Prepaid travel cards pros and cons
When you pack the essentials for your next big trip, whether it’s a business meeting in Brussels, a food tour of Florence or a volunteer vacation in Venezuela, you may want to consider taking a prepaid travel card.
Prepaid travel cards offer an easy way to get cash in the local currency without the risk of using your own debit card, the cost of a credit card cash advance or the hassle of traveler’s checks. But watch out. That convenience comes with fees and limitations, such ATM withdrawal and purchase amount caps that could put a damper your vacation.
“A prepaid travel card is one tool in a diverse travel wallet,” says Julie Hall, public relations manager for AAA, which offers prepaid travel cards. “It’s one of most convenient ways to get money while traveling.”
How prepaid travel
Prepaid travel cards have gained in popularity in the United States only in the past five to 10 years, though they’ve been widely used in Europe for much longer, says Brad Fauss, President and CEO of the Network Branded Prepaid Card Association (NBPCA), a prepaid card industry association.
A prepaid travel card works in a similar way to a general purpose prepaid card, except that it typically offers special features and perks designed for travel, which can vary based on the issuing bank, Fauss says.
In general, to use a prepaid travel card, you purchase the card and simultaneously load the funds you want to spend on your trip, up to the maximum amount allowed on the card. For example, the Travelex Multi-Currency Cash Passport MasterCard allows a maximum balance of $8,500 while AAA’s Visa TravelMoney Card (not available in California, Hawaii or Texas) allows a balance of up to $9,999. Once you’ve arrived at your destination, you can use your card at ATMs to get cash or to make purchases.
A prepaid travel card is one tool in a diverse travel wallet.
If you have a prepaid travel card with a Visa or MasterCard logo, you’re protected by the zero liability policy from those card networks. Depending on the card issuer, you may be able to use a smartphone app or log onto a website to check the balance, review your purchases and look for charges you don’t recognize.
For example, the AAA Visa TravelMoney Card offers a mobile app that helps you track your card transactions on the go, Hall says. “If there’s a fraudulent purchase, you can be alerted to that pretty quickly.”
The pros and cons of prepaid travel cards
Think you’ll just take some cash, a credit card and your debit card with you on your next trip abroad? There are two big reasons you might want to take a prepaid travel card instead.
- Security. Prepaid cards are safer than using your own debit card. “I almost never travel with my personal debit card,” says Elizabeth Avery, founder of the travel site Solo Trekker 4 U, who has traveled to 66 countries. “It’s linked to your hometown bank, so somebody can steal your entire bank account.” Prepaid cards also are safer than carrying wads of cash, says Rupert Kaufmann, president of the site Dream Travel On Points. “Cash is high risk for theft,” he says.
- Travel-friendly features and perks. Travel-specific prepaid cards are designed with globe-trotters in mind. For example, some issuers offer MasterCard Travel Cards that are chip-and-PIN, says Jeff Feuerstein, North American senior vice president of prepaid for MasterCard. Because this technology is the norm in Europe and other parts of the world, having a chip-and-PIN card can make it easier to buy train tickets or other items at unattended kiosks. Also, prepaid travel cards may offer some of the perks usually associated with rewards credit cards. For example, the Visa TravelMoney card from Inova Credit Union offers purchase protection, which covers items bought with your card up to $500 for 90 days from the date of purchase for theft or damage due to accidents, fire and weather. The card also offers travel and emergency assistance, pre-trip planning help, emergency translation services and lost luggage reimbursement up to $250 per trip.
Prepaid travel cards also provide convenience when compared with traveler’s checks, which, yes, still exist. “Travelers checks are almost extinct these days, and it's hard to find places to cash them in some countries,” Kaufmann says.
One big con: fees
Travelers may balk at prepaid cards’ fees. “Check the fine print,” Kaufmann says. Travel cards can have “outrageous fees.”
- Foreign transaction fees. Like some credit cards, prepaid travel cards may
charge foreign transaction fees. The AAA Visa TravelMoney Card, for
example, hits users with a foreign transaction fee of 3 percent for purchases
made outside the United States, while the Travelex Multi-Currency Cash Passport
Card has a foreign transaction fee of 5.5 percent.
Today, it's far easier to find cards with credit cards with no foreign transaction fee.
