How To See The World On A Budget: Prepaid Debit Cards

Planning a trip should include a healthy dose of thinking about money. It is best to do this before the actual departure to make sure you don’t run out of funds mid-trip or stress after you get home and check your bank statements.

One way of making sure you never go over your initial budget is to use prepaid debit cards. These tools act just regular cards, the only difference is that they are not connected to any accounts, which helps you manage the urge to overdraft.

Benefits of a prepaid card

You get all the perks of having a card, like withdrawing money from an ATM in local currency, paying at accepting locations, making reservations, and more. To get an overview of top rated prepaid cards you can check this review by AAACreditGuide.com.

The advantage of using this solution when traveling abroad is that it limits your potential loss if you get robbed or are just careless.  Some well-versed travelers don’t even think about taking their debit cards with them in foreign locations since this could endanger their checking account and they are not ready to take that risk.

Just load money on it and keep track of your spending to avoid having your card declined during your trip. Most cards come with attached apps that simplify this process and help you monitor the remaining balance in real time. The app also enables you to top up your account, if necessary. Furthermore, it can offer you insights about how you spend your money.

Having such a card also protects you from predatory currency exchange bureaus. Some of these are even located in airports and offer sub-par rates. Instead, find the nearest ATM and get local currency at an internationally accepted rate. When prompted, always choose the local currency option for payment, even if your card was pre-loaded with your domestic.

Some companies even offer family options where you can have a card for each member with different allowance limits. This is one way to help your teenager travel on their own without worrying that they will dry your funds. It’s basically a digital traveler’s cheques.

If you are looking specifically for a prepaid card for traveling you can ask for a chip and PIN option since these are the norm in Europe and other parts of the world. You might be surprised to get even a few perks like purchase coverage, emergency assistance abroad, and luggage reimbursement.

Possible drawbacks and solutions

Depending on the issuing bank, some of these have monthly maintenance taxes around $2-$5. Most of them offer the possibility to waive the fee if you load a moderate amount monthly.

Some cards have fees for each purchase, and the rate can be different for signature purchases versus PIN purchases. Also, beware of the inactivity fee. If you don’t use your card for some time, you might be charged.

Some issuing companies give you the option to overdraft a bit but only use this as an emergency option, it can get pricey.

The other problem with such a card is that it is not part of the instruments used to create your credit score. Since this is not a credit card, it can’t directly improve your score. There is a small trick you can do to waive the fee and enhance your FICO at the same time. Just schedule an automatic monthly payment from your credit card to the prepaid one.

Bottom line

If you are an occasional traveler and want to enjoy your trip as safely and cheaply as possible, the prepaid card could offer you peace of mind. It will also help you stick to a preset budget and protect you from exchange rate variations. Consider this option if you are a parent and you want to help your teenager get a sense of freedom without spending recklessly. Frequent travelers could get more value from using their credit cards and earning rewards and miles in the process.