Prepaid currency card confusion costing Brits
Brits are incurring millions of pounds in credit and debit card fees after being left confused by prepaid currency cards, according to the findings of a new report.
In the in-depth study, over 3,000 British holidaymakers were questioned about their holiday spending money and more than 50 of the most popular debit, credit and prepaid holiday money cards were analysed. It was commissioned by the UK’s leading foreign exchange provider, Travelex, and carried out by independent financial journalist Andrew Hagger.
The findings revealed that the majority (77 per cent) of Brits taking a holiday abroad this summer will use a credit or debit card to fund purchases or withdraw cash – while nearly half (48 per cent) said they had deliberately chosen not to take a prepaid card after being left confused about which one to choose. Travelex estimates holidaymakers could incur in excess of £100million in fees and charges by using their credit and debit cards abroad this summer and is calling for a uniform method of displaying prepaid card information to make it easier for consumers to choose the right card.
Currency conversion or load fees are the most common type of charge levied by providers for credit or debit card transactions abroad. The fees see users incur, on average, 2.75% every time a credit or debit card is used abroad; which could add nearly £70 to the cost of a family holiday every year, compared to using the cheapest prepaid card. A frequent traveller could save £270 over the course of 12 months by using a Travelex Globe prepaid card.
When questioned, four in ten (41 per cent) cited that choosing a prepaid card was “extremely difficult” while the majority (68 per cent) revealed they couldn’t work out the best value card. The confusion means that hundreds of thousands of travellers are missing out on holiday savings as well as the security benefits of carrying a prepaid travel money card.
Independent financial expert, Andrew Hagger, comments: “There has been an explosion in the number of prepaid cards in recent years, with different cards for different currencies and a myriad of different companies offering prepaid cards. However, unlike credit or debit cards, there isn’t a uniform way of displaying these cards so holidaymakers are faced with a bewildering array of fees, charges and terminology.”
Travelex’s unique report was carried out as part of a wider campaign to highlight the benefits of prepaid currency cards and the confusion around travel money card information and to encourage all prepaid card providers to display fees and charges in a simpler, clearer way for consumers. It is hoped that a benchmark will be set for the industry to follow.
In the study, not being able to understand the charges, or how to compare prepaid cards, were cited as the most common reasons for the confusion among holidaymakers. A worrying quarter of holidaymakers (25 per cent) don’t realise they are incurring fees and charges using credit and debit cards abroad, while one in five travellers believe credit and debit cards are actually cheaper than using a prepaid card.
Travelex’s report comes after the OFT published its investigation into credit and debit card surcharges and fees at the end of last year which has led to greater clarity around the fees and charges levied on debit and credit cards when used abroad.
As part of the Travelex study, British travellers were given the published fees and charges from some of the most popular prepaid currency card providers and asked to calculate the cost of withdrawing £100 from an overseas ATM. For the Post Office Travel Money Card Plus, only three per cent of those questioned were able to correctly recognise the correct cost of £4.50. Less than 10 per cent of the respondents correctly identified that it would cost £2.75 to withdraw £100 using the Global Traveller card from Caxton FX.
The terminology used by prepaid card providers is also revealed as adding to the confusion for holidaymakers. Travelex’s study shows there are, on average, five different terms used by card providers to describe the same charges. When asked to identify the correct term used to describe a charge to withdraw cash abroad, respondents were so confused that they chose five different answers, and nearly half (48 per cent) were unable to identify the most common term for the one-off fee levied by some providers when issuing a prepaid card.
In response to the study Travelex has launched a new industry standard for presenting information across its portfolio of seven leading prepaid cards, which it hopes will be adopted by other card providers. Available at travelex.co.uk, it aims to end the confusion by simplifying the way information is presented, providing a glossary to help inform holidaymakers about the different terms and presenting a number of different spending scenarios for each prepaid card.
Phillip Hanson, at Travelex, comments: “We’re pushing for greater clarity and transparency to make it easier for travellers to decide which product is right for them and we are sure that more of them will discover the benefits of the prepaid currency card and save money when they head abroad.
“Prepaid currency cards offer a fantastic way of getting cash and paying for things when you’re abroad. You get all the convenience of a debit or credit card, plus the peace of mind that there’s no link to your bank account, without all the fees and charges associated with using credit and debit cards abroad. Over 90 per cent of prepaid currency card users would recommend them to a friend, yet only 10 per cent of travellers have ever used one.”