Travellers are increasingly warming to prepaid travel money cards as the next best thing to carrying cash.

Travel money cards such as the well-known Travelex Cash Passport and the relatively new American Express Global Travel Card combine the convenience of credit cards with the simplicity of cash exchange.

When you buy a travel money card you also buy a certain amount of foreign currency at that day's exchange rate. This sits in credit on the card in the foreign currency -- unlike the fluctuating exchange rate that applies to credit cards and ATM withdrawals when used overseas.

Travel Money cards also have the advantage of being totally separate from your bank account. Even if your card is defrauded while overseas, the most you could lose is the amount of money you've preloaded onto the card.

The biggest advantage of all, though, is that there are no per-transaction fees for using travel money cards to make purchases.

Unlike credit cards that charge up to 3.5% on every overseas purchase ($35 out of every $1,000), if you've loaded a travel money card with US dollars, and make a purchase in US dollars, there's no surcharge. In that way, they're much like spending cash.

ATM cash withdrawal fees are also cheaper with travel money cards than with ordinary bank ATM cards. For example, NAB charges $4 + 2% per overseas withdrawal ($24 on $1000), while ANZ, Commonwealth Bank and Westpac charge $5 + 3% ($35 on $1000). 

However, travel money cards charge no percentage surcharge (as long as you're withdrawing cash in the currency you loaded onto the card) and a reduced flat fee -- for example, $2 for US dollar withdrawals on an American Express Global Travel card.

The four cards on test

We compared the four cards on the market:

• ANZ Travel Card
• Commonwealth Bank Travel Money Card
• American Express Global Travel Card
• Travelex Cash Passport

Many outlets offer travel money cards that are just rebranded Travelex Cash Passport cards. We have not included them in this review. 

Revealed: the hidden fees of travel money cards

Like any financial product, all sorts of fees and charges apply to catch the unwary. Still, even cash exchange is laden with fees, as evidenced by the atrocious rates charged at bureaux de change for walk-in (not pre-arranged) exchanges.

We've done the work of sifting through the fees and charges for you, to identify the charges you need to watch out for.

Initial card purchase fee: with all the travel money cards, you pay a one-off fee to buy the cards. This ranges from $11 (ANZ Travel Card) to $15 (all the others). Compared to the rest of the fees, this fee is inconsequential, however if you are travelling to numerous countries with different currencies, it does become more important if you have to buy travel money cards in various currencies, where the up-front fee is multiplied by the number of cards you need.

It is worth noting that the American Express and Travelex cards can be purchased at Australia Post with an $0 card fee, rather than the standard $15 card fee.

Initial cash purchase surcharge: most cards include the initial 'cash load' onto the card as part of the purchase fee. The only exception is Travelex, and only if you are loading Australian dollars onto the card -- they will take 1.1%. Loading a foreign currency onto a Travelex card is free when you initially buy the card.

Cash reload fee: when you need to add more money to the card, all the cards charge 1 to 1.1% of the amount you're loading on. American Express Global Travel Card compares well to the other cards here -- it charges 1% of the reload amount, but caps it to a maximum of $10 each time, which means any recharge over $1,000 is a discounted rate.

ATM withdrawal fees: every time you withdraw money from a foreign ATM, there's a flat fee charged. The cheapest fees are from American Express and ANZ -- $2.00 and $2.20 respectively for a withdrawal in the USA or £1.25 in the UK. Travelex is more expensive, charging $3.75 for a withdrawal at a USA ATM, and Commonwealth Bank is between the two extremes.

Shop surcharges: while this is not strictly a fee directly charged by the travel card provider, it will affect you nonetheless. While Visa and Mastercard purchases don't usually attract additional surcharges when paying for something at a shop, American Express cards often do. Using the American Express Global Travel card means you'll be paying up to an additional 5% on purchases (the average seems to be around 2.5 - 3%, and some outlets charge nothing extra and absorb the Amex cost into their prices.) In the USA, merchants are contractually obliged to American Express not to charge surcharges for American Express purchases, but some will still try to apply them.

Wrong currency purchase fee: if you've loaded US dollars onto your travel money card but buy something in British pounds, the travel card provider charges a percentage surcharge to convert the transaction across. This is generally a similar rate as what's charged for ordinary overseas credit card purchases -- ANZ just says "the wholesale market rate from Visa", while Commonwealth Bank charges 2%, and American Express 3%. Travelex is horrendous on this point: it slugs you 8.45% of the transaction.

