Foreign currency: credit cards vs prepaid travel money cards
04 June 2011
If you're heading overseas, you might be wondering whether it's more cost effective just to use your existing Australian credit and debit cards, or buy prepaid money cards from Commonwealth Bank, ANZ, American Express or Travelex.
The answer -- as always -- is "it depends".
If you are going to transfer enough money for your whole trip onto the card at the time of purchase, then prepaid travel money cards are good value.
For example, with most prepaid money cards there is an initial upfront purchase fee of between $11 (ANZ) and $15 (all the others). This fee also covers the initial transfer of cash onto the card. If you buy the card through Australia Post, you may be able to get this fee waived entirely. If you need to reload them part-way through your trip, though, you will have to pay a 1.1% surcharge ($11 on $1,000 for example.)
Even so, once you've paid that surcharge, the money is yours to spend relatively fee-free in the foreign country.
Additionally, once you've loaded your money onto them in the foreign currency, the exchange rate is locked in, just like cash. However, there are some 'gotchas'. If you buy a US dollar prepaid travel money card but then use it in Singapore, the card provider will charge you a wrong currency conversion fee, which is typically comparable to the 3% fee charged by most credit cards for overseas purchases.
Travelex has a really nasty fee to catch people out here, though. Travelex Cash Passport customers who buy something in the wrong currency are charged a punitive 8.45% on the spot.
Cash withdrawals from a prepaid travel money card at a foreign ATM cost $2.00 to $4.00 each time, depending on the country you're using the card in -- generally cheaper than using a standard Australian bank debit/credit card to withdraw money.
So, to summarise, if you buy the prepaid travel money card at Australia Post, you can transfer cash onto it with no fees, and spend money from it with no (or low) fees too. However, in a worst case scenario, if you buy a Travelex Cash Passport card from a Travelex booth, you'll pay $15 for it, then when you need to reload money onto it, it'll be another 1.1%, then if you purchase goods in the wrong currency, Travelex will slug you another 8.45%. Travelex is the only company to slug you another $10 to get any left-over money back from the card at the end of your trip.
So, clearly, if you're not careful about how you purchase a prepaid travel money card, they can be costly.
