Prepaid travel cards FX products vs alternatives: which is right for you?

The smart way to pay abroad and at home

A fast-growing UK prepaid market and sharper FX tools make travel money choices more complex. We explain how prepaid travel cards stack up against debit, credit, cash and digital wallets so you can minimise fees and maximise control.

Understanding FX fees is not just about percentages - it is about what you actually pay on the trip.

Who benefits most

UK travellers seeking cheaper overseas spending, budgeters who want to cap outgoings, families managing allowances, and anyone wary of debt. If you value predictable costs, app controls and in-wallet security, prepaid cards can be powerful. If you need Section 75 or large cash withdrawals, alternatives may fit better.

Jargon made easy

• Interbank rate: The baseline wholesale exchange rate between banks. Few consumer cards give this exact rate, but good prepaid cards track close.
• FX markup: A percentage added to the base rate. Lower is better. Some cards charge a small markup at weekends or on less common currencies.
• ATM fee: Fixed or percentage fee for cash withdrawals. Prepaid cards often allow a free monthly allowance, then charge.
• DCC (dynamic currency conversion): Merchants offer to charge you in pounds. Decline it. Paying in local currency is typically cheaper.
• Chargeback: A scheme process to dispute transactions. Available on many prepaid cards, separate from Section 75.
• Section 75: UK credit card protection for purchases over £100 and under £30,000. Not available on prepaid or debit cards.
• FSCS: The Financial Services Compensation Scheme protects eligible bank deposits. Prepaid e-money balances are not covered.

Quick take: Prepaid cards prioritise budgeting and fee control. Credit cards prioritise protection and borrowing flexibility.

Your payment choices compared

The UK prepaid market is scaling quickly, with spend projected near £59.8bn by 2025 and strong growth through 2029, driven by e-commerce, travel and digital wallet integration. One in five UK adults now use prepaid cards, often to control spending or avoid debt.

Side-by-side at a glance

Short list: If your priority is low-cost travel spending, prepaid often wins. If your priority is consumer protection on high-value bookings, credit cards lead.

The money angle - costs, risks, value

• Overseas spending: Many prepaid travel cards beat high-street debit on FX and per-transaction fees, especially outside the EEA.
• Cash withdrawals: Prepaid often cheaper than credit (which charges cash advance and interest). Watch daily limits and ATM operator fees.
• Weekends: Some providers add a small markup when markets are closed. Check your card’s tariff.
• Acceptance gaps: Prepaid is rarely accepted for pre-authorised transactions such as car hire or some hotel deposits. Carry a credit card for these.
• Safety: No FSCS if the provider fails. Funds are usually safeguarded, but not deposit-protected. Keep only what you plan to spend.
• Value: For frequent travellers, savings on FX plus strong app budgeting can outweigh limitations. For one-off big purchases, a 0% FX credit card with Section 75 can be smarter.

Bottom line: Use the right tool for the right transaction.

Who qualifies - and what providers look for

• Prepaid cards: Usually available without a credit check. You will need ID for KYC and a UK address. Useful for students, new arrivals, or those building financial footing.
• Credit cards: Require credit checks and sufficient income. Ideal if you want Section 75 or to build credit, but avoid cash advances.
• Debit cards: Come with your current account. Costs for overseas use vary by bank tier and account type.
• Digital wallets: Work with compatible cards. NFC and secure chip technology make tap-and-go reliable, and pairing a prepaid card adds spend caps and instant freezing.

UK context: The UK leads on prepaid spend per capita, with government and commercial adoption rising. In Northern Ireland, government-issued prepaid schemes have boosted local engagement, showing prepaid is mainstream, not marginal.

Set up and go - a simple path

1. Compare FX markups and ATM fees.
2. Check acceptance limits for car hire and hotels.
3. Apply in-app, complete ID checks.
4. Load only what you plan to spend.
5. Add to Apple Pay or Google Wallet.
6. Turn on spend and location alerts.
7. Decline DCC, always choose local currency.
8. Keep a credit card for pre-authorisations.

Advantages and trade-offs

Prepaid cards offer disciplined spending, often lower FX costs, real-time controls and broad acceptance for everyday travel. Digital wallet integration improves convenience and security. The main drawbacks are acceptance for pre-authorised transactions, limited ATM allowances, and no Section 75 or FSCS coverage. Credit cards bring powerful protections and emergency flexibility but can be expensive for cash and may encourage overspending. A blended approach is usually best: prepaid for day-to-day travel spend, credit for deposits and major bookings, small amounts of cash for tips and taxis.

Red flags and fine print

• No FSCS: Avoid parking large balances on prepaid cards.
• Pre-authorisations: Expect issues with car hire and some hotels. Use a credit card instead.
• Weekend FX: Small markups can apply when markets are closed.
• ATM operator fees: Independent ATMs may charge. Withdraw slightly larger, less frequent amounts.
• Card freezing: Great for security, but do not forget to unfreeze before a payment.
• Budget creep: Set alerts and caps. Load in tranches to stay on plan.

Rule of thumb: Load little and often, never more than you can afford to lose.

If not prepaid - your other routes

• 0% FX credit card: Strong for purchases abroad, adds Section 75 on eligible transactions. Avoid cash withdrawals.
• Bank debit with travel tier: Some premium accounts waive FX fees. Check monthly fees vs savings.
• Cash: Useful as a backup, but risky to carry. Buy when rates are favourable and store safely.
• Multi-currency accounts: Keep balances in destination currencies, then spend with a linked card for predictable rates.

Your questions, answered

• Are prepaid travel cards cheaper than debit and credit overseas? Often yes for day-to-day spending and ATMs, but compare your specific card’s FX markup and cash fees.
• Do prepaid cards have protections? Many have chargeback. They do not have Section 75. Funds are safeguarded, not FSCS protected.
• Will my prepaid card work everywhere? Widely for retail and dining. Not reliable for car hire, large deposits or offline terminals. Carry a credit card.
• How much should I load? Only what you plan to spend in the next few weeks. Keep surplus in your bank account.
• Can I use a prepaid card in a digital wallet? Yes. Integration is now common, improving security and convenience for contactless travel spending.
• What about exchange rates on weekends? Some providers add a small extra margin. If possible, convert on weekdays or hold local currency balances.
• Is this useful beyond travel? Yes. One in five UK adults use prepaid to budget and avoid debt, reflecting stronger financial discipline.

Make your move

• Pick a prepaid travel card with low FX and clear ATM terms.
• Keep a 0% FX credit card for deposits and big buys.
• Add both to your digital wallet for secure tap-and-go.
• Set spend alerts and decline DCC at the till or ATM.

Travel with costs under control and protections where you need them.

Important information

This guide is for general information only and does not constitute financial advice. Fees, rates and acceptance can change. Check provider terms before you travel and consider your personal circumstances.