UK travellers missing out as £438m languishes on pre-paid travel cards
UK travellers are returning from overseas holidays with a total of £438m sitting on pre-paid travel cards* as awareness of more cost-effective alternatives remains low, according to research from Currensea, which offers a money-saving debit card linked to existing bank accounts via open banking.
The research reveals that 15% of UK travellers use pre-paid cards for their holiday spending money – over 7.9m people across the UK, but only 15% spend all the money they topped up.
On average, travellers are returning from holiday with £55.20 left on these cards – funds which are at risk of being forgotten about if travellers don’t immediately withdraw, with frequent travellers returning with an average of £96. Unfortunately, withdrawals often result in fees or poor foreign exchange (FX) rates, meaning travellers are financially hit once again. For example, pre-paid card provider Caxton charges £1.50 plus a 2.49% exchange fee to convert back into GBP – as well as a £2 monthly fee if the card is unused for 12 months**.
Younger travellers are at particular risk of losing out as one in five (19%) 18-34 year olds return with over £100 still on cards, compared to 14% of 35-54 year olds. Worryingly, younger travellers are more looking to travel more than other age groups, with 14% of 18-34 year olds planning more overseas trips than before the pandemic, double the figure for 35-54 year olds (7%) and almost five times as many as those aged over 55 (3%).
Misconceptions around exchange fees are costing UK travellers
Almost two thirds (64%) of pre-paid card users claim they use it because it is convenient, despite having to top up from your bank account before travel.
Yet, over a third (34%) mistakenly believe that these pre-paid cards offer better foreign exchange (FX) rates on overseas transactions, with 26% of travellers opting for this option as they thought they could save money.
The research also reveals that over a fifth (21%) of travellers still persist with cash for 100% of their holiday spending. However, if they run out of money they face high fees from withdrawing cash from overseas ATMs or from currency exchange shops.
Currensea is a travel debit card which uses open banking technology to allow people to spend directly from their existing current account when abroad. Its users benefit from access to the best foreign exchange rates at only 0% to 0.5% above the FX base rate. The Post Office’s pre-paid Travel Money Card charges a hidden charge in the FX rate of up to 3.8% for topping up the card, as well as an additional 3% cross border fee for currencies outside the basic 23 offered on the card. Currensea saves at least 85% on every overseas transaction by cutting out the normal fees. For example, a user spending $1500 while visiting the USA would save £40 compared to using a card from a high-street bank and £50 compared to the Post Office’s Travel Money Card.
James Lynn, Co-Founder of Currensea, comments: “UK travellers are sitting on a huge stockpile of unused spending money. Many will have worked and saved extremely hard to enjoy their first overseas holiday since the pandemic but risk wasting huge amounts in foreign exchange fees if they aren’t savvy with how they get their holiday money.
“Too many people still believe that pre-paid cards offer the best solution when spending money abroad. They used to be seen as more secure – as if you lost your pre-paid card, you only lost the amount you topped up – however, banks and other financial providers have caught up. If you lose your bank card abroad, you can usually simply freeze it, meaning that the biggest advantage pre-paid cards may have had historically is no longer relevant.
“It’s a guessing game trying to figure out how much money you’ll need with many overestimating their spend. Whilst travellers can withdraw what is left on their pre-paid cards once they return from holiday, many are likely to forget the high fees they’ll face mean that it’s not worth exchanging. Unfortunately, many of these cards simply get stuck in a drawer at home and travellers are losing huge sums.”
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