Prepaid travel cards: Leave home without them
Seattle Times staff columnist
When Bob Carlson, a software developer from Eugene, Ore., took his family to Europe last June, he loaded 2,000 euros — the equivalent of about $2,425 — onto a prepaid American Express Travelers Cheque card with the expectation that he would use it to get cash while traveling.
Three weeks later Carlson returned home, frustrated that he was unable to find many ATM machines or merchants that would take the card. "Every machine I tried to use with my [bank] debit card worked," he said. "The ones that took the travel-funds card were few and far between."
Making matters worse, Carlson discovered he couldn't use the card to get cash at American Express offices the way he might with regular traveler's checks. When he did find an ATM, he found there was a limit on how much he could withdraw.
"I wasn't able to do enough transactions to get all the money off the card," he said. Carlson came back with 250 euros left on it. "I've still got it in my pocket."
With banks raising their fees for using credit cards and ATMs, travelers such as Carlson are more confused than ever about the best way to obtain cash and pay for hotels and merchandise.
Now along comes a marketing push for the prepaid travel cards — the Travelers Cheque card from Amex and the Visa TravelMoney card. (MasterCard doesn't offer a prepaid card in the U.S. but plans to introduce one later this year.)
Both are designed to be used anywhere Visa and Amex are accepted, including ATM machines. The theory is that they eliminate the hassles of carrying cash or traveler's checks, and, unlike debit or bank-issued ATM cards, aren't tied to a bank account.
My guess is that not everyone will wade through the pages of "terms and conditions" attached to using these, but those who do are likely to conclude, as Carlson did, that these are cards you can afford to leave home without.
Fees and more fees
Amex says it's now possible to obtain cash with its cards at its offices worldwide — a change in policy since the time Carlson traveled. Both cards, however, come with a long list of fees — essentially charges for using your own money — and some restrictions on where and how they can be used.
Those without a bank account or credit card, such as students, or people who need a self-imposed limit on their spending might find them worth the cost, but for most travelers there are better alternatives.
Regardless, anyone who might be considering a prepaid card will want to note important differences between the Amex and Visa cards. One of the largest sellers of the Visa money card is the American Automobile Association, which offers it through a partnership with London-based Travelex. AAA's terms and conditions are more favorable than those of most banks that also sell the card.
Activation and ATM fees
American Express charges a $14.95 "activation" fee to initially load cash onto its Travelers Cheque Card ($300 minimum, $2,750 maximum), plus $5 for each reload.
Visa's fee on the AAA TravelMoney card is $4.95 for members and $9.95 for nonmembers, with three free reloads ($250 minimum, $1,500 maximum if purchased by telephone or online; $9,999 maximum if purchased at a AAA office).
The Amex card can be loaded in U.S. dollars, euros or British pounds at a conversion fee of 3 percent over the official exchange rate (the interbank rate published in daily newspapers or available on sites such as www.oanda.com). The Visa card is available only in U.S. dollars.
Both cards can be used to make purchases anyplace that accepts Visa or Amex, and to withdraw cash from ATM machines, but both place limits on the amount you can withdraw per transaction, and levy withdrawal fees — $2.50 for Amex; $2.50 for Visa in the U.S., $2 elsewhere.
Many banks also charge ATM withdrawal fees; some, including Bank of America and Wells Fargo, levy as much as $5 on foreign transactions, but savvy consumers can avoid these by using a cash card issued by a credit union or a bank that doesn't. (More on this below.)
Perhaps the biggest pitfall of the AAA Visa TravelMoney card is the foreign-currency conversion fee. If you use the card to withdraw cash or make a purchase in another country, including Canada and Mexico, you will pay a 7 percent surcharge over the official exchange rate. American Express adds 2 percent.
The highest foreign-currency surcharge levied by any U.S. bank is 3 percent — 2 percent for the bank plus a 1 percent processing fee charged to the banks by Visa or MasterCard and usually passed on to customers. With the exception of that 1 percent fee, consumers can avoid paying anything more by using cards issued by credit unions or banks that don't levy surcharges.
The list of fees attached to the cards goes on to include a charge for a printed monthly statement (Amex $5, Visa 50 cents), overdraft fees ($15 on each) and provisions for a "cash out" fee if you have money left on the card and want it back (Amex $10, Visa $15).
Amex prohibits some types of purchases with the Travelers Cheque card. Gasoline paid at the pump through automated terminals, cellular phone and Internet charges, airplane phones and onboard cruise charges are a few.
AAA's agreement with Visa allows for these types of purchases if the balance left on the card is 10-15 percent more than the cost of the item.
Lost or stolen cards
Unlike travelers checks, which you can buy and carry in small denominations, the prepaid cards are designed to be loaded with large amounts of cash. Lose the card and you lose it all until the reimbursement comes in.
Amex promises a refund on lost or stolen cards within 24 hours. AAA's agreement says unauthorized transactions will be recredited by Travelex in five business days, but "the goal is to have more than 90 percent done in 24 hours," says AAA spokesman Justin McNaull.
Mary Ann Catlin of Medfield, Mass., found it all more hassle than it was worth when she returned home from a trip to Italy last year and found that a bank in Venice that had refused her card at its ATM actually processed a withdrawal for $314.
Catlin said she called the number on the back of her card and was connected with a representative from Travelex in England. "They were very nice ... but after one, two months, there was no resolution.
"I got a supervisor on the phone who agreed to close the account and refund the money left," she said, but she soon began receiving letters "that I owed them money. They agreed with the Italian bank on the dispute."
The matter was ultimately resolved in her favor after the branch manager at her local AAA intervened.
Advertising for both cards plays up the fact that they aren't tied to bank accounts. Catlin said one reason she used the money card instead of her ATM card is that "I didn't want my account to be vulnerable." But banking experts generally agree this is not a major risk.
Federal laws limit your liability on cards tied to a bank account ($50 if you report the loss in two days; up to $500 if you wait longer). More important, virtually all banks go beyond that to offer the same "zero liability" protection on debit and cash cards that do they on credit cards.
Bank of America, for instance, promises to credit unauthorized debit transactions up to any amount the next day if they are reported within 60 days of receiving a statement.
Most travelers will be better off using a no-annual-fee credit card with the lowest foreign-currency conversion surcharge, and obtaining cash from ATMs as they go with a cash card issued by a bank or credit union with no withdrawal fees.
Notify your bank or credit-card issuer that you'll be traveling and using your cards in places you normally don't, and keep your pin number secure. It's a good idea to carry a second card and traveler's checks as a backup.
Locally, no-fee ATM and credit cards are available from Boeing, Watermark and some other state-chartered credit unions (membership is open to anyone who works or lives in Washington), as well as some local community banks.
One national commercial bank, Virginia-based Capital One (www.capitalone.com), offers a credit card with no foreign-conversion surcharge. It absorbs the Visa and MasterCard 1 percent fee instead of passing it on to customers.
See www.bankrate.com/currencyconversion, a link to a study by Bankrate.com thatcompared charges among 10 large credit-card issuers. Seattle-area consumers will want to keep an eye on at least two of the financial institutions mentioned. Providian Financial Corp., the nation's ninth-largest credit-card company, will become part of Seattle-based Washington Mutual in October. MBNA, the third-largest, is being acquired by Bank of America.
Carol Pucci's Travel Wise column runs the last Sunday of the month in the Travel section. Comments are welcome. Contact her at 206-464-3701 or email@example.com
Copyright © 2005 The Seattle Times Company