates across the board so shop around depending on where you are going!
As you can see from our scenario, the more cash youâ€™re planning on taking the more important it is to go with a card that has a set purchase fee.
Accessing Cash at ATMS
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 donâ€™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.
Cross-currency conversions: These fees will be charged if you purchase an item in a currency you donâ€™t have loaded on the card. These vary greatly from card to card and can be up to 8.45% (Cash Passport) of the price of your unexpected little splurge.
Reloading: If you find yourself low on funds after a big night out on the town, most cards will let you use BPAY or internet banking to reload more cash. Itâ€™s as straightforward as paying a bill at home, but it can take a day or two to process.
The return home: Like foreign cash and travellers cheques, another pitfall of a prepaid card is when you come back home with funds still on the card. Â Youâ€™ll need to convert them back into Aussie dollars which means, yes, youâ€™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.
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 youâ€™re spending or if youâ€™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 next overseas jaunt.
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