Prepaid Credit Cards: How to Pay Before You Go!

Prepaid credit cards are now becoming relatively common and are usually issued by credit card providers.

When backpackers first hit the road in the 1960s and 70s, we had few choices about carrying money: we could use travelers checks (or travellers cheques, if you're British), receive wire transfers as we traveled, carry credit cards (yes, they did exist) to purchase things or withdraw money at a bank, or take along huge wads of cash stuffed in our travel money belt.

How do prepaid credit cards work?

There's nothing simpler. You pay up front. When the card runs out, you refill it. Use it like a credit card, but no bill at the end of the month, only a statement showing what you've spent. That's why it's prepaid.

All you do is decide how much to put on your prepaid credit card - and deposit that amount on the card, as you would into a bank account. Once it's spent, you refill the card. Or stop spending. You won't have to pay interest or go into debt, and you'll be able to use it just like a regular credit card.

Make sure you check the refill charges on prepaid credit cards. Some can be high

Not only do you have to pay to refill your card, but you'll have to pay a one-time up-front fee to set up the card and open an account.

And if someone wants to give you a present before you leave (these are always welcome!), ask them for one of the prepaid gift cards. Having a widely accepted form of currency is a convenience every traveler should have. Travel credit cards ensure you can book reservations, make purchases, and withdraw cash at any ATM machines around the world.

Why this option rather than a regular credit card?

No reason - if you have a regular credit card and can spend within a budget, then take it with you. For many of us, knowing there's a limit to spending keeps us in check, especially when we have to contend with complex currency exchanges.

Using regular credit cards overseas

What you can no longer afford to do is travel without a card of some sort, credit, debit or prepaid. In an emergency, you'll be able to buy a ticket home or get some ready cash - ATMs or credit card machines are nearly everywhere. Just beware - these transactions are never free.

Visa and Mastercard are the most widely accepted.

Credit cards are accepted in most major cities, although they're not used as widely in developing countries. Hotels and major restaurants accept them, as do airlines and expensive shops. Smaller shops, however, often take only cash. And, in many countries there is a commission added to the credit card purchase so you'll have to pay a few percentage points above the actual listed price.

Regular and prepaid credit cards are convenient and safe - if they get stolen and you report them, you won't lose much money. Many also come with insurance, so if what you buy is stolen, lost or broken, you'll get a refund. Some credit cards also cover life insurance, health insurance or accidents.

If money conversion is an issue, this too will be eliminated because all purchases are charged back to you in your home currency.

Beware, though - purchases mount up and the bills will be waiting for you at home. If you don't pay them off immmediately you'll have to face interest payments in addition to a fee for currency exchange. It is also difficult to calculate just how much you owe, because if a currency is unstable, its value will change between the time you buy something to the time you're billed for it.

Credit cards are important to have - but make sure you have a few alternatives as well.