Prepaid travel card or debit card abroad

A prepaid travel card is one you load with foreign currency before you travel, then spend as you would your everyday debit card¹. It is not linked to your bank account, so the money on it is separate from your current account³. A debit card, by contrast, draws directly on your current account and is accepted almost everywhere, but your bank may add a foreign exchange fee of often around 3% of the transaction and a cash machine charge of typically between £1 and £3 each time you use it abroad, except for euros in the EU⁴.

The choice comes down to what each one costs and where each one is accepted. Prepaid cards can often avoid ATM withdrawal charges and other bank card charges, and you lock in an exchange rate when you load¹. But prepaid travel cards may not always be accepted, and you need to check the terms of your provider before you travel, for example for hiring a car or paying on a cruise⁶. Debit cards work in far more places, but the fees are set by your bank and vary widely.

Neither is a credit card, so neither carries Section 75 protection on purchases. You cannot apply for a Section 75 claim if you paid with a debit card, and the same limit applies to prepaid cards⁷. That matters most for large purchases such as flights or a holiday booking.

Loaded before you go: currency on a prepaid card

A prepaid card is one that you can load up with foreign currency before you travel¹. You decide how much to put on it, in which currency, and at what exchange rate. Because the money is already on the card, purchases use money that is already loaded onto it rather than borrowing¹¹. The card is a payment card, meaning it can be used to withdraw money or pay for goods and services, alongside debit and credit cards¹⁰.

The main appeal is control. You cannot spend more than the balance, so a lost card does not expose your current account. Prepaid cards can often avoid ATM withdrawal charges and other bank card charges¹. You also lock in the exchange rate at the time you buy, and providers commonly advertise 0% commission on loading⁵.

How many currencies you can hold depends on the card. Some prepaid travel money cards store up to 22 currencies, and some allow you to hold multiple currencies at once⁸. That means you can load euros for one trip and dollars for another without opening a new product, though each card sets its own list.

There is a catch with the balance. Aim to use unused funds from a prepaid card within 12 months of returning home, or before the card's expiry date, whichever is sooner¹⁰. Money left beyond that can be difficult to recover. Prepaid accounts also cannot be used to set up direct debits, so they are spending cards rather than a replacement for a current account¹².

Using your debit card abroad

A debit card is linked to your current account, and spending abroad draws on that account¹³. It is accepted wherever the card network is accepted, which in practice is most shops, restaurants, hotels and cash machines worldwide. Some banks, including first direct, say there is no need to let them know you are travelling and planning to use your debit card abroad¹⁴.

The cost is the issue. MoneyHelper sets out the two charges that typically apply: a foreign exchange fee, often around 3% of the transaction amount, and a spending or cash machine charge, typically between £1 and £3 each time you use your card, except for euros in the EU⁴. On a two week trip with regular card use, those add up.

Banks differ, and the differences are worth checking before you go. Bank of Scotland says there are fees for using your debit card abroad¹⁶. HSBC says you may still be charged an international transaction fee on your debit card¹⁷. Bank of Ireland's student account charges 2.75% of the foreign currency amount spent on debit card payments¹⁸. Halifax takes a different approach, saying it will not charge debit card fees when you use your Reward, Ultimate Reward, Student or Graduate debit card abroad¹⁹.

Some accounts are built for travel. Ulster Bank's travel account charges no transaction fees from the bank when you spend in the held currency with sufficient funds, and uses the same debit card as your linked current account, so no separate card is needed²⁰. Cater Allen notes that if you make a payment using your debit card in a foreign currency, Visa converts it into the currency of your account, not the bank²². That conversion is where the exchange rate, and the cost, is set.

Where prepaid travel cards are often refused

This is the practical limit that catches people out. If you want to pay at a petrol station, hire a car, or pay on a cruise, generally you can only use a credit card, a debit card or a travel debit card; prepaid travel cards are often not accepted⁹. The reason is that these merchants want a card that can guarantee a larger sum than the balance sitting on a prepaid card, either as a deposit or as a hold.

The same warning appears in providers' own guidance. Prepaid travel cards may not always be accepted, and you will need to check the terms and conditions of your chosen provider before you travel, for example for hiring a car or paying on a cruise⁶. That is not a small exclusion: car hire and fuel are two of the most common holiday expenses.

