Business & Finance Tips

How do travel money cards work?

These cards are fairly recent additions to the cards that are available out there, and they give you the ability to place a certain amount of a specific currency on the card at a predetermined exchange rate, so that you have ready access to funds when you travel.

You can apply for these cards on the providers’ websites online, and the transfer of funds to the card can be made on the phone, the internet, or through SMS services, in some instances. At this time, only the pound, euro, and U.S. dollar can be uploaded onto currency cards.

How are travel money cards better than traditional credit cards?

One major benefit is that you will receive an exchange rate that is much more favorable than if you went to High Street and use the services of the bureaux de change. Another advantage is that the exchange rate of the uploaded funds is fixed, so there will be no surprises after you use it. Traditional credit cards and debit cards typically use the exchange rate that applies at the moment of the transaction, so you never know what you have spent until you see your bill.

Is that all there is to it?

Not at all. When you use a traditional credit card or debit card to make a purchase abroad, you are typically charged around 2.75% of the transaction as a fee for the foreign currency exchange.

These foreign currency exchange fees also apply in shops and eating establishments; however, a travel money card does not have these associated charges. The rates charged for obtaining cash with a credit or debit card can be very high, but since you have prepaid the amount on your currency card, it is not a loan, and there are no fees for the service.

Wonderful. Are there disadvantages to having a currency card?

Since you are uploading cash onto the card before your trip, your vacation is paid for up front, not with credit, so you must save for your trip. But, that may not be a disadvantage in the current economy. Currency card do have fees for withdrawing cash from ATMs, but the associated fees are much less that those incurred with credit or debit cards.

One example of this is that, when this article was written, NatWest and RBS both had a withdrawal fee of two percent, which amounts to about EUR6 each time you withdraw the sum of EUR300. Currency exchange cards, however, have a flat fee that amounts to as little as EUR1.50 no matter how much your ATM withdrawal is.

The major disadvantage of a travel money card is that you will be charged as much as 2.75% if you use the card for a currency that wasn’t assigned to it when it was issued. For instance, if you paid for something in U.S. dollars on a card issued in euros, then you would have to pay this foreign currency exchange fee. There are cards, however, that don’t carry an FX fee.

What about credit cards that can be used without FX fees?

Traditional credit cards like Post Office, Nationwide Gold, and Abbey Zero fit into this category. The first two cards, though, have 2.5% withdrawal fees for cash with a minimum charge of