Don’t want to carry large amounts of cash on holiday? Want to avoid credit card charges for spending abroad? Want to give your teenage children a secure way to spend their allowance on a trip with their friends? A prepaid card could be the answer.
Prepaid cards are used like a credit or debit card. You can use them to pay in shops and restaurants as well as online. However, prepaid cards aren’t a way to borrow money from the bank – you can only spend the money you have already loaded onto the card. You can even trust your teenagers with them on their first trip abroad with friends.
Prepaid cards also offer you added security. If you lose your card abroad or your wallet is stolen, you can recover the funds for a small fee. Much easier than the turmoil of losing a pocket of cash on the beach and much less hassle for all.
However, prepaid cards aren’t the answer for everyone. Firstly, for certain cards you can only use prepaid cards for spending US dollars or euros. So if you’re planning a trip to an unusual destination, you’ll have to shop around for the right prepaid card.
And don’t forget to look out for card charges. Some prepaid card suppliers will charge you a fee for using your card, making it less economical than using your existing debit or credit card.
The exchange rate can also be a pro or a con when using these cards, depending on when you add funds to the card. You will usually get the rate of exchange on the date you transfer your money onto the card. If the rate changes between this date and your holiday, you will either benefit from a better deal or lose out if the pound weakens.
Although spending on some prepaid cards comes without a fee, you will be hit with a charge if you withdraw cash from an ATM. This charge is often less than high street credit or debit cards but still means that paying on your prepaid card will be a much cheaper option.
There are a few cards on the market that don’t charge fees for using abroad or for adding funds to the account. Shopping around could lead you to a good deal on a prepaid card which could provide a hassle-free way to spend money while on holiday abroad.
Don’t forget – your money may not be well protected in your prepaid card account. If the issuer goes bankrupt, you may lose your money. Always use these cards for pocket cash, not for saving large sums.