Should you use a prepaid travel card?
Learn about prepaid travel cards and how to use them.
Margaret Montgomery, Content Specialist
If you’re like me and you’re traveling on a budget, one of the best ways to save money is to have everything planned out ahead of time. Knowing how much you’ll need for dinners, experiences and souvenirs is the first step, and then ordering foreign cash or a prepaid travel card is the next step. But do you need a prepaid travel card, or should you just use foreign cash? Find out the pros and cons of using a prepaid travel card, and learn how to find the best prepaid travel card for your needs.
Why would you need a prepaid travel card?
If you have a credit card that doesn’t charge foreign transaction fees, or you prefer to use cash while traveling, you might not need a prepaid travel card. My credit card doesn’t waive foreign transaction fees so that’s why I chose to order a prepaid travel card for my trip to Europe and load Euros on it before departing. That way I know how much money I have to spend before I get to my destination and I deal with the currency exchange rate ahead of time. It helps me take some of the uncertainty out of currency exchange rates, which change every day.
I also didn’t want to order Euros from my bank and then carry cash around with me. I personally don’t like carrying cash around because it feels less secure and I find it harder to keep track of where my money is going. Plus, many card issuers reimburse users in the case of fraud or scams on payment terminals while abroad.
One more thing to keep in mind is that sometimes payment terminals will offer the option to pay in your home currency, rather than the local currency. Avoid doing this. These transactions can carry hidden fees that will cost you more than just paying in the local currency.
No foreign transaction fee credit card vs. prepaid travel card
The difference between a no foreign transaction fee credit card and a prepaid travel card is that when you use your credit card abroad, you’ll be charged currency exchange rates which are determined by your credit card provider (like Visa or Mastercard) in real-time.
Plus, you’ll be charged interest, usually around 19.99% or more, on unpaid balances with a credit card (so try not to rack up a huge travel bill you can’t pay off before the due date.) With a prepaid travel card, you aren’t charged interest because you set your spending limit yourself by depositing money onto the card. You’ll convert your currency ahead of time with a prepaid travel card, which makes it a bit easier to know how much you have to spend.
If you choose to order foreign cash before you leave, you’ll be charged the currency exchange rate from your bank, which can vary depending on who you bank with. This is no different than loading money onto a prepaid card, it just depends on whether you’d rather carry cash around with you or use a card. The caveat to prepaid cards like the one I’m using is that the bank’s exchange rate can be higher than with other financial institutions, so be sure to compare your options.
Keep in mind that in addition to the currency exchange rate you’re paying for (which can mean paying more Canadian dollars for fewer foreign dollars), your credit card provider may also charge foreign transaction fees on top of the foreign exchange rate. Foreign transaction fees can be an additional 2.5-3% of the purchase price. This can really add up over several transactions.
Here’s a breakdown of current currency exchange fees using CAD to USD as an example (rates change daily).
To demonstrate how much foreign and currency fees cost using a Visa that doesn’t waive foreign transaction fees, we’ll compare an example with a $1,000 purchase.
$1,000 USD x 1.351199 = $ 1,351.198 CAD + 2.5% forex fees = $1,384.98
You would save around $33 with a no foreign transaction fee credit card or a prepaid travel card that doesn’t charge forex fees. These charges can really add up over the length of your trip and you could end up paying hundreds of dollars in foreign transaction fees.
How to choose the best prepaid travel card
The biggest thing to pay attention to when signing up for a prepaid travel card is the fees. The whole point of ordering one is to save on ATM fees for foreign cash withdrawals, and to save on foreign transaction fees. Prepaid travel cards generally have very few perks, unlike travel credit cards, which can offer trip and rental car insurance, airport lounge access, rewards points for flights and hotel bookings and more.
What is the best prepaid travel card?
The best prepaid travel cards do not mark up their currency conversion rates, charge reloading or card use fees, and do not charge foreign transaction fees in supported currencies while you're spending abroad.
