Financial & Travel Musings

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Prepaid cards seem to be breeding like rabbits around the world and every single one is different from the others in terms of charges, features and general useability.

Rather than trawl through all the cards that would pay me to recommend them to you as the majority of card comparison sites do, I’m just going to go through those that are “best” here and tell you why that they’re the best so that you’ll be able to choose which is best for your circumstances.

At the moment there are basically three types of card available:

1. Maestro cards;
2. Visa Electron cards; and
3. Mastercard debit cards.

All of the Maestro cards seem to charge you for the card and a number of them charge you an annual fee too for a card which is very limited in functionality. Therefore, it isn’t worth considering these any further.

At the moment there seem to be only two Visa Electron cards available aimed at the holiday market which is a shame as it’s a very useable card. The Post Office card is free to get, £5 to renew and costs £1.50 per UK withdrawal, £2 overseas; if you get the Euro or Dollar cards their “0% commission” works out at around 3.5% otherwise it’s 2.75% when you use, say, the dollar card in Europe. There’s a 1.5% charge to add money to the sterling card. The LloydsTSB costs £7.50, £5 to renew and costs £1.50 per withdrawal with a 2.75% currency exchange fee when used abroad; on the Euro or Dollar cards their “0% commission” should work out at a similar charge to the Post Office card (they don’t offer a sterling card). That £7.50 initial charge (waived if you have a LloydsTSB Silver account) and much wider availability means that the Post Office card will be best for most people.

The range of Mastercard debit cards is vast. The majority of these cards have a monthly or annual fee which makes those ones very expensive which is a shame as this is the most useful of the three types of prepaid card currently available. However, the FairFX card is free if you load £500 or more onto either their Euro or dollar cards or alternately via this link for £10 upwards (it’s £9.95 for a three year card otherwise) and costs £1/€1.50/$2 to withdraw cash (there’s no transaction charge for purchases). The card is renewed free if you top it up at least twice over the three year validity of the card, otherwise it’s £6/€9/$12. The ICE card is free to issue from £100/€100/$100, £1.75/€3/$3 to withdraw cash and charges 4% for all currency conversions. It’s renewed free if your balance on the card is at least £50 when renewal time comes up otherwise it’s £3/€5/$5. They charge £1.75 per purchase transaction when you use the sterling card in the UK but the euro/dollar cards are free to use for purchases everywhere and the sterling card is free to use everywhere except the UK for purchases. Purely on the published charges this makes the FairFX card the one to go for but it’s even better than that as they only charge about 1% for currency exchange.

So, which of all of these cards should you get?

1. The very clear winner is the FairFX card which is free to issue via this link, £1 per cash withdrawal and about 1% to convert the money to euros/dollars. If you load your card at least twice every three years (the topup when you get the card to begin with counts), renewals are free otherwise they’ll charge you £6. Topups are via debit card or bank transfer; in theory you can topup via credit card but FairFX charge you 1.5% to do this and you could get hit by cash advance fees from your bank too if you do this.
2. In second place comes the ICE card which is free to issue and renewed free if you have at least £50 on the card at renewal time, £1.75 per cash withdrawal and 4% to convert the money to euros/dollars. You can top-up online by credit/debit card or in their branches with cash, cheque or credit/debit card.
3. In third place comes the Post Office card because it’s free to issue, £5 every two years to renew, £2 per cash withdrawal and about 3.5% to convert the money to euros/dollars. You can top-up the card with cash or credit/debit card in a Post Office branch or by phone or online with a credit/debit card. The big plus point of this one is that you can get it immediately from a Post Office branch so if you’re looking for a last minute card before you head off on holiday, this is the one to go for although do bear in mind that the card needs to be activated before use ie you can’t get one in the Post Office in the aiport, get on the plane and use it immediately in the resort.

What would I get myself? The FairFX card in that the charges are so low. This is a truly exellent card and if you remember to topup twice every three years it’ll not cost you anything to operate. I’d also consider the Post Office card in that it’s useful to have both Visa and Mastercards as not everywhere takes both and you could come unstuck if you only took one.

For true emergency use the Post Office card comes into its own as you could get someone to get one for you in the Post Office and post/courrier it to you whilst you were on holiday.

