Currency cards can ease money hassles abroad

By Emma Lunn

If you're travelling abroad, a currency card could save you money on the purchases you make during your holiday.

Currency cards allow you to load money in foreign currencies (usually the US dollar or the euro) and freeze that day's exchange rate. In other words, if the exchange rate is particularly favourable today, you can load up the card and then take advantage of the savings on a trip later.

Currency card providers boast that, as well as offering favourable exchange rates, the cards are safer than carrying cash. However, there are a number of fees and small-print clauses that travelers should look out for when choosing a currency card.

How do currency cards work?
Currency cards are prepaid cards that look like credit or debit cards and normally display the Visa or MasterCard logo, which means they can be used wherever these signs are displayed. They are issued by a whole raft of providers from the Post Office and AA Financial Services, to foreign exchange companies such as Travelex and Caxton FX. foreign-currency

If you have a UK bank account, you can apply for a currency card and load money onto the card, fixed at that day's exchange rate. Your card would keep this exchange rate even if the pound fell against the dollar. While you're abroad, you can manage your account and top it off online and, if your card is stolen, you can make a phone call to freeze it, saving the remaining funds.

Mark Huggins, director of AA Financial Services, says that travel currency cards are becoming an increasingly vital travel necessity.

"That's largely because they are so convenient. Exchanging travellers' cheques can be a hassle, while carrying a lot of cash around carries obvious risks," he says.

Like all prepaid cards, currency cards can also help with budgeting, as there is no overdraft or credit facility -- you can spend only the money loaded on the card.

"Prepaid travel cards can be pre-loaded with euros or US dollars before you leave home, meaning there is no chance of spending money you don't have and incurring excessive charges or fees that you would on a current account or credit card," says Andrew Hagger, founder of MoneyComms.

Exchange rates
As you lock in the exchange rate when you load currency to the card, it's a bit of a gamble. If the pound gets stronger against, say, the euro or dollar, you might wish you'd waited to exchange your money. But, on the other hand, you have the chance to lock into a decent rate when the pound is strong.

Even among currency card providers, the exchange rate will differ slightly on the same day -- so make sure you check several before deciding which card is right for you.

Rates on currency cards will generally beat airport currency exchange bureaus, but comparisons with regular debit cards are less clear cut. Say, for example, you decide to risk fluctuations in the exchange rate -- or expect the pound to get stronger -- and use your bank's regular debit card abroad. In that case, the bank will convert the currency at the time of purchase. You may come out ahead, based on the exchange rate alone --  however, keep in mind that many debit card providers will charge foreign loading fees on transactions abroad that might eat into any savings. Currency cards, which are designed for travellers, generally do not have these per-transaction charges.

Small print
Although currency cards can save money, charges might be levied for secondary cards and replacing lost or stolen cards. Monthly dormancy fees may also apply, so keep that in mind if you're saving the funds on the card for a trip several months in the future.

If still have funds on the card after your trip and want to put them back in your bank account, that could end up costing you as well.

"If you wish to redeem the balance on your card, you will find that most providers will charge you a fee of between £6 and £10 so it's sometimes best to leave the money on there until your next trip, particularly for smaller sums," says Hagger.

What's on offer?
Still interested in a currency card? Here are a few to consider:

MytravelCash Euro and US Dollar Currency Cards: These cards are unique in that they offer 1% cash back on spending. There are no ATM fees abroad but a 2.99% fee if you withdraw cash in the UK. You can load up to €6,000 on the Euro Card and up to $8,000 on the US Dollar Card.

Caxton FX Europe and Dollar Traveller Cards: These cards don't charge for ATM withdrawals abroad but do charge in the UK, charging €1.75 and $2 for the Europe and Dollar cards, respectively. The maximum amount you can load is €7,500 or $10,000.

FairFX Euro and Dollar MasterCards: The Euro Card charges €1.50 for ATM withdrawals, both overseas and in the UK, while the Dollar Card charges $2. You can load up to €3,750 on the Euro Card and up to $5,000 on the Dollar Card.

Post Office Travel Money Card: Cards can be loaded with various foreign currencies, including the US dollar, the euro, the Australian dollar, the Swiss franc, the South African rand and the Canadian dollar. ATM fees vary by currency -- you can check them using this chart. When it comes to euros and dollars, the maximum load amounts are €6,000 and $7,500.

AA Euro Card: AA's Euro Card, which costs £9.95, can be loaded with up to €6,250. ATM fees, both in the UK and abroad, are €1.50 (waived for withdrawals over €50).

See related: If your airline loses your luggage, will your credit card come to the rescue?, Editor's Pick: Travel rewards cards with no annual fee

Published: 16 April 2013