With the warmer months fast approaching, it’s almost time to start thinking about a summer holiday.
For many, summer holidays are expensive – and whether the latest Brexit-related event will cause the Euro will go up or down, or how much your bank will charge you to go abroad, are added concerns. With travellers checks becoming increasingly rare, pre-paid cash cards have become a popular alternative.
The idea is simple: pre-load money onto a cash card at the day’s exchange rate, and use the card abroad for (almost) no extra cost. Usually this exchange rate is fair; according to comparison site mytravelmoney.co.uk, prepaid cards beat airport currency exchange rates by 8 percent and those offered by bureau de changes and travellers cheques by 4 percent.
Unlike a day-to-day British credit or debit card, if the money is lost it can be automatically transferred to another card and reissued, with no chance of thieves accessing your bank account. Similarly, pre-paid cash cards often avoid the costly charges applied by most British banks.
So what are the drawbacks?
Its true that whilst most currency cards don’t charge usage fees abroad, they often make their money in other ways. Some cost money to activate the card, with others charging to take unused money back off the card at the end of the holiday.
To see which offers a better deal, we have compared three main UK banks with three main cash currency cards.
Natwest charge Foreign Purchase Fee of 2.75 percent of the value of every transaction, Lloyds charge a fee of between 1.5 and 3 percent when not paying in sterling, and Barclays charge both a 2.75 percent Non-Sterling Transaction fee and a £1.50 fee at ATMs.
In comparison, spending in your chosen currency on the three largest pre-paid cards avoid those charges. All three, Caxton, FairFX and Travelex, charge no fee at points of sale. FairFX does, however, charge 1.50 euro to take money from an ATM.
However, Travelex does charge a £2 monthly inactivity fee once a card has not been used for 12 months as well as $20 to refund any leftover money at the end of the holiday.
FairFX again appears to have the highest charges, with the activation of the card costing £9.95, as well as a £10 refund fee to get back unused money.
Caxton cards come out on top with the lowest charges, with 0 percent commission at point of sale, no overseas ATM fees and a £5 fee for refunds, or to swap money over from a stolen card.
So are they better?
If you manage your money well and budget for the holiday, prepaid cards are more than likely to work out cheaper. If you leave nothing left on the card at the end of the holiday, you will have saved plenty against your British card by avoiding the 2.5 percent fees charged by banks at every withdrawal or point of sale. Plus, if you go over budget, topping up a currency card is usually free and can be done from a smartphone app with minimum effort.
It also offers the chance to hedge against currency fluctuation and avoid the worry of global events making your holiday more expensive.