People constantly on the go, must have at their disposal a payment option that lets them avoid the pitfalls of foreign exchange. Converting one currency to another while moving between countries is common. However, if it could be avoided, that would be a good thing; to stay clear of the hefty foreign exchange fees that seem to always crop up. A prepaid travel card is one of the cards curated to offer a cheaper and safer way of spending while abroad.
Also known as currency cards, prepaid cards allow travelers to load money into their cards to spend in another country. Zero foreign exchange fees on spending or withdrawals are some of the perks that make these cards stand out as compared to other cards.
Similarly, prepaid cards come with competitive rates that allow people to save money while using their cash in foreign lands. The card also averts the risk of plunging into debts on overspending while holidaying, given that they do not come with any borrowing facility.
There are various types of currency cards.
Single currency cards
Single currency prepaid is pegged on a single type of currency: euros, U.S dollars, pound, etc. When one loads their amount into the card, they are converted into the currency on offer, conversely locking in the exchange rate on offer at the time.
While they allow one to lock in a the competitive rate at a given time, they also increase the risk of one losing on a given exchange rate moving in favor upon conversion.
Multiple currency prepaid cards are designed to allow people load their amount into different cards. Likewise, they are ideal for people traveling in multiple countries. In this case, one can divide the amount loaded into the account to pounds, dollars, and euros. Likewise, one gets to use the right currency depending on where one is, instead of being limited to a given currency.
Sterling Prepaid Cards
These are a special type of prepaid currency cards that accords people an opportunity to preload their cards with Sterling Pounds, which can be spent in a number of different currencies. When it comes to spending or withdrawals, the pounds are often c converted into the currency one needs at the prevailing exchange rate.
Choosing a currency Card
When it comes to choosing prepaid travel card, it is important to consider the exchange rate mode in use. While some leverage the interbank rate, others are known to use the MasterCard or Visa exchange rate.
Regardless of the exchange rate used, it is the percentage applied on top to these exchange rates that people should focus on. Most providers are known to apply 1% it 2.5% on the exchange rate, which can significantly increase the foreign exchange fees.
Likewise, the lower the percentage, the better, as it reduces the cost of conversation. Similarly, it is important to compare the exchange rate used as well as the card fees before settling on the prepaid travel card.
Prepaid travel cards Fees to Watch Out For
Prepaid travel cards, just like any other financial instrument, come with a variety of fees and charges.
Application fees: Card providers are known to apply a one-off charge when one opens an account with them. The fees can range between $5 and $10. However, some are known to offset the application fee on people depositing a given amount of money.
Monthly Fees: This is the amount of fee charged on holding the card every month. The fee, which can be as high as $5 a month, can significantly eat into one’s preloaded amount.
To Up Fees: Some providers are known to charge a fee on people who use their credit cards to load their prepaid travel card. The costs can increase significantly given that a credit card provider will also charge a fee and interest.
Cross border fees: This is a fee that comes into play on using their currency card on a transaction that is not in the cards currency. This is a problem when dealing with single currency prepaid cards.
Replacement Fees: A renewal fee often comes into play when renewing currency cards, whether it has expired or it gets lost. The renewal fee is a must if one is to continue using the card.
Why Prepaid travel cards
Prepaid travel card is crucial for people constantly on the go as it offers a preferred means of payment that is widely accepted. Likewise, such cards help travelers avoid the risk of overspending as they don’t come with a borrowing facility. Instead, one has to spend money preloaded.
Similarly, prepaid travel cards are cheaper for overseas spending and withdrawals as they offer some of the most competitive exchange rates. They are also safe as they use the same security features as credit and debit cards.
Prepaid travel cards drawbacks
One of the biggest downsides of prepaid travel cards is that they have no way to borrow money which could be a problem in an emergency. Similarly, they come with a variety of fees which can eat into one’s preloaded amount.