What to know about prepaid travel credit cards

Finally ready to take your next international trip? Whether it’s a business meeting in Brussels or a foodie’s tour of Florence, you might consider packing a prepaid travel card for your trip.

Prepaid travel cards let you access cash in your destination’s local currency without the risk of using your debit card. They also let you avoid the high fees of credit card cash advances or the hassles of scrounging up traveler’s checks before you depart.

But, be careful — despite the convenience of prepaid travel cards, they come with their own set of fees and limitations (most notably ATM withdrawal and purchase amount caps that could put a damper on your vacation).

“A prepaid travel card is one tool in a diverse travel wallet,” said Julie Hall, internal communications manager for Hilton Grand Vacations and former public relations manager for AAA, in a previous interview. “It’s one of the most convenient ways to get money while traveling.”

Let’s take a look at everything you need to know about prepaid travel cards — from how they work to the pros and cons of using them for your travels.

How do prepaid travel cards work?

Prepaid travel cards work much like general-purpose prepaid cards, except that they typically offer special features and perks designed for travel — which can vary based on the issuing bank.

In general, to use a prepaid travel card, you purchase the card and simultaneously load it with the funds you want to spend on your trip, up to the maximum amount allowed on the card. (For example, the PayPal Prepaid Mastercard®, a general prepaid card, allows a maximum balance of $15,000.)

Once you’ve arrived at your destination, you can use your prepaid card to make purchases directly (much like you would with a debit card). You can also use it at an ATM to get cash in that destination’s currency.

Depending on the card issuer, you’ll be able to log in to a mobile app or your online account to check the balance, review your purchases and see any any account charges.

What are the benefits of a prepaid travel card?

Why not just take cash, your credit cards and your debit card the next time you travel to an international destination? Why would you also take a prepaid credit card?

If you lose your card, thieves only have access to the loaded cash

If a thief gains access to your prepaid card abroad, they’ll only have access to whatever funds are loaded onto the card (unlike debit cards, which can provide thieves access to your bank account, or credit cards, which a thief can charge up to a certain limit).

Further, the network through which a prepaid card is offered may provide a zero liability policy, though, overall, prepaid cards don’t offer the same breadth of protections as debit and credit cards (think chargebacks and fraud alerts).

More convenient than traveler’s checks

Prepaid travel cards also provide more convenience than, say, traveler’s checks (which, yes, still exist). Getting traveler’s checks before you go can be a hassle, and you might also be surprised at how many retailers across the globe no longer accept them. As a result, prepaid cards are often a better option than these paper checks.

What are the drawbacks of a prepaid travel card?

Like most financial products, prepaid travel cards come with pros and cons. Here are some of the drawbacks of using one:

Foreign transaction fees, among others

Travelers should be wary of the fees connected to prepaid cards, as they can add up to a lot of money during an international trip. Many prepaid cards carry foreign transaction fees. Today, it’s far easier to find credit cards with no foreign transaction fees than to find prepaid cards without them.

Further, prepaid travel cards may also charge a card purchase fee, ATM withdrawal fee, higher foreign ATM withdrawal fee, inactivity fee and a fee to get any remaining balance back by check.

No help for your credit score

If you charge restaurant meals, souvenirs and tickets to a traditional credit card and pay your bill on time, your three-digit credit score will receive a boost. This doesn’t happen with purchases you make with prepaid travel cards, because your prepaid card activity isn’t reported to the national credit bureaus.

If you don’t keep track, you could run out of funds

If you’re used to swiping a credit card without much thought, there’s a chance a prepaid card could leave you high and dry when you go to make a purchase. Just be sure to keep tabs on the amount of money you’ve loaded — and spent — on your card.

Prepaid travel card tips

Prepaid travel cards do come with some potential hurdles. Here are some tips for avoiding the most common downsides of these cards:

• Check the fees associated with your card (or potential card): Prepaid cards can charge fees that existing debit and credit card holders aren’t used to, so it’s important to read the fine print before swiping. For example, the Netspend® Visa® Prepaid Card charges a $5.95 inactivity fee per month after the card has been idle for 90 days.
• Verify the card will work at your destination: Double-check with your issuer that your prepaid card will be accepted where you’re traveling. Even a card that’s designed for international travel might not work in specific locations due to restrictions from U.S. trade sanctions.
• Know the limits: Prepaid travel cards typically have limits that could throw a wrench into your trip if you don’t understand them ahead of time. For example, some cards can have a daily reload limit as low as $500 (or as high as $7,500, in the case of the Netspend Visa card). Again: Be sure to read through your card’s fine print before embarking.
• Avoid holds at all costs: In a sense, prepaid travel cards work like debit cards. Be sure to avoid using a prepaid travel card to reserve a hotel room or a rental car, which can trigger a hold that could tie up hundreds of dollars of your cash for a week or longer. Instead, use a credit card to reserve these items, then use your prepaid card to pay the final charges.

Should you use a travel credit card instead?

If the drawbacks of a prepaid travel card outweigh the benefits, you might be better off signing up for a travel credit card or using one you already have as your primary payment method while traveling.

Travel credit cards almost always have zero fraud liability, which can set your mind at ease in the event your card is lost or stolen. They also let you earn rewards for your spending, and many offer purchase and trip protection and have no foreign transaction fees. Some even offer perks such as access to airport lounges where you can get complimentary food and drink. And, depending on your credit limit, you may have more spending power with a credit card than a prepaid card.

That said, they can also have pitfalls. Not all travel credit cards are accepted in all countries. For example, Visa and Mastercard are widely accepted, while American Express and Discover have a smaller international presence. And, depending on your location, some merchants may require chip-and-pin cards or may not accept payment cards at all.

It’s advisable to carry a few different payment methods with you (credit, debit and prepaid) when traveling, along with some local cash. Also, notify your credit card company about your travel plans, lest they flag your card as stolen and cancel it.

Bottom line

A prepaid travel card doesn’t come without downsides, but if you want an easy way to access cash in your destination’s currency — and want a quick way to pay merchants once you arrive at your international destination — the ease of using them might make your trip a less stressful one.