Travellers Cheques Versus Prepaid Travel Cards

Ways to pay

There are now loads of different ways for holiday makers to spend their cash abroad – you can change your money up before you go – taking your foreign currency with you – or go to a foreign bank or hotel to change British Pounds into foreign cash.

However, it’s not a good idea to carry large quantities of cash with you while abroad.

Alternatively, you can pay using your usual credit or debit card, or a new prepaid travel card.

The more traditional way of taking money abroad – in the form of travellers cheques – now appears outdated. But are prepaid travel cards a better option?

What are travellers cheques?

Travellers cheques are issued by American Express in a number of currencies and denominations. You can buy them from any high street bank, the Post Office or any other bureau de change.

Once you’ve bought your travellers cheques, you simply need to sign them and take a note of each unique serial number. Travellers cheques can be replaced within 24 hours almost anywhere in the world if they are lost or stolen.

When you cash a travellers cheque, simply show you ID and sign the cheque again to pay for goods or exchange it for local currency.

Travellers cheques don’t expire and you can often buy them commission free.

The benefits of travellers cheques

• They’re cheap, with commission charges as low as 1 per cent of the total bought
• They’re safe – when signed, only the signatory – who must produce ID – can use travellers cheques
• They’re accepted worldwide in banks, retailers and foreign exchange bureaus
• They can be replaced almost anywhere in the world at 24 hours notice
• They never expire so if you don’t use them, you can save them for your next trip

The disadvantages of travellers cheques

• Increasing numbers of foreign retailers and merchants are not accepting travellers cheques, preferring credit cards or cash
• In many places, travellers cheques are only useful for changing into local currency at a banks or bureau de change
• The range of currencies offered as travellers cheques is limited

What are prepaid travel cards?

Prepaid travel cards are fast becoming an electronic alternative to travellers cheques. They work in the same way as a credit or debit card – they allow you to take cash out at ATMs, pay for goods in shops and also use chip and pin, making them safe and secure.

Prepaid travel cards use the Visa system, so are accepted anywhere that a standard Visa card can be used.

To use a prepaid travel card, you simply need to top it up with cash before you go abroad. Most of these cards charge between one and 1.5 per cent commission, though if you top up in the currency loaded to the card, there’s usually no charge.

You can get prepaid travel cards from a number of high street banks, such as Alliance & Leicester and Lloyds, or the Post Office.

Charges vary from one provider to the next, from a one-off set-up fee to a small charge each time you top up, and you might also be charged by ATM providers.

Unlike a credit or debit card though, a prepaid travel card is not linked to your bank account – so if it’s lost or stolen there’s less chance of someone draining your finances before you can cancel the card.

Also, because the money is pre-loaded onto the card, you can’t go over your budget – though you can still top up by phone, online or in participating banks and post offices. Bear in mind that each time you top up, your money may have more or less 'real' value, as currency fluctuates.

The benefits of prepaid travel cards

• You can draw money out at any compatible ATM
• You can pay for goods in shops just as you would with any other card
• Accepted anywhere displaying the Visa logo
• You don’t have to carry ID with you in order to get cash, as you would with travellers cheques
• They help you to stay within your budget
• They are safer than using your own credit or debit card abroad

The disadvantages of prepaid travel cards

• You need to have an alternative way of getting cash in case your card is lost or stolen
• Commission is typically slightly higher than travellers cheques
• You might also have to pay fees each time you top up