^{ANZ figure is estimated}

Monthly inactivity fee: ANZ and Travelex start draining your card balance if you haven't used the card for more than 12 months, at the rate of a few dollars a month. Commonwealth Bank and American Express do not charge this fee, and allow cards to remain open indefinitely.

Card expiry balance forfeiture: if you keep a balance on your travel card past the expiry date on the card, ANZ, Travelex and Commonwealth Bank will zero your balance and keep it for themselves. American Express Global Travel Card is more ethical on this point -- it holds the money in trust until the cardmember claims it, even if the card is expired.

Account closure fee: if you complete your trip and decide you want to get your money out of the card again and back as Australian dollars, you can close your account and convert the money back at the current exchange rate. Travelex is the only provider that also charges an additional $10 fee for this.

How the travel money cards differ

Apart from the differences in fees outlined above, some of the cards do have some unique features:

Multiple currencies on one card: Commonwealth Bank is the only travel card provider that allows you to load up to six currencies onto one card.

You can put different amounts of money into each currency, and when you spend money in each country, it's deducted from the appropriate currency balance.

If you run out of money in the right currency, the card will fall back to another currency, but you will be charged a wrong currency conversion fee of 2% (still cheaper than the 3% - 3.5% fee charged on most credit cards.)

However, if you are organised, you can ring Commonwealth Bank and transfer money from one currency to another at no charge, which is a fantastic benefit.

The other travel card providers require you to buy a separate card for each currency you want to take on a trip, which, at $15 a pop, could be the monetary equivalent of a cafe lunch for two that you could save by going with Commonwealth Bank. (You can, however, avoid paying a card fee for Travelex Cash Passport or American Express Global Travel cards if you buy them at Australia Post.)

Methods for reloading the card: Ease of adding more money to your card while travelling is important. The weakest card in this respect is American Express Global Travel Card, which can only be recharged via an American Express Foreign Exchange Office in Australia, or via BPAY, which has a delay of several days.

Travelex has an SMS recharge system, where you send a text message while overseas, and they direct debit your bank account based on an authorisation you give them when you first set up the card. However, this method still takes up to two days.

All the cards offer reloading via BPAY, which provides a convenient option for anyone with internet or phone banking, however all the card providers warn this can take 2-3 days for funds to be credited.

^{Branch reloads can only be done at Australian branches for all cards.}

Currencies available: some cards have a better range of currencies available than others. The weakest is the American Express Global Travel Card, which only offers US dollars (USD), Great Britain Pound (GBP) and Euro (EUR).

The best is the Commonwealth Bank Global Money Travel Card, which offers those, plus Japanese Yen (JPY), New Zealand Dollar (NZD), Hong Kong Dollar (HKD), Canadian Dollar (CAD) and Singapore Dollar (SGD).

If you need to go to a place which uses a currency not offered by any of the cards (for example China RMB, or Thai Baht) you can still use a travel money card, however you will just pay a "wrong currency conversion fee" each time you use the card -- 2-3% of the transaction amount for ANZ, CBA and Amex, and a hefty 8.45% for Travelex. In these circumstances, a better choice would be the international fee-free 28 degrees Mastercard, which we've explained extensively here.

Exchange rates

We checked the exchange rates on 8th April 2011 for purchasing US dollars, Euros, British Pounds and New Zealand Dollars for all the travel card providers.

All the providers were very competitive with each other, with rates that were similar to the rate you get if you pre-book cash to pick up from Travelex (one of the cheapest ways to buy currency). There was little difference between the cards in terms of exchange rate on the day we checked. 

^{(Green/larger numbers are better)}

Australian Business Traveller's recommendations

What to buy

If you're visiting a single country: ANZ Travel Card has a low $11 upfront fee, and has the advantage for ANZ customers of being linked to internet and phone banking so that more money can easily and instantly be transferred into the card. If you need Japanese Yen or Singapore Dollars, the ANZ card doesn't offer them, so you should go for the Commonwealth Bank card instead.