- Other fees. Prepaid travel cards may also charge a card purchase fee, an ATM withdrawal fee, a higher foreign ATM withdrawal fee, an inactivity fee and a fee to get the remaining balance back by check.
To avoid high fees, Kaufmann shops around and uses prepaid cards not marketed specifically as travel cards. For example, he used the American Express Bluebird card, until AmEx in 2016 announced it would remove the ability to withdraw cash from ATMs abroad, he says. He’s now switching to Simple, which offers a Visa that charges a 1 percent foreign transaction fee. That's still a better deal than many travel-specific cards, Kaufmann says.
Prepaid travel card
Depending on the card you want and where you live, you might have to go to a local AAA office, bank branch or a Travelex location to get the card. MasterCard offers a prepaid travel card locator, as does Visa.
Before you make the trek, check out the details of the cards online. Here are five tips for shopping for and using a prepaid travel card:
- Check the fees. Some travel cards get you coming and going, so read the fine print before you buy. For example, the Inova Visa TravelMoney Card charges a $2 card purchase fee, a $5 international ATM withdrawal fee and a $10 account closure fee. And, in addition to foreign transaction fees, the Travelex card charges a $20 balance refund fee and, after the card hasn’t been used for a year, an inactivity fee of $3 a month. That bothers Kaufmann: “I don't want to pay fees when I'm at home and the card sits in the drawer,” he says.
- Verify that the card will work at your destination. Make sure you’ll be able to use the card where you’re going, Avery says. She once got a prepaid travel card at a drugstore for a volunteer trip to an orphanage in the Dominican Republic. After she opened the card, she found out it couldn’t be used abroad. “It was definitely for U.S. travel,” she says. Even a card that’s designed for international travel might not work in specific locations due to restrictions from U.S. trade sanctions. For example, both the Travelex Cash Passport card and AAA’s Visa TravelMoney won’t work in prohibited countries, which include Ecuador, Indonesia, Kenya, Turkey and Vietnam. After Avery discovered her card wouldn’t work abroad, she had to return to the store and go back and forth with the issuer to get her money back, she says: “All it cost me was time and frustration, but I ended up with no card to use on the trip.”
- Pick a card you can manage with ease. Look for a card that lets you check the balance and view purchases either online or via your smartphone, Kaufmann says. “If you’re in a foreign country and different time zone, calling your bank by phone is difficult and expensive,” he says. Also make sure that you can load your card quickly and easily, for example, by free bank transfer, he says. AAA allows reloading at the original purchase location, at various AAA locations, online and by phone. However, funds may not be available for 48 hours when loaded in the latter two ways. “If you use your card more than expected, you don't want to be stuck with an empty card,” Kaufmann says.
- Know the limits. Prepaid travel cards typically have limits that could throw a wrench into your travels if you don’t understand them ahead of time. For example, the Travelex Cash Passport has a $250 reload minimum and also limits you to loading a maximum of $10,000 in a week and $20,000 in a month. The card also has a $1,000 a day ATM withdrawal limit and a $5,000 purchase cap.
- Avoid holds at all costs. Prepaid travel cards function as debit cards, Fauss says. So avoid using a prepaid travel card to reserve a hotel room or a rental car, which can trigger a hold that could tie up hundreds of dollars of your cash for a week or longer. Use a credit card to reserve and, if you want to, use your prepaid card only to pay the final charges.
Despite the downsides, business and leisure travelers should consider prepaid travel cards, says Avery, who had great luck using one on a recent trip to Portugal. “For a traveler, it just makes so much sense,” she says.
- Merchants have a big incentive to lure you away from credit cards – As general market credit cards become costlier to accept, retailers are under pressure to lure cardholders away from premium rewards cards. That could mean discounts for using gift cards, store cards and other payment methods ...
- You can now rent a car with a debit card without all the hassle – If you prefer to use debit cards instead of credit when you travel, your next trip may be less stressful. Some travel companies have relaxed their restrictions on using debit cards to book rental cars ...
- Wearable payments are finally starting to take off in the U.S. – A growing number of U.S. brands and financial services companies are embracing payment-enabled wearables that you can tap to pay without fumbling for a physical phone or card ...