As consumers look for ways to manage their money more efficiently and carefully, they have been turning away from traditional banking services and towards prepaid cards in increasing numbers. A market report last year from the Mercator Advisory Group Inc determined that the amount of money loaded on general purpose reloadable prepaid debit cards in the US has almost tripled from 2008 to 2012, rising to $76.7 billion. Mercator predicts that number will have more than doubled again to $168.4 billion by 2015.
In the UK there has been a similar explosion of prepaid card products being offered by all manner of issuers, from major banks and financial institutions to international retailers and service providers. The Prepaid International Forum (PIF) notes that while there were only 50 such products available in 2007 the range of prepaid cards has swiftly risen to over 240 currently on offer.
Prepaid cards offer a number of attractive advantages in the modern economic environment. Whether they are designed for use in international travel, public transport, online/offline retailing or as a part of an incentive rewards scheme, they offer their users increased security and a simpler way to budget accurately. It’s these twin advantages that have seen their popularity rise accordingly and nowhere is this more apparent than with the prepaid travel card market.
Like any prepaid card, those designed for travel primarily offer users peace of mind as they represent a safer way to carry multi currencies abroad. They are loaded cash which can be used for purchases and cash withdrawals at ATMs much like any credit/debit card, but the card itself is not linked to the owner’s bank account.
In addition, in the event of the card’s theft or loss the owner can quickly and easily get a replacement card with any unused funds transferred over for free or for a nominal fee with some providers.
As well as security, the other obvious benefit is simple and effective holiday budgeting. Modern consumers are becoming much more aware of the hidden costs involved of spending abroad, understanding that regular use of their credit/debit cards can lead to them racking up significant charges to be dealt with back home, or even worse, running out of money while on holiday. Prepaid travel money cards are preloaded with currency fixed at that day’s exchange rate. This allows the user to know exactly how much foreign currency they will have access to via the card, regardless of fluctuating exchange rates. The given rate on the day you make the exchange is the rate you get.
Put simply: prepaid travel money cards allow consumers to accurately predetermine how much they want to spend while travelling so they can budget accordingly and avoid overspending.
As with credit/debit cards, prepaid travel card issuers still exact a variety of charges and fees which can vary immensely from provider to provider. Some levy activation/cancellation or monthly usage charges, others charge for card transactions or ATM withdrawals, others still charge ‘inactivity’ fees for cards which aren’t used after 12 months. As with any financial product, those who fail to read the small print can find their balance wiped out by a charge they weren’t expecting.
Ranking prepaid cards across the industry remains a challenge due to the fact that the fees can be convoluted and generally depend on how the card is used. The same card can cost one consumer nothing to use while another consumer with frequent loads and ATM withdrawals can amass significant charges in a short space of time. The best way for end users to find the most appropriate provider is to carefully plan how they are going to use the card and find a provider with the lowest fees for their preferred activities.
The following are some of the most newest and innovative prepaid travel cards for UK and European travellers as they keep their fees transparent and simple while providing versatile and convenient service:
Introducing a whole new dimension to the travel money, banking and payment card experience, Centtrip is the world’s first prepaid MasterCard to offer 14 currencies on a single card at ‘spread-free’ exchange rates. Managed on the go via smartphone app or online through a multi-currency travel account, Centtrip is set to revolutionise both the corporate and consumer space with transparent and fairer pricing alongside effective and intuitive account management.
With no charge for point-of-sale transactions in the UK or abroad and lower international ATM fees alongside the heritage and confidence of the MasterCard marque - accepted at over 34 million locations and 2.1 million ATMs worldwide displaying the MasterCard Acceptance Mark - the Centtrip prepaid MasterCard is the essential travel companion for all of life’s adventures whether on business or pleasure.
With an annual turnover of £760 million, Caxton FX is clearly benefiting from the simplicity of its card usage policy, which has free issuance, transactions and ATM withdrawals, with no load charges. Accepted in 35 million outlets worldwide, with all major currencies available, the Caxton FX card is versatile enough to support the vast majority of European holidaymakers.
Even’s key differentiator is that it offers a card which allows for overseas spending and withdrawals at the Wholesale Interbank Foreign Exchange Rate; the lower rate that banks and financial institutions offer each other to move money around the world through innumerable trades every day.
Rather than relying on banks and financial middlemen, WeSwap’s approach is to utilise smart peer-to-peer technology to connect people travelling in different countries to allow them to swap currencies directly. You simply load your account with the amount of currency you wish to trade and confirm which currency you would like instead, then WeSwap make the trade at the mid-market rate, charging a single, transparent fee of between 1% and 1.4%, depending on how quickly you want access to your money.
Increased focus on budgeting and security for both travel and online payments has elevated the relevance of prepaid travel money cards among banked consumers who want to segregate their spending for better control. For those seeking an alternative way of utilising their travel money that is safer than cash and more convenient and versatile than traveller’s cheques, the prepaid card satisfies the needs of both leisure and business travellers.
As more prepaid travel card products become viable alternatives to airport and high street exchange service providers, leading industry analysts predict that they will secure significantly greater market share within the next 5 years. This should encourage major banks and currency exchange service providers to follow suit and improve the transparency of their charges or else offer more attractive exchange rates in order to compete effectively.
However, the rapidly evolving innovation of prepaid cards has greater ramifications that extend beyond the travel industry. The entire prepaid concept is beginning to shed its rather unfavourable reputation for high interest rates and convoluted fees, with the best providers who adhere to the principles of simplicity and transparency steadily gathering more customers and positive press. Consequently, more people are turning towards prepaid products as a money management tool for all manner of financial activities; travel, budgeting, borrowing, providing unbanked children with an allowance that cannot become overdrawn, etc.
As new FinTech innovations continue to narrow the gap between borrowers, lenders and individual money traders, the costs of moving money domestically and internationally are shrinking accordingly. The travel money industry –with its prepaid cards that embrace peer-to-peer trading, wholesale interbank exchange rates and lower fees overall – demonstrates the shape of things to come for the prepaid concept.