For years people have been told to use debit and credit cards while traveling abroad as the exchange rates are typically better than you would get with travelers checks or cash.
At one time this was true, and although the exchange rates may still be favorable, banks began getting the clever idea to levy fee upon fee for those wishing to take advantage of this convenience. I suppose they need to get bailed out from somewhere, but don’t let it be your problem.
Enter the Pre-Paid Currency Card
Now, one of the newest items on the market of handy items for travelers is the prepaid currency card, and it is used just like the debit card you probably have in your wallet, but is pre-loaded with foreign currency and won’t incur as many fees.
It works just like a typical prepaid card. You load it with money and off you go, only this time you get to load it with money you can spend overseas. So now when you see that leather bag in a Paris shop window, and cannot possibly live without it, you will feel secure in the knowledge that if there is no money left on the card you can’t be overwhelmed by the heat of the moment.
In a word, it allows travelers to set personal spending limits without having the nasty surprise of a page or two’s worth of charges or usage and over-the-limit fees tacked on their banking statement. Everyone knows the fear of coming home from a wonderful trip abroad and finding the dreaded credit card or bank statement in the mail. It can turn your dream holiday quite quickly into your financial nightmare.
Advantages & Disadvantages of Pre-paid Currency Cards
There are many advantages to traveling with a prepaid spending card, some of which combine the ease of using a debit-type card and the security of knowing you won’t be able to spend more than you had planned for. However, there are also disadvantages.
Currency Card are not fee-free. They have to make their money somehow, but the fees are not anywhere near as steep as most credit card companies. However, one should always compare different companies before buying, as some are attempting to place levies on items such as top ups, ATM withdrawals, and even foreign currency exchange itself. Steer clear of those at all costs; however, if you belong to the segment of the population that doesn’t already have a debit and or credit card and cannot qualify for one they are still an option for you over traveler’s checks.
Where You’ll Find Currency Cards
In Europe there are more than a dozen providers of prepaid currency cards, but in the United States it is still relatively unknown. The preeminent dealer in the U.S. is Travelex; a name well associated with foreign exchange.
Currency cards have not been around very long, and are just beginning to achieve recognition in Europe. The cards are gaining ground with travelers going between Britain and the European continent and even those coming to the U.S, but have a long way to go to catch the eye of American travelers.
They can be bought and topped-up online in many cases, and as they grow in usage and acceptance, should have the ability to top-up in places like convenience stores. For the meantime though, unless they become more well known in the U.S. they may not gain traction amongst a credit happy populace.
Who Should Be Using Currency Cards
The prepaid currency card is especially suitable for young people traveling alone as it adds a sense of comfort for parents knowing that their child will never be caught in a foreign country without funds. No more frantic calls in the night from wayward children stranded abroad without money. Young students often do not have credit cards, and although they could use their ATM card, more and more banks are joining the fray of charging exorbitant rates on their usage in foreign countries. Parents can rest assured that funds can be added from anywhere by the click of a button.
The cards are also good for companies sending personnel overseas that may not have a company or even personal credit cards at their disposal. As the global financial crisis affects more and more people, credit is no longer as easy to come by for many so this provides a good alternative to the traditional corporate cash advance.
Increasingly, companies are looking at ways to not only save money, but to find alternatives to expensive and cumbersome expense reporting practices currently in place. The prepaid card allows companies to send their staff off on business trips with exactly the amount of currency they will need or is allotted. While this is beneficial to the company it is also beneficial to the employee. There is no chance of going over the spending limit and no excess, non-reimbursable finance charges for the employee to complain about.
Advanced Usage of Currency Cards
One of the best benefits to using a prepaid card is the opportunity to lock in and hedge exchange rates. If the card is loaded while your home currency is at a favorable rate, and not used until it drops against the currency of the country you are going to, then you will end up with extra money in your pocket. While this may not make that much difference to the casual user, it could be a tremendous benefit to business users.
The cards can be used anywhere Visa and MasterCard are accepted, and in Europe and the United States that is just about everywhere, including every fast food joint in every little hamlet. The cardinal rule with credit cards is never to withdraw money on them from an ATM, and the same is somewhat true of the prepaid card as well.
It is far better to use the card directly at an establishment as it is just like cash and you will not incur extra fees in most cases. Speaking of fees, one of the downsides is that some companies will charge sign up and monthly sums for having the card in your pocket. If you choose one of the cards that do this, you may be defeating the purpose of having a prepaid card altogether. Again, not all do, so shopping around is essential.
Available Currency
Although the most common currencies available on the cards are the British pound, the Euro, and the U.S. dollar, some companies do offer a more global card. The guess is that as it grows in acceptance, more currencies will become available on all cards. Unless they do, again this will be a downside to having them in your travel wallet.
Whether or not the prepaid cards ever gain any traction with the U.S. tourist market remains to be seen, but they should be popular in the business world. The best applications are most definitely for businesses and young travelers, which may or may not keep the trend going.