Travel money: the benefits of credit and prepaid currency cards

THE PROLIFERATION of credit, debit, and prepaid currency card deals means changing holiday money is no longer a matter of simply comparing rates along the high street. While the majority still prefer to take cash with them – 60 per cent, according to research by Halifax – debit and credit card providers widely facilitate the cheap use of plastic abroad.

Halifax’s Richard Washington notes that “taking cash carries the risk of loss or running out. Credit cards, on the other hand, can help spread the cost and offer protection when buying goods and services directly.”

Crucially, the conversion rates offered by credit cards are often the best around, with the Halifax Clarity yesterday offering a particularly attractive €115.70 for £100, compared to €111.08 at M&S’s bureau de change. Holiday-goers who quickly pay off credit card balances can thus save money, regardless of the credit interest.

Despite the preferable rates, this option is not without risks. As Matthijs Boon of Moneycorp says, “Don’t use a credit card to withdraw money from an ATM abroad. Cash advances will not only incur a charge of at least £3 per withdrawal, but will also accrue interest.”

For this reason, the Post Office’s Andrew Brown says some may be better off with prepaid currency cards. “Credit cards are best reserved for direct retail purchases.” Holidaymakers travelling to regions without extensive card payment facilities – developing countries, but also many smaller merchants in Germany and Spain – could forego the slightly better exchange rate and take a prepaid currency debit card for use at ATMs.

Travellers pre-load the card with an amount of foreign currency and – with the best deals, such as the Caxton FX card – can use it abroad at no cost. Prepaid cards offer the added benefit of locking in the initial exchange rate for the duration of use, particularly good for those expecting a further decline in sterling. It is important, however, to pay attention to the redemption fee for transferring back into sterling. Caxton’s global card offers a flat rate of £1.50, but others can be higher.

Even with these benefits, “the safest thing is to take a mixture of cards and cash”, says Brown. Holidaymakers can be flexible and use the cheapest option according to where they end up spending their money.

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