What Are Prepaid Travel Cards?

What are prepaid travel cards?

By Matt Fernell, Editor-in-Chief at Finance.co.uk. Published 2nd November 2023.

Matt Fernell

A prepaid travel card can be pre-loaded with money before you set off on a trip abroad and is a smart alternative way to spend when overseas.

They’re a great way to avoid taking lots of cash with you - which can be easily stolen or lost. Plus, you can only spend the amount that you’ve pre-loaded onto it, helping you stick to your budget.

One of the main reasons travellers get prepaid travel cards is because an exchange rate is locked in. This means that every time you make a purchase or withdraw cash, you’ll be using that same rate.

How do prepaid travel cards work?

To get a prepaid travel card in the UK, you will need either a valid passport, UK driving licence, or an EEA card. When you first purchase a prepaid travel card, you need to decide how much cash you want to pre-load onto it.

When ordering a card online, it will be posted directly to your door and should usually arrive within 3 days.

To manage your card, most providers will have an app that will allow you to track your spending and potentially add more money to it.

What exchange rate do you get?

When loading a card, you can either load it with the currency used in your destination - locking in a set exchange rate in the process - or load it with pounds and use the exchange rate of the time of your spending.

The exchange rate that you receive will depend on your provider, making it wise to shop around before committing to one.

The best prepaid travel card providers will use the interbank rate (often considered the best exchange rate). Other providers will use the rates that have been set by either Mastercard or Visa, while certain providers will use these rates plus an additional fee added - often 1-2%.

With these cards, you’ll be able to pay directly for a variety of purchases when abroad, such as meals or activities, and withdraw cash from ATMs - although there may be additional fees for doing so.

Where can you use prepaid travel cards?

You can use a prepaid travel card for most of your holiday spending, including:

  • Gifts and souvenirs in shops

  • Food from supermarkets and restaurants

  • Trips and excursions

However, despite being designed to work at any place that accepts Mastercard and Visa, some retailers, hotels and restaurants don’t accept these types of cards.

The most significant are hire car companies, so you need to have a backup debit or credit card to pay for this. Most hire car companies only accept major credit cards and will ask to keep your credit card details on file as a deposit.

Some petrol stations and motorway tolls won't accept these cards either, so it’s best to have an alternative method of payment for these expenses.

What charges do travel cards come with?

A prepaid currency card will have more charges and fees than most credit cards, so it’s important to be aware of these before getting one.

Some prepaid travel cards will exclude the charges below, but you should expect the following fees on many available on the market:

Application and replacement fees

Some providers charge an application fee, or card fee, for opening the account, as well as a delivery fee if you’re ordering online.

These cards expire after a certain time, with the common timeframe being 12 months. You are sometimes charged a replacement fee to use it again after it has expired. 

Some cards will also charge a monthly fee for simply having them. This charge can make travel cards more expensive, but cards with monthly fees often don’t have any transaction charges. 

Transaction fees

Some prepaid travel cards charge a small transaction fee when using it for retail purchases or withdrawing from an ATM.

These fees can either be charged as a percentage of each transaction, like 0.5% or 1%, or a flat fee per transaction, usually no more than £1 or £2.

If you’re making a lot of small value purchases, the percentage transaction fee is a better option. If you plan on making less frequent, higher-value purchases, opt for the flat fee.

Inactivity charge

Providers want you to regularly use your travel cards. This means they may penalise you if the card isn't used for a while. This charge is usually around £2 a month if you haven’t used the card in 12 months.

Top-up charges

If you top-up your prepaid travel card using a credit card, you can be charged a whole host of avoidable fees. You might be charged withdrawal fees, interest and potentially more.

This is because buying currency on a prepaid travel card is considered a cash withdrawal. That’s why it’s best to use a debit card if you’re topping up currency because debit cards aren’t subject to these charges.

Some providers will also have their own terms for currency exchanges. For example, some providers will only charge a fee if you’re making an exchange during the weekend.

Other providers might charge an additional fee if you exchange more than a certain value over a 30-day period.

You can also expect a small fee every time you make an exchange. This fee will depend on the currency you’re loading onto the card. For example, popular currencies such as the US dollar will cost less than currencies like Lira.

Is a travel money card better than cash?

Prepaid travel cards are safer than carrying cash with you because if you lose it, you can cancel the card, keeping your money safe. 

Prepaid travel cards can also be more budget-friendly and easier for tracking your spending than cash, especially if your provider offers an app where you can check each transaction.

The main downside to using a prepaid card over cash is that it isn’t accepted everywhere. It’s always a good idea to take a small amount of cash with you when you travel to use where cards aren’t accepted or to leave tips.

How much money can you put on a prepaid card?

The maximum amount you can put onto your travel card will depend on your provider, so it’s worth shopping around to find a limit that suits you.

Many providers will have a maximum limit, with the average being £10,000. This is the maximum amount of money you can have at one time on your prepaid travel card.

There is also a maximum annual balance limit, which is the amount your card has had on it over the course of a year.

For example, if you’ve had two trips in a year and loaded £3,000 for the first trip and then £4,200 for the second one, your annual balance would be £7,200. On average, the maximum annual balance limit for a prepaid travel card is £30,000.

When loading or topping up your card, there’s also a maximum and minimum amount you can put on it each time. This usually ranges from £50-£5,000 but can alter depending on your prepaid travel card provider.

Travel money card pros and cons

Here’s a breakdown of the main advantages and disadvantages of using prepaid travel cards for your spending abroad.

Pros of prepaid travel cards

  • Safer than taking cash

  • Help you stick to a travel money budget

  • No foreign exchange fees 

  • Hold multiple currencies on one card

Cons of prepaid travel cards

  • Not accepted everywhere, e.g. car hire companies

  • Withdrawal limits - you could face charges if you withdraw too much

  • No Section 75 protection, unlike credit cards

  • Can come with a range of fees

Is it worth getting a prepaid travel card?

If you want a safe way to spend and to lock in an exchange rate before you travel then prepaid travel cards are worth it, even more so if you’re frequently travelling within a year.

Prepaid travel cards are also a good option if you want to keep to a set budget. There is no danger of overspending and getting into debt if you use a travel card, but if you do use all of your balance, you will need to find another way to spend.

Alternatives like travel credit cards are an option. They also have near-perfect exchange rates, and you get the added bonus of Section 75 protection on purchases ranging between £100-£30,000.

The information provided does not constitute financial advice, it’s always important to do your own research to ensure a financial product is right for your circumstances. If you’re unsure you should contact an independent financial advisor.