You should consider these cards only as backup to your normal credit/debit cards. For use abroad, the best bet remains the Nationwide Building Society’s Flexaccount (Visa debit or Cirrus) which has no charges at all for withdrawing cash or converting from sterling to any currency. Alternatives to this are Abbey’s Zero Card (Visa or Mastercard) which appears to be even better than the Nationwide offer. Other credit cards with no foreign exchange fee include Thomas Cook (Mastercard), the Post Office (Mastercard) which charge nothing where-ever you are and Saga which charges nothing in Europe and 1% outside. Finally there’s the Egg Money card (Mastercard) which charges 2.75% for currency conversion but has no transaction charges for cash withdrawals and pays a quite respectable rate of interest when the account is in credit; it’s an excellent choice if you like to budget your holiday spending as you can use it like a savings account.

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Most of the time it’s fine to take a few cards and maybe a travellers cheque with you on holiday, but what do you do if you run out of money when you’re abroad or if your cards/cheques are stolen?

It’s safest to work on the assumption that your cards and/or cheques will be stolen and prepare for that. The way to do this is to keep a note of the card numbers, expiry dates and cancellation phone numbers for each card that you are taking with you. For the travellers cheques you need to note down the cheque numbers and the date & place that you bought them. Take one copy of the note of these details with you (separate from the cards, of course) and leave one behind with a friend or family member. It’s best to cut down on the number of cards too and go with the minimum which is three: one Visa, one Mastercard and one more for when the other two are stolen (keep the third one separate from the other two).

When they are stolen, you just go through the details and call to cancel the cards and cheques. The cancellation numbers are usually reverse charge numbers ie you won’t have to pay to call the banks. It’s useful to look up the number of the international operator and/or AT&T direct number for the countries in which you’ll be on vacation in advance.

In theory, cards can be replaced abroad within 24 hours but this depends on your card, your card company and the banking system in the country in which you’re on holiday. The best cards for replacement are gold/platinum ones but unfortunately they’re also the most attractive to thieves.

However, some countries just aren’t up to replacing cards quite so easily though a combination of language problems and primitive banking systems. Nobody who has stayed with us and had a card stolen in Prague has ever managed to get it replaced whilst they were there.

So what do you do if the card company can’t manage to replace the card? That’s when you need to look into how to get money to yourself from home and there are several ways of doing that which I’ll be covering next.

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Cash cards are much more limited in function than credit and debit cards but they have one really big advantage abroad: without the PIN, they’re useless and therefore they’re of much less interest to thieves.

Cash cards for international use come in only two versions which are Cirrus and Plus. Both are linked to your bank account although you can also get prepaid versions of both.

These cards can’t be used in shops to make purchases and are limited to withdrawing cash from ATMs. Some banks put these symbols on their cards without considering that it means the cards can be used overseas so the charging for overseas transactions is sometimes less than clear. Once or twice I’ve found banks who were so sure that their card couldn’t be used abroad that they had no provision for making additional charges in their terms and conditions (and didn’t in my case, but don’t rely on that).

Although it’s not always clear, you can use Cirrus cards in all Mastercard branded ATMs and Plus cards in all Visa branded ones. You need to check that the country you’re going to has ATMs (not all do!) as these cards can’t be used over the counter in banks. Also, check that it will be practical to use them eg in India I found that ATMs were not widely available and Rarotonga didn’t have any ATMs until quite recently.

Charges on these are made up of a transaction charge of around 2% with a minimum of £2/$2 plus a foreign currency conversion fee of around 3%. It’s therefore best to make withdrawals of £100/$100 at a time to minimise these charges.

Downsides are basically those charges and the fact that you can only use these cards in an ATM.  For those living in the UK, a Nationwide cash card eliminates all charges and if you’re in the American military a USAA card works in much the same way. If your bank is a member of the Global Alliance (Bank of America, Bank of Nova Scotia, Barclays, BNP, Deutschebank and Westpac) then you can withdraw cash from one of the other member banks ATMs without the transaction charge (you still get charged the foreign exchange fee).

I’m going to work my way through the various ways you can take money abroad over the next week or so. I’ve already covered cash, travellers cheques, credit cards/charge cards and debit cards and will be covering prepaid cards in the next episode.

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