The safer alternative to carrying cash, prepaid cards are cheaper than using debit or credit cards abroad and offer travellers better exchange rates. Providing the convenience of plastic without the fear of getting into unplanned debt helps make prepaid cards a winning deal.
How it works
Prepaid currency cards are issued by specialised companies or credit-card firms. Travellers can preload money in a chosen currency from their bank accounts on to the card or pay cash fixed at that day’s exchange rate, without the spreads that money changers in the holiday destination are likely to add up even if they say that there is no exchange fees.
It makes sense to use a specialised travel card company such as Travelex, Moneycorp, MyTravelCash or Travel FX, if available in the country of origin, because they normally offer better exchange rates than banks or credit-card firms. According to a comparison by Mytravelmoney.co.uk, prepaid cards beat airport currency exchange rates in popular holiday destinations by around 8 per cent and those offered by money exchanges and travellers’ cheques by about 4 per cent.
Cash Passport from MasterCard, Global Travel Card from American Express and Visa’s TravelMoney card are some examples of prepaid travel cards.
The cards can be used in the holiday destination to withdraw cash from ATMs in the country’s currency or to make payments for purchases. However, the cards should not be used for hotel or rental car deposits as the amount may be locked on the card for up to 30 days.
Prepaid cards come with several safety features. When stolen or lost, they can easily be blocked and as they are not connected to a bank account, fraudsters don’t have much use for it. If lost or stolen, the balance can easily be transferred to a new card. However, prepaid travel cards come with a personal identification number (PIN) and if the card and the PIN get stolen, a quick-acting thief could withdraw all the cash. Thus, it makes sense to have two prepaid travel cards with one as a backup in the hotel. If the first card gets stolen or lost, the balance can be transferred to the second one.
Another draw for prepaid cards is that it only takes minutes to get one and there is no need for users to go through lengthy applications and checks. A prepaid travel card can be obtained over the counter and used right away or can be loaded with foreign currencies at a certain point of time ahead of actual use when the user feels that the exchange rate is favourable and can be used later. Some offer cashback on certain purchases abroad and can be used for booking tax refunds when leaving the country.
Remittance and money exchange chain UAE Exchange launched its first prepaid travel card in the UAE and the region last December. Called Gocash, this product allows cash to be loaded in up to six currencies, offering access to 34.3 million merchant locations and 1.5 million ATMs worldwide.
“Customers have the choice of 15 currencies, of which they can load up to six on the card,” says Y. Sudhir Kumar Shetty, COO Global Operations, UAE Exchange. “The card protects the user from exchange rate fluctuations while on the move and gives the traveller peace of mind.” It is available at all UAE Exchange branches in the country.
However, prepaid travel cards don’t come for free and there are fees involved for getting the card issued, which in the case of gocash is Dh35. Some companies charge a fee for foreign cash machine withdrawals, while others levy an inactivity fee if the card is left unused over a certain period of time. An annoyance for those who have not spent all the balance on the card is that some companies also charge hefty redemption fees.
Disciplined usage
“The best thing is to be so disciplined that one uses the entire balance on the travel cash card upon expiry,” says Vikas Rangarajan, Customer Relationship Manager, ICICI Bank, Bangkok. With around 24 million tourists last year, Thailand now ranks among the top ten holiday destinations worldwide and is a country where travel cash cards are heavily used, says Rangarajan. ICICI, India’s largest provider of prepaid travel cards, has tie-ups with Visa, MasterCard and American Express and offers up to nine currencies including the UAE dirham on its travel cards.
“I advise people not to leave cash on card when their holiday is over. With the redemption fees, travel card companies make their money,” adds Rangarajan.
There have also been concerns that prepaid travel cards could be used for money laundering, as they can, in many cases, be loaded anonymously and are not governed by monetary instruments under the laws of most countries. Reports have also emerged that these cards are used in bulk by drug traffickers and terrorism groups, according to an FBI analysis that estimated the stored value card industry at more than $300 billion (Dh1.1 trillion) a year.
Prepaid travel cards come with a cash storage limit that lies under the reporting value for international cash transfers of many countries. The UAE Exchange gocash card limit is currently $5,000. There is no limit on the number of cards that can be obtained by customers.
