Some travelers (i) who have had major security issues with using debit  cards or credit cards overseas or (ii) who have had one too many experiences with overspending while traveling swear by usage of Prepaid Travel Cards.  Prepaid Travel Cards allow you to get access to cash in local currency without needing to access funds on deposit in your bank account or having to incur the cost of a cash advance on your credit card.   The prefunding nature of the cards can also work as a good tool to help you stay on budget because the preloaded limit is usually limited to your travel budget. If you are considering whether a prepaid travel card is the right thing to include in your wallet, this blog post is for you. 

RESOURCES MENTIONED IN THIS BLOG POST

1. Do You Overspend on Vacation? This Blog Post is For You!

How to Use Prepaid Travel Cards

Prepaid Travel Cards are very similar to debit cards (i.e., you have a pool of money on deposit with a financial institution).  You are able to access money deposited/loaded on the travel card through purchases or ATM withdrawals.  The main difference is that prepaid travel cards can often offer special travel rewards.  Prepaid Travel Cards differ from debit cards because they often have maximum amounts that you can load on the card (which are usually less than $10,000).  Most Prepaid Travel Cards also have mobile apps that allow you to conveniently check your balance, review purchases and reload the card with additional funds while you are on the go.

THE GOOD: Why Some Are Raving Fans of Prepaid Travel Cards

• Security:  Anybody who has had the experience of having their identify stolen or unauthorized transactions in their bank accounts will likely say enhanced security makes usage of prepaid travel cards a no-brainer.   I am super vigilant about monitoring my accounts for this very reason and this how it all got started . . .When I was in graduate school, I was getting ready to go to an overseas internship in Geneva, Switzerland at the World Health Organization.  My school deposited my scholarship money in my account (i.e., my living expenses for the summer) and someone promptly booked a luxury African Safari with my debit card number (and the funds in my account).  I promptly disputed the charge because I needed that money (and was flying out in 4 days to Geneva) but the bank promptly informed me that the dispute process for bank accounts takes some time and tried to assure me my money would eventually get returned to me.  Eventually was not good enough because I was flying out to Geneva in 4 days with no family and no friends to live by myself while interning.  So I made it my business to be a personal pest until the charges were reversed, I was issued a new bank account number and debit card and the “stolen” money was accessible in my account.  In the end, yes, I got my money back but it was 3 days of stress and aggravation to do so, which can be tragic if you are traveling. 

• Travel Rewards Perks:  Many prepaid travel cards offer purchase protection (for certain types of loss, theft and damage), lost luggage insurance, emergency assistance, pre-trip planning assistance, emergency translation services, cash back opportunities and opportunities to take advantage of travel promotions.  

THE BAD: Where Can We Go Wrong with Prepaid Travel Cards?

Fees:  I am anti-fee so that typically makes prepaid cards a non-starter for me but if you are considering getting a prepaid travel card you should be mindful of how much maintenance of one may cost you.

1. Purchase Fee:  Some prepaid travel card providers require you to purchase the card in order to use it.
2. In-Person Purchase Fees:  Some prepaid travel card providers may charge you a convenience fees for using the card to make purchases in-person (rather than online). 
3. Foreign Transaction Fees:  These are convenience fees that are charged for using the card outside of your home nation.
4. Inactivity Fees:  These are fees that are charged if there is activity on your card for an extended period of time.
5. Balance Disbursement or Account Closure Fees:  These are fees that are charged if you ask that any remaining funds loaded on your card be sent to you or if you request to close your account.
6. ATM Withdrawal Fees:  These are fees that are charged for withdrawing cash at an ATM.

THE UGLY: How things can go from bad to worse with Prepaid Travel Cards?

• Destination Limitations:  Some prepaid travel cards do not work in certain countries.  Imagine, you have decided how to make the potential fees work for you.  You are happy as a clam, until you arrive at your destination only to discover your card does not work there!!

This illustrates the importance of confirming that your card will work in your desired destinations before making the decision to open up a prepaid travel card account.

• Reload Limitations:  Some prepaid travel cards have a daily limit and clearance time for reloads.  Imagine needing $300 cash to take a dream snorkeling cruise or a helicopter ride over a volcano but realizing your prepaid travel card is short on funds.  You head over the website to reload you prepaid travel card, only to discover that you can only reload $250 per day and to make matters worse, the reloaded funds will not be available for 48 hours.  Now this cuts both ways.  So this may actually be a way for a chronic over-spender to manage their spending because of the built in deterrent caused by the delays in being able to access funds.  The most important thing is to be mindful of what the limits are so you can plan properly.

• Hold Transactions: Remember some types of transactions (such as reserving a hotel room or a renting a car) may require a hold to be placed on your card, which could result in hundreds of dollars of the cash preloaded on your prepaid travel card being inaccessible until the hold is released.  Remember that holds don’t usually get released until a few days after the reservation or rental has terminated.

RECAP:  If you are considering getting a prepaid travel card, here is quick checklist for you.

1. Make sure you have evaluated and are comfortable with the fees and holds that may be applicable because of the types and frequency of purchases that you anticipate making.
2. Make sure you can use the card in the places where you desire to travel.
3. Make sure that the card maximum and reload limits will not be a problem for you.
4. Try to get a card that makes it easy to check your card balance, review purchases online and reload the card while away online or via your phone.

What about you?  Have you used prepaid travel cards before?  If yes, what is your favorite one and why?