Pay-as-you-go holiday spending money

As sterling is so much weaker than it was a year ago, anyone travelling abroad for their summer holidays is going to find that their spending money buys far less. One result of this is that fewer of us are travelling abroad – see Innes Robinson’s piece ‘Recession hits Tenerife beaches’ on the GCSE blog, with its link to a video report on the BBC website showing glorious empty beaches, and the business closures, cancelled flights and growing unemployment in Tenerife as a result. Another result is that holiday makers will feel that their spending budgets are under pressure, and finding the best exchange rate could make a big difference. The BBC found that the cost of buying 500 euros varied hugely, from £423 to £463, which really makes shopping around worthwhile.

To help with budgeting, a number of banks, foreign exchange bureaux and the Post Office have identified a gap in the market and have introduced a new consumer product, designed to persuade you to use their exchange services before you go on holiday. This is a pre-paid card, working on a similar principle to a pay-as-you-go mobile phone, on which you load money via telephone or the internet before you go abroad. The cards are usually denominated in euros or dollars and are accepted in shops and restaurants around the world, wherever conventional credit or debit cards are taken. Because your money has already been converted to the currency of your choice at the moment that it was transferred to your card, there is no further fee applied when you use it; and you know the rate as which the money was converted so there are no nasty surprises like commission to be added to your purchases.

It seems that you still have to choose your card carefully – some will incur a charge if you use them in a cash machine, and others make a charge as you load cash onto them. You also have to keep a close eye on your spending, as there is no overdraft or loan facility – once you have used up all the money that you loaded onto the card, it won’t let you spend any more. But that would have the advantage of ensuring that you don’t accidentally end up spending far more on holiday than you meant to, and having to pay it all off later. Here are two links to articles about the cards - one to a written description, and one to a video report.