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Bad foreign exchange rates have put many of us off from travelling abroad to the United States or the Eurozone, but there’s a well-kept secret that’s becoming increasingly popular from a financial and practical perspective: travel money cards.

How do travel money cards work?

A fresh entry into the plastic money family, travel money cards let you load up a card at a fixed exchange rate, which you can spend at your leisure when you arrive at your destination.

You can purchase these cards through online providers, then upload money anytime you choose on the internet, or by phone, or possibly via SMS services. At the minute the cards are available with simply these currencies: dollar, euro, and pound.

What’s the big difference?

One major gain is that you will be given an exchange rate that is much better than if you went to High Street and use the services of the bureaux de change. Another plus is that the exchange rate of the uploaded funds is fixed, so there will be no shocks after you use it. Conventional credit cards and debit cards typically use the exchange rate that applies at the moment of the transaction, so you never know what you have spent until you see your bill.

So is that all there is?

Yes – there’s more. How about no additional fees for the currency conversion? Some credit and debit card providers tack on an additional fee of around 2.75% on top of the exchange rate — which costs you even more.

If you didn’t know, debit and credit cards might also elicit an additional “till charge” when used in restaurants or shops, but the currency exchange card doesn’t have this fee. Be aware that debit and credit cards have high rates for any cash withdrawals, but the money on the currency card have been prepaid, not borrowed, so it’s not applicable.

Anyway… Is there a catch?

Well, since the cards need to have money transferred to them before you take off, you might find yourself having to save up for your travels, instead of just relying on your credit cards. However, considering these economic climate that’s not such a bad thing, is it? Another trivial drawback is the charges required for ATM withdrawals, but the good news is those fees will be a lot less on prepaid cards than on credit or debit cards.

One case of this is that, when this article was written, NatWest and RBS both had a withdrawal fee of two percent, which amounts to about 6 each time you withdraw the sum of 300. Currency exchange cards, however, have a flat fee that amounts to as little as 1.50 no matter how much your ATM withdrawal is.

The major draw back of a travel money card is that you will be charged as much as 2.75% if you use the card for a currency that wasn’t assigned to it when it was issued. For instance, if you paid for something in U.S. dollars on a card issued in euros, then you be required to to pay this foreign currency exchange fee. There are cards, however, that don’t carry an FX fee.

What about credit cards that can be used without FX costs?

Yes, there are such cards (Post Office classic, Nationwide Gold, and Abbey Zero), but the first two — even though they’re good deals, and include no conversion charges — still have big withdrawal fees (3 minimum, 2.5% of withdrawal) and this doesn’t compare favourably with travel money cards — unless you certainly need credit while travelling.

The Abbey card is an brilliant best-buy – no cash withdrawal expenses or foreign exchange, however there is a rather high interest rate of 25.9% on cash withdrawals! (Note: currently the rate is 22.9% for Nationwide and 20.83% for the Post Office).

That’s me, convinced — tell me more. Who has the best deal on travel money cards?

FairFX Euro Currency is simply the leading card on the market at the moment, with exceptionally good exchange rates, a 0% fee for the exchange rate conversion, and a very low ATM cost (1.50). You’ll also find a low ATM fee (1.95) with the Indigo Travelcard Euro, but it has a high conversion cost of 2.75%. For no conversion fee, there’s the ICE Travelers CashCard Euro… but it has a higher ATM fee (4).

When taking into consideration dollar cards, again, FairFX is the top deal, as the currency card charges just $2 for ATM transactions, and it doesn’t have a convert fee. Another bargain for dollar cards is the ICE Travellers CashCard, because it does not have a convert charge, and the fee for ATM transactions is just $3. Don’t forget that when there is no convert charge, the cards can be used for any available currency.

What’s the best travel money card for world travel?

FairFX have just launched what they call an ‘Anywhere Card’ which at the time of writing appears to be the top value of all the travel money cards for worldwide use.

The are no ATM costs with the FairFX Anywhere Card, and no loading fees either! A 1.5% transaction charge is the only fee that applies so it certainly appears to be the cheapest global travel money card on the market.

Be advised that for the moment FairFX has a special offer going which offers you a free euro, dollar or sterling card (normally 9.95) which just requires a small minimum initial load. So what are you waiting for? Get your own travel money card and start getting more value for your money!