Prepaid travel cards FX products: pros, cons & common pitfalls

Smarter travel money - clarity before you tap

A prepaid travel card can steady your holiday budget, but it is not a silver bullet. Understand protections, acceptance, fees and FX rules before you rely on one overseas.

Understanding APR is not the point here - your real risk lies in fees, acceptance, and the protection you do or do not have.

Lock in rates, track spend, avoid surprises - if you know the limits.

Who should consider one

Prepaid travel cards suit UK travellers who want predictable exchange rates, simple budgeting via an app, and separation from a main bank account. They are also useful for families giving a set allowance to teens. If you plan hotel deposits, car hire, or travel to countries with less common currencies, you may need a backup credit card and some cash.

Key terms - the essentials in plain English

• Chargeback - a card scheme process to reclaim funds for certain disputes. Many prepaid cards support this.
• Section 75 - UK credit card protection on purchases over £100 - not available on prepaid cards.
• FX rate lock - fixing the exchange rate when you load or convert funds on the card, giving certainty over spend.
• FX mark-up - an extra percentage added to the exchange rate. Some cards charge a mark-up, others use near-spot rates.
• Ring-fencing - providers holding customer funds in safeguarded accounts. Helpful, but it is not FSCS protection.
• FSCS - Financial Services Compensation Scheme. Prepaid balances are not FSCS protected.
• Pre-authorisation - a temporary hold on funds, common for hotels or car hire. Many merchants do not accept prepaid cards for this.
• Inactivity fee - a charge applied when a card is unused for a period.
• ATM limits - per-withdrawal or daily caps. Fees may apply, especially abroad.

Your travel money choices at a glance

Different prepaid models bring different trade-offs. Compare fees, FX and acceptance before loading large sums.

What it might cost you - and why it matters

• Exchange rate certainty - loading foreign currency can protect you from rate swings, useful for budgeting multi-country trips.
• Fees vary - you could face application, top-up, cash withdrawal, foreign ATM, replacement and inactivity fees. Some providers add a monthly plan fee.
• ATM use - many cards cap daily withdrawals and charge after a set number of free transactions. Factor this in if you rely on cash abroad.
• Protections - you may have chargeback routes for disputes, but you do not get Section 75 for purchases over £100, and balances are not FSCS protected. Do not park savings on a prepaid card.
• Acceptance gaps - car hire desks and hotels often reject prepaid cards for deposits or pre-authorised holds. Carry a backup credit card.

The impact is straightforward - low-fee cards with clear FX can be cost-effective if you plan spending. Hidden fees and ATM charges can erode value quickly.

Can you get one - and what providers look for

• Age and residency - typically 18+ and UK resident. Some teen cards exist with parental control.
• KYC checks - expect identity and address verification. Electronic checks are standard.
• Loading methods - bank transfer, debit card, or cash via partners. Some methods incur fees or limits.
• Currency availability - most support USD, EUR, GBP, AUD, JPY. Less common currencies like Vietnamese Dong or Peruvian Sol may not be available.
• Caps and controls - providers set load limits, balance caps, and withdrawal limits. Premium tiers may raise limits for a fee.
• App access - most cards require a smartphone for security controls and instant notifications.

Get set up - step by step

1. Compare fees, FX mark-ups and ATM limits in the UK market.
2. Apply online - complete ID checks and set strong app security.
3. Order the card - enable contactless and set a memorable PIN.
4. Load funds - lock in FX if using multi-currency wallets.
5. Add to your phone wallet - set spend and ATM alerts.
6. Test a small spend domestically to confirm everything works.
7. Pack a backup credit card for deposits and emergencies.
8. Monitor in-app - top up and freeze the card if needed.

The trade-offs - quick snapshot

Pros:

• Lock in exchange rates to avoid holiday budget shocks.
• Separate from your main bank account for security.
• Real-time spend tracking and instant freeze controls.
• Some cards offer cashback or premium travel perks.

Cons:

• No Section 75 and no FSCS protection on balances.
• Fees vary widely - top-up, ATM, inactivity and monthly costs.
• Not always accepted for hotels and car hire deposits.
• Limited currency support outside major global currencies.
• Contactless fraud risk for small offline taps if lost.

Stop costly mistakes before they happen

• Check acceptance with your hotel and car hire firm. Many will not approve a prepaid card for deposits.
• Read the fee table. Add up top-up, FX mark-up, ATM and inactivity charges for your itinerary.
• Load only what you plan to spend. Keep larger funds in a current or savings account.
• Verify currency support for your destination. If your currency is not supported, plan alternatives.
• Turn on notifications and set app limits. Freeze the card if it goes missing and inform the provider promptly.

Keep a credit card for deposits and emergencies. It solves most acceptance gaps abroad.

If not a prepaid card, then what

• UK credit card with no foreign transaction fees - often accepted for deposits and protected by Section 75 on eligible purchases over £100.
• Debit card with fee-free FX - simple, but watch ATM charges and daily withdrawal caps.
• Cash for small merchants - useful where cards are not common, but secure it carefully.
• Bank travel accounts or premium bundles - can include insurance and fee-free withdrawals, balanced against monthly costs.

Common questions, answered

Q: Do prepaid travel cards have FSCS protection? A: No. Funds are usually safeguarded by the provider, but they are not FSCS protected. Keep only trip money on the card.

Q: Will hotels and car hire accept prepaid cards? A: Often not for pre-authorised deposits. Use a credit card for the hold, and a prepaid card for day-to-day spending.

Q: Can I avoid exchange rate volatility? A: Yes by loading foreign currency in advance. You lock the rate when you convert, which helps budgeting. Check conversion fees.

Q: What fees should I watch for? A: Application, top-up, FX mark-up, ATM withdrawal, replacement after 1 year, inactivity and sometimes monthly plan fees. Compare before you buy.

Q: Are there ATM limits abroad? A: Yes. Many cards cap daily withdrawals and may charge after a small free allowance. Local ATM operator fees can also apply.

Q: What about contactless fraud? A: Small offline transactions may go through if your card is lost. Freeze the card immediately and report it to the provider and local authorities.

Q: Do cards support all currencies? A: Most cover major currencies like USD, EUR, GBP, JPY and AUD. Less common currencies may require cash or a different card.

What to do now

• Shortlist two or three UK cards with transparent fee tables.
• Check acceptance for your accommodation and car hire.
• Decide whether to lock FX now based on your travel dates.
• Set up app alerts, spending limits and a backup credit card.

Plan with intent - the right mix of card, cash and credit keeps your trip smooth and your costs predictable.

Important information

This guide is general information, not personal advice. Card features and fees change, and acceptance varies by merchant and country. Check the latest terms with providers before loading funds and consider a backup credit card for deposits and emergencies.