If your trip involves driving, a prepaid card alone is unlikely to cover it. A debit card linked to a current account, or a credit card, is more likely to be accepted at a hire desk, though the hire company's own rules decide. Some cards bundle car hire benefits: the Arab Bank Europe Premium Visa Debit Card offers 15% off premium global car hires with SIXT plus access to travel, retail and lifestyle merchant offers²³. That is a debit card, not a prepaid card, and it is one provider's own offer.

The refusal is not about the money being real. It is about how the merchant authorises the payment. A prepaid card holds a fixed balance, and a merchant that wants to hold a deposit cannot be sure the balance will cover it. That is why the refusal tends to happen at the point of sale rather than online.

Travel debit cards: spending in many currencies from your own account

A travel debit card sits between the two. It is a debit card, linked to your own account, but built to reduce the cost of spending abroad. Currensea's travel debit card, for example, lets you spend in 180 currencies anywhere Mastercard is accepted, using the card, Apple Pay or Google Pay²⁴. It is a debit card, not a prepaid card, so it draws on your account rather than a loaded balance.

The distinction matters for acceptance. Because it is a debit card, it is accepted where prepaid cards are often refused, including petrol stations and car hire⁹. It also avoids the prepaid card's leftover balance problem, since there is nothing to load and nothing to run down.

The trade-off is that it is still linked to your bank account. A prepaid card is not linked to a bank account, which is the whole point of the separation³. If your concern is limiting exposure, a prepaid card does that in a way a travel debit card does not. If your concern is acceptance and simplicity, the travel debit card is closer to an everyday card.

Some providers make savings claims for travel debit cards against prepaid cards and high street banks. Currensea states that a two week family holiday to Florida saves over £290 using its travel debit card compared to a prepaid travel card or your bank⁹. That is the provider's own comparison, not an independent figure, and it depends on the spending pattern assumed.

Prepaid card or debit card: which suits your trip

The two products suit different trips, and the deciding factors are where you will spend and how much you want separated from your main account.

A prepaid travel card tends to suit a trip where a fixed budget in local currency is wanted and spending happens in shops, restaurants and online. Money is loaded before the trip, the rate is locked in, and the balance cannot be overspent. Prepaid cards can often avoid ATM withdrawal charges and other bank card charges¹. For anyone who wants to pay with plastic but does not want a debit or credit card, a prepaid bank card might be the right option²⁵. The limits are the leftover balance, which needs to be used within 12 months of returning home or before the card expires, whichever is sooner, and the places that refuse it¹⁰.

A debit card tends to suit a trip where acceptance matters most, or where you would rather not manage a separate balance. It works almost everywhere, and some banks charge no fees for spending abroad on certain accounts¹⁹. The cost is the foreign exchange fee, often around 3%, and the cash machine charge of typically £1 to £3, except for euros in the EU⁴. Those are averages across the market; your own bank's terms decide what you pay.

A travel debit card suits a traveller who wants debit card acceptance with lower foreign spending costs, and who is comfortable with the card being linked to their account²⁴. It is not a prepaid card, so it does not give the separation a prepaid card gives.

Whichever you choose, the protection picture is the same for both: neither is a credit card, so neither carries Section 75. You cannot apply for a Section 75 claim if you paid with a debit card⁷. For a large booking, that is a reason some travellers put the purchase on a credit card instead.

If something goes wrong

The Financial Conduct Authority regulates firms in the financial services industry, alongside the Prudential Regulation Authority²⁷. It regulates credit products such as credit cards, personal loans and overdrafts²⁸. Prepaid cards are e-money products, and providers state their regulatory status in their terms²⁶. If a prepaid card provider stops trading or goes out of business, your rights depend on how the money was held, and you can find general guidance on what to do when a company stops trading⁷.

If you have a complaint about a prepaid card that is not handled as you requested, you can take it further²⁹. The Financial Ombudsman Service deals with complaints about consumer credit, including unaffordable lending³⁰. The FCA took over the regulation of consumer credit from the Office of Fair Trading in April 2014, and launched a market study into credit cards in November 2014³¹.

For free, impartial help with money problems, including debt, you can contact MoneyHelper or a debt advice charity. If a prepaid card balance is lost because the provider failed, that is a debt advice question as much as a consumer one, and the same charities can help.