Prepaid Travel Cards

The six prepaid card need-to-knows

Before you pick a prepaid card, check out the other options. Travel credit cards are often less of a faff than loading these before you go. But if rate certainty or tight control of your budget is what you want, then prepaid cards work well as once loaded, you know how much you have to spend and can't go over that unless you reload. Here's what you need to know...

• Your money's safe if the card issuer goes bust

  All prepaid cards listed below deposit customers' cash in a bank or building society in a ring-fenced account, separate from the card provider's account. So, if the prepaid card company goes bust, the bank or building society where your money's resting will still retain your cash.

  The slight risk comes if the bank or building society goes bust, because your cash is NOT protected in this case. Therefore, think of your prepaid card as one that you'll keep cash on for immediate spending requirements, rather than as a place to store heaps of it.

• If you lose the card or it's stolen, you need to report it

  As long as you contact the provider of your prepaid card and get it blocked, you shouldn't lose out on any money, though you may have to pay up to £10 for a replacement card.

  Pay special attention if your prepaid card is contactless as it could be used for a series of small, fraudulent transactions, so always alert your card provider as soon as possible. It's also worth alerting local police or security services if there's been a theft - you may need an incident number to claim losses back on your travel insurance.

• Providers use their own exchange rates, which can vary, so be careful

  Prepaid cards providers offer different rates to each other. Some use the 'spot rate' (the perfect exchange rate), some use Mastercard's or Visa's exchange rates, others still set theirs by picking one of these rates, then taking a certain percentage as their exchange fee, usually between 1% and 2.5%.

  To choose the cards in this guide, we do a comparison between the rates offered and the cards' fees and charges, then we list the ones with the best rates and lowest fees. Compare our top picks with the best you'd get for cash by using TravelMoneyMax.

• Some cards allow you to lock in a rate when you load, which means you can win (or lose) if there are currency fluctuations

  Unlike debit and credit cards, which always calculate your exchange when you spend, with prepaid cards, some give you the ability to lock in a rate on the day you load them - good if you need certainty over budgets. If the pound weakens after you load the card, you'll gain, though conversely, if the pound strengthens, you'll lose.

  There are also prepaid cards which allow you to load them in pounds. These ones will give you the rate when the transaction's processed by the card provider, which can take up to a week.

• Beware fees – some cards even charge you for not using them

  Prepaid cards have more fees than credit or debit cards. We take all these into consideration when picking our best buys, deliberately picking cards with low – or no – fees, but these are the charges you need to watch out for with bog-standard prepaid cards:

  Application and replacement fees

  Many cards cost £5 to £10 to open and display that fee prominently on their websites. However, many also charge a sneaky 'replacement fee', and set the expiry date to one year after opening. After 12 months, you'll have to pay around £5 to keep using the card and any funds already on it.

  A few cards also charge a monthly fee of a few quid simply for holding it, which works out hideously expensive.

  Transaction fees

  Many cards charge you for retail purchases (just buying something in a shop), or withdrawing money from an ATM. Both fees usually jump when you're abroad.

  Spending. Some cards levy a fee every time you spend, either a percentage of the amount or a flat fee per transaction. If you make a high number of small purchases, go for a percentage fee. If you make fewer and higher-value purchases, go for a set fee.

  Withdrawing. Most prepaid cards charge for using ATMs, usually £1.50 to £2.50 per withdrawal.

  Inactivity charges

  Prepaid providers want you to regularly use the card, racking up charges and boosting their profit. Therefore, you're often penalised if the card goes unused, typically £2/month if you haven't used the card in 12 months.

  So use it frequently enough on small transactions to avoid this charge. Similarly, don't overload funds onto the card; most charge a fee to refund the money.

  Paying for the prepaid card

  There's a hidden charge you could fall foul of if you're using a credit card to pay for and to top up your prepaid card.

  Buying currency on a prepaid card is counted as a cash withdrawal, so you could face a myriad of fees, including cash withdrawal fees, interest, or even a fee for using a credit card charged by the money changer.

  Therefore, if you're buying and topping up currency on a prepaid card, ALWAYS use a debit card, which isn't allowed to charge this fee.

  It's also worth checking the cards for loading and transaction limits. If you're likely to want to withdraw lots of cash, it's no good picking a card with a £50 or £100 per day limit for cash withdrawals.

• You can't use these cards for car hire, or at many petrol stations

  While these cards say they're accepted anywhere you see the Mastercard or Visa symbol, there are some notable exceptions. Most car hire places won't accept prepaid cards, or if they do, they're likely to also require a credit card for the excess deposit authorisation, so make sure you have back-up cards.

  We've also heard from MoneySavers that prepaid cards aren't accepted at many petrol stations or motorway toll booths. Please let us know in the Prepaid Travel Cards forum if you've had a prepaid card declined in other places.