I used the CIBC AC Conversion Visa Prepaid Card for my trip. (CIBC has said that the card will be discontinued effective August 26, 2024, and funds will be returned on this date.) I chose the AC Conversion card because I’m traveling to Europe, and the card supports Euros. The card doesn’t cost anything to use, you don’t have to pay fees to load money on the card, and of course there are no foreign transaction fees charged (unless you use an unsupported currency.) You don’t have to be a CIBC customer to use it. Plus, there’s no fee to order the card, unless you want express shipping with a courier. Just make sure to order the card a couple weeks before you depart to allow for mailing time.
Some users say that CIBC’s foreign exchange rate does contain markups, however, so although you save on foreign transaction fees while abroad you may be paying more for loading money onto the card than you would with another prepaid travel card.
Again, the biggest disadvantage of some prepaid travel cards is the fees - but not all cards charge them, so be sure to compare your options. Here are some fees to look out for:
- Reloading fees
- ATM withdrawal fees
- Inactivity fees
- Non-supported currency fees (so load the right currency on your card!)
- Unloading fees (when you get home and want to get your money back)
There are other options out there besides CIBC’s, though. Here’s a comparison of some of the best prepaid travel cards out there.
How to load a prepaid travel card
The process varies depending on the bank or financial institution you use. With the CIBC AC Conversion Prepaid Travel card, I downloaded the AC Conversion app after I received my card in the mail and registered my card number as well as a password for my account and activated my card.
However, when I was ready to load currency onto my card (in my case, Euros) I was not able to use the app to instantly load money onto the card using my connected chequing account. I had to contact both the financial institution that issues my chequing account and CIBC, and then perform a bill payment. This was inconvenient because the bill payment took a few days. Once the money ended up in my account, I had to use the desktop app as I was informed that the app often doesn’t work. I entered the amount of money I wanted to load onto the card in Canadian dollars and was presented with the amount I’d get on my card in Euros based on the current exchange rate. CIBC’s exchange rate did turn out to be a bit higher than market exchange rates, and using $1,000 Canadian as an example, I was charged about a $51 premium for exchanging money compared to the market rate for Euros. But still, I saved myself money on foreign transaction fees.
Some other prepaid cards like the Wealthsimple Cash card have apps that are much more intuitive. The difference with the Wealthsimple card, though, is that while you aren’t charged forex fees while using your card in a different currency, you don’t get to see how much of the foreign currency you have available to spend, only what you have in Canadian dollars - so if you’re budgeting or planning out your spending you’ll have to do the calculations as you go.
The app did warn me that I might have to call my bank to confirm that it’s not a suspicious transaction so it would go through. If you run into any issues like I did, call the number on the back of your card.
Screenshots of the CIBC AC Conversion mobile app.
Should you order foreign currency or use a prepaid travel card?
You can order foreign currency online with most banks, and have it delivered to your house for a fee or pick it up at an in-person branch. Some people like using cash rather than a credit card with no forex fees, because they don't have to worry about exchange rates on their purchases, and you don’t have to deal with calling customer service if your bank thinks your foreign purchases are suspicious and freezes your card.
I personally just prefer to have a card and carry a bit of foreign cash in the rare chance that a Visa or Mastercard isn’t accepted. Plus, the drawback of using cash only is that if you find you don’t have enough cash when you arrive, you could be hit with ATM withdrawal fees and transaction fees on top of the exchange rate. And if you brought too much cash, you’d have to convert it to your home currency when your trip is over and potentially lose out on some money if the foreign currency is stronger than Canadian dollars. If you go the cash route, make sure to check your daily withdrawal limit with your bank before you leave to avoid stress at the ATM. With a prepaid travel card, the benefit is that you can load however much money you need onto the card at any time through a mobile app or browser (although I wasn’t able to do this with the CIBC AC Conversion card.)
The bottom line
As with every personal finance product, take a close look at the terms and conditions to understand the fees and restrictions associated with your prepaid travel card. The last thing you want to do is end up stressing over transaction fees or exchange rates while you’re abroad!