Off on holiday? Could a currency card be right for you?

A lady sun bathing

The world is becoming a smaller place, as airlines offer more routes and better deals tempting us to switch our holidays from Norfolk to New Zealand or Nantucket.

Once you reach your destination, it's time to hit the restaurants, the clubs, the beaches and the shops - and you need money to make the most of the experience. In the past, this might have meant traveller cheques or uncomfortable travel belts stuffed with foreign currencies.

More recently, it's become much more common for travellers to take prepaid foreign exchange or currency cards with them.

Offered by travel companies and specialist foreign exchange firms such as Travelex and FairFX, as well as the Post Office, a traveller can transfer cash from their bank account to the currency card, which could be for a single currency, such as euros or US dollars, or for multiple currencies.

When 'loading up' a euro card, for instance, the money will appear in euros and usually be fixed at the exchange rate for that day. On multiple currency cards, the money remains in sterling until it is spent.

An alternative option could be to take out a specialist travel credit card, usually from a bank. They can help you avoid non-sterling transaction fees, which are applied on purchases made on some everyday credit or debit cards abroad. The average non-sterling transaction fee is usually 2.5% to 3%1, so this can add up if you use your card a lot.

What makes currency cards a smart choice?

  • You don't have to carry wads of cash when you travel abroad, which improves your personal and financial security.
  • If you have a bank account, you can apply online or in person - at the Post Office, for instance.
  • You don't have a credit check run on you when you apply for a prepaid currency card. You will, however, be credit checked if you decide to take out a specialist travel credit card.
  • It's easy to top-up your card balance if you need to via a mobile app, online, by phone or by text. You can also track and monitor your spending online.
  • There are no overdraft facilities, so you can't run up a debt. Once you've spent the money that's it, unless you top the card up - so it helps with budgeting for your trip.
  • The cards are typically linked to the MasterCard/Visa networks, not your bank account. So, if the card gets lost or stolen this can reduce the risk of having your bank account cleared out.
  • Any spare currency on the card can be saved for your next holiday or converted back into sterling.
  • The exchange rates can be better than what you would receive when exchanging cash.

What do you need to keep in mind?

  • On single currency cards, you're generally locked into an exchange rate and are therefore unable to take advantage of currency fluctuations in your favour. On the other hand, if sterling weakens against another currency then you are protected from the swing.
  • Look out for fees and charges. Some card providers charge application and replacement fees if the card is stolen or lost abroad. Others charge monthly fees and inactivity fees if you leave spare currency on the card for a set period of time. There are sometimes redemption fees to transfer your cash back into sterling, and there are often charges for purchases or withdrawing cash from ATMs when abroad.
  • Upper spend limits vary by provider, so double-check before you apply. There are also often maximum limits on ATM withdrawals over a 24-hour period and the total amount that can be loaded over 12 months.
  • If taking out a currency credit card, always read the Terms and Conditions, just as you would with any credit card.

As with applying for any financial product, always make sure that the currency card you take out is the one that best suits your needs.

Happy travels!

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