If you're visiting multiple countries: It's hard to go past the convenience of the Commonwealth Bank Travel Money Card, which can store up to six currencies on one card, saving you the cost of purchasing multiple cards for each currency. You can also shift money between the currencies free of charge, which is a fantastic service.  

About the rest

American Express Global Travel Card is let down by a lack of options for adding more funds to the card during the trip, and the "American Express surcharge" that you will be charged in many shops and restaurants. There are some upsides to the American Express card -- there is no 'monthly inactivity' fee after 12 months, and the ATM withdrawal fees for the US and Britain are the cheapest of all the cards.

Travelex Cash Passport provides the best exchange rate and a convenient SMS reloading option if you need to put more currency on it, but you have to be very careful in using it, because if you buy in a currency other than the one you've loaded onto the card, you'll lose 8.45% of every transaction. Travelex also charges a $10 fee to get your money back off the card if you have money left over at the end of the trip, and if you  leave your card unused after 12 months, Travelex will gradually fritter the money away with monthly fees.

How travel money cards compare to credit/ATM cards

Almost all credit cards charge 3 - 3.5% on top of all foreign purchases (that's $30 - $35 on $1,000), while travel money cards do not charge any surcharge on purchases made on the card -- as long as you spend in the right currency.

If you buy something in a currency other than the one you loaded on the card, you'll pay a conversion surcharge, but it is usually lower than the 3 - 3.5% charged on regular credit cards. For example, Commonwealth Bank only charges 2%. Travelex Cash Passport is an exception to this rule, though, slugging wrong currency purchases a whopping 8.45% penalty fee.

In terms of ATM cash withdrawals, normal Australian bank accounts and credit cards charge around 3% of the withdrawal amount plus $5 each time (for example, an $11 fee for a $200 withdrawal).

Preloaded travel money cards do not charge a percentage surcharge if you withdraw the currency you've loaded onto the card, but they do charge a flat ATM withdrawal fee -- in the range of US$2.00 - US$3.75 for a US dollar withdrawal, for example. So they are a bit cheaper for withdrawing cash than standard Australian credit/ATM cards.

One inescapable gotcha that applies to both standard ATM and preloaded travel money cards is foreign ATM operator fees. These can be as high as $15 per transaction if the ATM is in the lobby of a five star hotel, for example.

Unfortunately laws vary from country to country on whether ATM operators are required to warn you of these fees before proceeding with your transaction -- Australian Business Traveller staff have been stung without warning by a $15 fee using an English-language ATM in a five star hotel in China.

This fee applies whether it's a travel money card or a standard ATM card used in the withdrawal, so the two are comparable on this point.

It is worth noting that there is one credit card and one debit card on the market that allow fee free ATM withdrawals overseas, and do not charge any surcharge for international transactions. Read our writeup of the GE Finance 28 degrees Mastercard and NAB Gold Visa Debit.

The downsides of these cards are that there is a greater potential for fraud than with the limited balance stored on a travel money card, and the exchange rate fluctuates on a daily basis. However, they are otherwise cheaper to use than preloaded travel money cards.

How travel money cards compare to exchanging cash

Travel money cards are roughly comparable to the exchange rate you get if you pre-book a cash exchange from Travelex.

However, they have the advantage of being able to be easily replaced if you lose them, whereas replacing cash will require a travel insurance claim (if the policy even covers it) which can take many weeks to process.

Travel money cards are generally issued in pairs so you can keep one in your wallet, and one in a hotel room safe. If the first one is stolen, it can be deactivated without deactivating the second card, which has a different card number and PIN number.

They also have the advantage of only having a limited amount of money on them. If your card is skimmed and used fraudulently elsewhere, the amount of money you will lose is limited to the amount you've loaded onto the card.

However, unlike cash, which is always accepted everywhere and without any additional fees, Travel Money Cards will not be accepted by vendors that don't take credit cards, and if you want to get cash out at an ATM, you will have to pay some fees.

Beware, though, exchanging cash is only a good value option if you pre-arrange it. If you walk up to a change bureau, it can be very expensive.

In our investigation of the cheapest currency exchange outlets in Australia earlier this year, we found that when buying £1000, the cost in Aussie dollars could be as little as $1696.65 (at Flight Centre Money Centre) or as much as $1916.00 (using the Travelex change booth at Sydney International Airport). That's a difference of almost $220!