Pre-pay Card Could Be Best Option For Hols

Using your plastic on those foreign holidays can often lead to the post-holiday blues once the credit card statement land on the door mat.

Credit card companies and banks make a staggering £500m in fees off the £20bn their customers spend abroad when using their plastic.

Unscrupulous foreign retailers can charge you for goods and services in sterling at their own inflated conversion rate which in turn can add up to 25% to the final bill. This makes it difficult to keep an eye on how much you’re spending on your card.

For those who like to use plastic rather than cash or travellers cheques when abroad, pre-pay card should be considered. While new to the UK market they have been a huge success in the States, where £2trillion is put onto cards.

Travelex, the foreign exchange specialists, will launch a UK pre-pay card next month. Cardholders will be to deposit up to £5,000 in sterling, euros or US dollars onto the card at a fixed exchange rate. This eliminates the chance of dodgy foreign retailers liberally applying currency conversion rates.

An added bonus is that the Travellex card will only charge customers a fee for cash withdrawals, set at £2.50 a time. Currently most credit and debit cards charge fees for cash withdrawals and any other transactions, and then add a 2.75% exchange rate conversion fee on top of that.

As tourists are charged in sterling rather than the local currency when using their cards abroad, retailers set their own exchange rate which is usually higher the market rate. With the Travellex card because the cardholder chooses which currency to load onto the card, any transaction will only be charged in that currency.

No fees are levied for depositing currency onto o the card or for topping it up but cardholders will be charged a fee for card inactivity. If the card isn't used in twelve months a £2-month charge is levied until it is used again.

One thing to be taken into consideration is when using the card to reserve a hotel room the hotelier will estimate expenditure, add that to the total cost of the room and reserve that amount of money on the card. This will make that money unavailable for other purchases.

Alisdair Milton
4th May 2006

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