When you think about prepaid cards, the first thing that might come to mind is that you can only use the exact amount that you put into the card. In a world where credit is king, this may seem like a limitation. But it is also a tried and tested method of financial control, and only the first of the numerous benefits of prepaid cards, especially when you are planning a trip.
1) Prepaid cards won’t allow you to go into debt.
Prepaid cards might operate the same way as credit cards when you’re shopping, but they offer significant advantages over their traditional counterpart. Unlike a credit card, prepaid cards will only allow you to spend the money you already have, and so you are not charged any profit (or interest in the case of conventional banks). For those who tend to overspend, this makes prepaid cards the ideal travelling companion.
This can be a lifesaver when you’re browsing shopping destinations and feel the urge to buy more souvenirs than you can afford. It’s also a way to limit spending by family members, be they spouses or children, who have a history of over-spending.
2) A financial education for teens
Teaching a teenager about financial responsibility can be a real challenge, especially when they’re used to the generous credit limits at the bank of mum dad, especially while on holiday! A prepaid card with a set limit will help them to realise that money is a finite resource and they need to practise mindful spending. It is also a great way to instill the importance of budgeting, prioritising your spending, and focusing your money on things most important to you. Perhaps the biggest advantage of a prepaid card is that you can monitor how your teenager is using it!
3) Safer than cash
Perhaps the best reason to use a prepaid card while travelling is the high level of safety it offers. You might be in a location completely foreign to you, making you stand out in the crowd as a potential victim of theft. You can deter thieves by avoiding cash. No one looks twice when you’re using a prepaid card at the cashier. They are designed to detract unwanted glances from suspicious characters who may be more inclined to target you if they see you pull out large numbers of bills. Using prepaid cards is a recommended safety precaution to all travelling shoppers.
4) Pay utility bills automatically
You may be busy immersing yourself in the surroundings of another country, but back home, life continues and it’s easy to forget the due dates of all those important bills. Water and electricity still need to be settled on time, and you wouldn’t want your phone or Internet bills to accumulate, or even worse, come home to find yourself in the dark.
Most services now allow auto-scheduling for monthly payments. With a prepaid card, you can simply load the monthly amount into the card, set payment for the due date, and go on holiday with your mind at ease, knowing that there will be no accumulated bills or additional expenses.
Using cards is easier than carrying cash and loose change. Whenever you need to pay for something, you just take out your card and within seconds, the transaction is done. No need to figure out foreign currencies, or potentially hand over a 1,000-denominated note when you really meant to pay 10! This can happen more often than you might think.
There is no avoiding currency exchange rates while spending money abroad, and your bank may charge you a little more than some exchanges, but this difference is nominal and more than made up for by the security and convenience you will enjoy. For example, Al Salam Bank adds value through its Multi-Currency Prepaid Cards, which allow you to load and reload your card with USD, Euro or GBP currencies, and use them virtually anywhere in the world with no foreign exchange transaction fee. Every card issuer has their pros and cons, so when you’re looking for the right card, make sure you consider the one that works for you and offers you maximum convenience.
So the next time you’re planning to travel abroad, make room in your wallet for a prepaid card as it will undoubtedly offer you security and convenience, wherever you may be!
* Mohammed Buhijji is head of retail banking at Al Salam Bank - Bahrain