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Watch out for fees when using prepaid cards abroad

Watch out for fees when using prepaid cards abroad

Category: Credit cards

Updated: 23/08/2017
First Published: 23/08/2017

Prepaid cards can be a great way to keep your budget in check, particularly when you're on holiday – you can't end up in debt, as you can only ever spend what's been pre-loaded onto the card, so there's no possibility of overdoing it on the souvenirs. They're known as being one of the most cost-effective ways to spend abroad, too, and while that remains the case, it's important to watch out for unexpected fees.

  • Load fees and delivery fees. Some prepaid cards charge you for loading money onto them in the first place, so make sure to factor this into your affordability calculations. In a similar vein, some will charge for issuing the card to you or for having it delivered to your home, so again, it's worth checking the small print before you take the plunge.

  • Exchange rates and fees. You have two options when it comes to prepaid cards – opt for one in sterling, or load it with currency for your chosen destination. Both will require exchange rates to be factored in, but for the former, the exchange rate will be calculated at the time you make each transaction, while the latter means the rate will be set in stone so you know exactly how much you'll have to spend. Some sterling-based cards will also charge additional exchange fees when you use them abroad.

  • Conversion fees. This is something that you need to be aware of when using any card abroad – if you opt to pay for things in sterling you'll be charged a conversion fee as they'll have to "convert" the transaction, which will add to the overall cost. So, when asked how you'd prefer to pay, always go for the local currency!

  • ATM fees. If you think you'll be using the card to withdraw cash at your chosen destination, try to look for one that doesn't have an ATM fee. Such fees are fairly commonplace in this sector, and some will even charge a percentage-based fee for transactions at the till as well, so make sure to do your research.

  • Inactivity fees. Some prepaid cards will charge you a monthly or annual fee if you haven't used it for a certain length of time, typically after a year, so if you're not a frequent traveller, you'll probably want to spend the balance before you get back home.

The different charges you could come across make it absolutely vital to research the market thoroughly, and make sure to scour the small print so you know exactly what you'll be dealing with (and paying for) when you're on holiday.

For example, the sterling-based Caxton card comes with a 2.49% foreign exchange fee, but it doesn't charge transactions, issue or ATM fees. Then there are the various ICE Travellers Cashcards, which will charge a £4.75 issue fee if less than £700 is loaded, but for foreign currencies you needn't worry about being charged for making foreign purchases or withdrawing cash.

It's all about finding the card for you, and fees aside, prepaid cards (and in particular, prepaid travel cards) can be a great way to help make your money go further on holiday. They'll certainly be cheaper than using a regular debit or credit card abroad, which can often charge extortionate fees for simply using them on foreign soil – unless you opt for a specific travel credit card, of course – so it's always worth comparing the options to see what's out there.

What next?

Check out the best prepaid cards and prepaid travel cards to see if you can find the perfect deal for your next trip.

Want to use a credit card instead? Make sure you find one that's been specifically designed for foreign use.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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