New research has revealed that Brits collectively poured away £650million on foreign currency usage fees last year. Prepaid cards are often cheaper than traveller’s cheques – so could they be the new plastic power as we plan our holidays abroad?” Thousands of British holidaymakers have jetted off for an Easter break, and many will pour money down the drain on unnecessary foreign usage fees when they use their credit and debit cards abroad.
Compare pre-paid credit cardsThe research from Nationwide revealed that UK holidaymakers wasted more than £650million on foreign currency usage fees last year. Most banks and building societies levy a ‘loading fee’ every time you use your card abroad. The fee is typically set at around 2.75% - with up to 3% charged on cash withdrawals and purchases made outside the UK.
With both credit and debit card providers implementing a series of fees, as outlined in the article ‘Beware the hidden costs of overseas spending’, there is strong support for prepaid cards as an alternative payment method.
What are prepaid cards and how do they work?
You’re probably familiar with the concept of prepaid cards already – they work in the same way as a prepaid gift card or prepaid phone card. You simply pay money on to a card and this can be used at retailers or online merchants.
Most prepaid providers allow you to load the card using cash, a bank transfer or a credit card. You can also place money on them in convenience stores wherever you see a Payzone or Paypoint sign and over the internet.
The key advantage of prepaid cards is that there is no risk of building up debts. You can only use the money that’s on the card and as a consequence there are no interest charges, no debts to pay and no risk of sinking into an overdraft.
What should you be wary of?
Unfortunately prepaid cards do carry fees of their own, these include:
- Application fees – The initial charge for obtaining the card.
- ATM withdrawal fees – One of the key ideas of the prepaid card is that you don’t need to withdraw cash as it’s already loaded on to your card. However, if a withdrawal is necessary you will usually be charged.
- Top-up fees – Some providers will charge you for the amount of money you put on to the card. This could be a set fee per top-up, or a percentage of the amount you load on to the card.
- Monthly/annual fees – For the length of time you hold the card.
Other fees to watch out for include a charge for every replacement card you order and currency conversion fees for overseas use.
Compare pre-paid credit cards
