Prepaid Travel Money Versus Credit Or Debit cards: Which One is Better

You have probably heard of them, prepaid travel money credit cards but I never knew exactly what they were until I was set to travel myself. Many banking institutions highly suggested I get one, whilst friends told me to just use my credit or debit card that I already have. So I thought I would do some serious research to work out what alternative is best! If you are currently baffled by the same question, then hopefully this article will answer all of your questions.

Why prepaid travel money cards?

Prepaid travel money cards are very similar to debit cards because you do not borrow money from the bank; instead you use the money you already have. However, before getting a prepaid travel money card, you have to put enough money on the card to last you the entire trip and obtaining these cards usually will incur a fee of around $10 to $15. You can reload if necessary during your trip but this incurs a surcharge, usually around 1.1%, which is not really a lot when looking at the scheme of things. To transfer an additional $500, it will incur a small fee of $5.50!

The main benefit of having a prepaid travel money card is that your cash will not be susceptible to drops in the value of the Australian Dollar but this can also be a negative if the Australian dollar boosts in value. This is because prepaid travel money cards have locked-in exchange rates, so you know exactly how much you have to spend during your overseas trip.

Another benefit is that when withdrawing money using a prepaid travel money card at a foreign ATM, it will usually cost between $2 to $4 each time. This fee is less expensive than the fee incurred when using your existing Australian debit or credit card at a foreign ATM, which is usually a percentage surcharge plus a flat fee. To illustrate, withdrawing $50 from a foreign ATM with your prepaid travel money could cost you $4. Alternatively, using your existing credit or debit card to withdraw the same amount could cost you $6.50, including a 3.0 per cent surcharge and $5 flat fee. To avoid too many ATM fees, it is advised that you withdraw more cash than required but keep in mind that with large sums of money at your disposal, always ensure money is placed in a safe location.

Another major benefit with a prepaid travel money card is if you are ever in an awful situation when your card is misplaced, stolen or susceptible to fraud, only the cash on your card will be vulnerable. This provides you with a level of control and peace of mind over your money, especially when overseas!

Now it can’t be all rosy and positive, a downfall with prepaid travel money cards is that if you transfer Australian dollars for British Pounds and then use your prepaid travel money card in Singapore, you will get charged a conversion fee. We have to keep in mind however that this fee is very similar to the fee charged by most credit card providers when making purchases overseas. A tip to avoid this fee is that prepaid travel money cards allow you to have multiple currencies stored on the one card, which will save you on conversion fees, especially if you are intending to travel to multiple destinations.

Another common downfall with prepaid travel money cards is that foreign retailers sometimes do not accept them because they often do not have a name or signature on the card, which can cause grief and embarrassment. This would be the main inconvenient aspect of a prepaid travel money card but to avoid this, withdraw more cash than you need because cash is accepted everywhere.

To summarise the pros and cons of using a prepaid travel money card:

Pros Cons
  • Money will be protected from negative changes in the Australian dollar
  • Withdrawing money out of a foreign ATM with your travel money card incurs a smaller fee than using your existing credit or debit card
  • Only cash on your prepaid travel card will be susceptible to fraud, protecting the rest of the money in your bank account
  • Can store more than one currency on your prepaid travel money card to save on conversion fees
  • Incurs a fee of around $10 to $15
  • Reloading your travel money credit card incurs a surcharge
  • Charged conversion fee when making purchases overseas with the wrong currency (usually comparable to credit and debit card fees)
  • Foreigners can refuse to accept travel money credit cards

Why use your existing credit or debit cards?

To begin, this method is the most simple because you do not have to do anything and these cards are widely accepted globally. However, just like prepaid travel money cards, you will incur fees when you make purchases internationally, so to prevent these fees it is suggested that you withdraw lump sums of cash from an ATM. Before going crazy with the ATM withdrawals, we have to remember that when you withdraw money at a foreign ATM with your existing credit or debit card, you will get charged a percentage surcharge plus a flat fee, making it more costly than using prepaid travel money cards. So again, always withdraw less frequently by getting out more money than is required.

To summarise the pros and cons of using an existing credit or debit card:

Pros Cons
  • Very simple method because you do not have to do anything
  • Widely accepted
  • Will incur conversion rate fees when making purchases internationally
  • Will be charged foreign ATM withdrawal fees (usually more than travel money credit cards)

Final tips:

On a final note, remember to withdraw more than you require and avoid those hefty ATM fees whilst travelling. When making a decision between both alternatives, remember that there are benefits and disadvantages for both so do your research and analyse your situation to know what will work best for you.

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