Holidaymakers are returning from abroad with an eye-watering £429million of unspent cash on their prepaid travel cards, research claims.
The amount left on prepaid cards has increased by 16 per cent from £369million last year, according to travel debit card firm Currensea.
These travellers may face additional fees and poor exchange rates when they withdraw their remaining cash, while many will simply forget about the leftover funds on their card after they return home.
Prepaid cards are chip and pin cards that allow travellers to load up cash in a different currency in advance, and avoid using their main bank account while on holiday.
Tap and go: Prepaid travel cards are convenient, but can incur fees to withdraw any money left on them at the end of the holiday
They are offered by lots of firms including the Post Office, Sainsbury’s, Travelex and Mastercard.
On average, travellers return from trips with £89 left on their prepaid cards, while 27 per cent of those using these cards have more than £100 left to spend, according to Currensea.
A whopping 42 per cent of those with school-age kids return with more than £100, with the average at £109.
James Lynn, co-founder of Currensea, said: ‘UK travellers are wasting a huge chunk of their holiday savings by sticking with costly and inconvenient pre-paid cards which offer poor value, high fees and require the hassle of topping up.
‘Topping up pre-paid cards before you travel leaves no room for error and often leaves holidaymakers scrambling for money at extortionate ATMs, facing steep bank charges when they have to rely on their bank card, or risking returning from holiday with huge amounts leftover on pre-paid cards.’
What are prepaid cards and what are the fees?
Prepaid travel cards work in much the same way as a credit or debit card, allowing you to withdraw from cash machines or spend your money in shops and restaurants.
The key difference is that the card is only loaded with as much money as you are willing to spend.
This has its benefits, allowing you to budget more effectively, as well as locking in one foreign exchange rate when you load the card, instead of a different rate every time you spend.
Some 13 per cent of holidaymakers opt for prepaid cards as their preferred method of holiday spending, according to Currensea.
However, these cards often charge a fee when you load the card, charge fees on cash withdrawal and sometimes even on transactions.
For example, Caxton’s prepaid travel card will charge £1.50 on withdrawals back in the UK, while the Post Office travel money card will charge the same.
Both cards also impose a £2 monthly fee for inaction after a 12-month period.
A third of pre-paid card users are under the impression that they offer better exchange rates than other payment methods, meaning that they could still be losing out even if they do spend all the money on their card.
In fact, regular debit cards that don’t charge fees for use abroad often offer a better deal.
For example, a Monzo debit card will allow you to buy €1.1697 for every £1, whereas Caxton’s black card will buy you just €1.14.
Currensea’s own offering, meanwhile, will buy you €1.1676.
Lynn said: ‘Millions of people still wrongly believe that pre-paid cards offer the best solution when spending money abroad.
‘They’re no longer more secure than bank cards as most bank and card providers allow you to simply freeze your card if it is missing or stolen and the fees are uncompetitive.
‘By adopting smarter spending habits, travellers can avoid excessive foreign exchange fees, securing as good a deal on their holiday spending as they do on flights or accommodation.’
With pre-paid cards having their drawbacks, what other options are available?
Cash remains king
Gone are the days where an envelope full of foreign cash was an essential part of planning a trip abroad. Nevertheless, more than half of travellers still count it as an important part of their spending.
The old adage of ‘cash is king’ proving true, as 58 per cent of Brits still favour physical money while on holiday, according to Currensea.
More than a quarter of people, 27 per cent, said they use their credit card while abroad, while 27 per cent also use a high street bank card.
Spending cash may also help you to stick to your budget.
With many ATMs charging withdrawal fees in foreign countries, taking out cash beforehand can prove a sensible decision, especially as you can compare the exchange rates offered by various vendors.
However, these rates might not be the best, especially if you leave it until you get to the airport to change your sterling.
On top of this, travelling with cash leaves you at risk of losing it or having it stolen.
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