Saturday, September 28, 2024

£429m is sitting on prepaid travel cards – is it the best way to pay abroad? – Which? News

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If you’re recently returned from a trip abroad, you may want to check if you’ve got any leftover funds on your prepaid card. 

Travellers are returning from holiday with an average of £87 left on their travel card, according to Currensea. The travel debit card provider said this collectively adds up to £429m overall.

But with some providers charging ‘inactivity’ and redemption fees, it might be a headache to get your money back. 

Here, Which? explains what fees to watch out for and alternative ways to pay while abroad this summer.

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Do you have money left on your prepaid card?

One in seven travellers opt to use prepaid cards when abroad, according to Currensea. 

Multi currency prepaid travel cards, also known as ‘currency cards’, allow you to load money in pounds and spend in another currency fee-free. They usually also allow you to lock in competitive exchange rates, saving you money compared with using your everyday debit or credit card.

However, these types of deals can come with their own special variety of hidden fees, which can include an application fee and an inactivity fee. There may be a minimum top-up requirement, too. 

According to the survey, travellers return with an average of £87 remaining on their prepaid card, and over a quarter find themselves with £100 left when they get back from holiday. 

For parents with school-age children, the average amount remaining on the card was £109.

Prepaid card fees to watch out for

If you’ve returned to the UK with money left on your card, you should watch out for these fees. 

  • Redemption fees – some providers will charge you a fee to get any money you haven’t used back. 
  • Inactivity fees – if you don’t use your card you could also face a penalty. Some providers will charge around £2 a month if you haven’t spent on the card within 12 months, eating away at the balance left on your card. 
  • UK and foreign ATM withdrawal fees – some prepaid cards charge for using ATMs in the UK and abroad, usually £1.50 to £2 per withdrawal. This may hit you if you decide to withdraw your cash domestically after your holiday.

Here’s how some of the main prepaid card providers stack up for fees which could catch you out when you return to the UK. 

For information on the currencies you can load and exchange rates, visit our guide to the best prepaid cards 2024.

Information correct as of 30 May 2024.

 Most providers won’t charge a redemption fee if you’re redeeming in-store, so it’s worth doing this instead of contacting customer services – where you get stung by £10 in the case of TUI. 

If you’ve returned to the UK with some currency, but you know you’ll be travelling again soon, you might be able to avoid an inactivity fee by using your card. You don’t necessarily have to make a purchase, it could mean adding money to your card, checking the balance, ordering a replacement card or converting it into another currency. It’s worth checking the terms and conditions of your contract as any fees should be clearly explained.  

If you’re not going to return to the country which you have currency for, it might be worth converting it back to sterling and using your card in the UK, or withdrawing it at an ATM. Note though that both of these tasks may incur fees or charges, so you should check your agreement first. 

Other ways to pay abroad this summer

If you don’t fancy using a prepaid card, here are some alternatives. 

Travel debit cards

Many banks charge a range of fees for spending with your card abroad that you’ll want to avoid, but not all do. 

Which? Recommended Provider, Starling Bank, is popular with travellers because it lets you spend on your debit card abroad without racking up a huge bill. It charges no fee on purchases or cash withdrawals. 

Fellow Which? Recommended Provider First Direct scrapped fees on spending abroad last year and is now another top pick. 

Monzo is also a good option for holidays, but it charges 3% if you withdraw more than £250 a month in the UK or European Economic Area (EEA) countries or £200 in non-EEA countries.

Currensea, who commissioned the survey, could be an alternative for anyone who doesn’t have the time or doesn’t want to set up a fee-free bank account. 

It links to your existing account, providing a layer that will allow you to spend in all 180 currencies without charges. For personal accounts, there is a 0.5% markup on the exchange rate. ATM withdrawals are free under a limit of £500 a month. After this, a 1% fee will be applied.

Travel credit cards

Credit cards come in handy on holiday, particularly if your hotel or car hire firm asks to temporarily hold a specific amount of the available balance upon booking. 

You’ll have added protection with a credit card as you’re covered by Section 75, which means purchases of £100 or more have extra protection. You should be able to get your money back if something goes wrong. 

Some cards also allow you to earn rewards on your spending – just remember to pay off your balance in full every month to avoid paying interest.

Top travel credit cards with no fees when spending abroad include the Halifax Clarity card and Barclaycard Rewards Visa. Both of these are Which? Best Buy credit cards, so they’re the top cards for their category and customers of the brand rate them highly.

Multi currency apps

Providers like Wise and HSBC-backed Zing can be convenient as you can load as much currency as you want into your account, but you’ll need to download an app to use them.

With these providers you can send and receive international transfers, convert between currencies and spend on a linked card. 

Cash

You’re usually best off ordering online – the larger the sum the better – than collecting in-store, to access better rates while avoiding delivery costs.

Compare bureaux de change online: moneysupermarket.co.uk is one of the larger comparison sites.

Which? travel advice 

If you’re heading on holiday this summer, we’ve got loads of advice to help prepare you for your trip. 

For spending, we’ve rated the best travel credit cards, as well as best debit cards to use abroad and have tips on buying travel money

If you need travel insurance, read our best and worst travel insurance guide to compare policies and find out the most common travel insurance claims to help you tailor your cover.

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