A warning about pre-paid travel money cards

Posted in 'Personal Finance' by Barry Stamp

13 January 2012

Many travellers now carry pre-paid travel money cards, which are intended to be used by holidaymakers and business travellers instead of traveller’s cheques. But you need to be really careful about which card you choose, as one of our customers has reported to us.

Prior to taking a long road and rail trip across the US, our customer obtained a pre-paid travel money card from the Cooperative Travel Service, so he could pre-load his holiday spending on to the card and then use it, with chip & PIN protection, to pay for his travel expenses, or to withdraw cash from cash dispensers. This also is a much cheaper way of paying abroad than using a debit card or credit card, which can attract transaction fees of up to 4%.

The pre-paid travel card was issued by Travelex and was managed via the website cashpassport.com.

This worked perfectly during the trip, but our customer had a nasty shock on his return to the UK, when he tried to convert back the outstanding $944.28 on the card. Coop Travel offered him only £497.25 – an effective exchange rate of 1.89. He then went straight to a cash dispenser, which would only dispense a maximum of £500 – and exchanged $815 at a much better rate of 1.63. That left $129.28 on the card, which he later withdrew via the cash dispenser and obtained another £79.20.

So he got a total of £579.20 from the hole in the wall, compared to the £497.25 offered by Coop Travel, a difference of £81.85.

So the thing to learn from our customer’s experience is not to load too much money on any pre-paid travel card, and when you get home, use a cash dispenser to avoid being ripped off.

It would have been far cheaper for our customer to have used a Post Office Credit Card.

This charges nothing at all for overseas transactions, and doesn’t even charge cash advance rates for foreign currency purchased through the Post Office Travel service.

The card also has a good 0% offers – 14 months for balance transfers and 3 months for purchases, which enables you to spread the cost of a trip over a long time without incurring interest. Once the 0% period is over, the APR is a competitive 16.9%.