What happens when your prepaid card doesn’t support the local currency

Rates and Fees verified correct on October 21st, 2016

What happens when your prepaid card doesn’t support the local currency? Know your options.

Maybe you’ve already researched and chosen the best travel money card for your overseas trip. This card has served you well in several countries, but you’ve just discovered that it doesn’t support the local currency in your next destination. No worries, here are some ways you can get around that.

What if my prepaid card doesn’t support the local currency?

Most prepaid travel cards support about 10 currencies which can be used in the major developed countries. This means that when you load funds onto your card and transfer them to the relevant currency wallet, you can use those funds in that country without having to pay a currency conversion fee. If you don’t have the funds loaded in that particular currency wallet, or if your card doesn’t support that local currency (e.g. most cards don’t support the Malaysian Ringgit and few cards support the Vietnamese Dong), you will be charged a currency conversion fee whenever you use your travel card in that country.

This essentially means that your card provider draws funds from your account according to the default currency order at their prevailing exchange rate, and charges you a fee on top of that for converting currencies.

What are currency conversion fees?

One of the perks of using a prepaid travel card is the ability to avoid high currency conversion fees that credit and debit cards often charge. This applies to preloaded and supported currencies, but when you make purchases in a currency that isn’t loaded or supported by your travel card, you may be charged a currency conversion fee of about 3%.

Know your currencies!

Jerry learnt this the hard way when he travelled through Southeast Asia using a few of his trusted travel cards. He’d assumed that his travel cards would work the same way in all the countries he visited, and was shocked to discover later that he’d accrued more than $300 in currency conversion fees. It turned out that while his cards supported most major currencies in Hong Kong, Thailand and Singapore, they didn’t support the Malaysian Ringgit or Indonesian Rupiah.

What is the default currency order?

A currency order is typically applicable when you withdraw or spend money in a currency that isn’t preloaded or supported by your card. Your purchase is then taken from the available currency highest on the default currency order list. The default order is usually determined by your card provider, but some card providers offer flexibility by allowing you to change this order on your account. For instance, the currency order on your card could be:

1. United States Dollars (USD)

2. Euros (EUR)

3. Great British Pounds (GBP)

4. Australian Dollars (AUD)

5. Japanese Yen (JPY)

If you have preloaded USD, EUR and AUD on your card, and you are spending Thai Baht in Bangkok, the card will convert whatever USD you have into Baht for your purchase. If you have insufficient USD preloaded on your card, it will convert whatever USD you have into Baht, and then withdraw the difference from your EUR wallet. A currency conversion fee may apply in these instances.

What is dynamic currency conversion?

Dynamic currency conversion is a service provided by international retailers whereby a cardholder can opt at the point of sale to pay for their purchase using their home currency. While this may seem familiar and safe, it is actually disadvantageous. Sarah was getting ready to pay for her new Chanel bag in London when the sales assistant asked if she wanted to pay in British pounds or Australian dollars. She chose to pay in Australian dollars, and was happy when her purchase was immediately converted into home currency.

In reality, the exchange rate she received on the spot was less favourable than the rate her card company would have charged. This is because the dynamic currency conversion rate incorporates the foreign exchange rate charged by the credit card company as well as a fee to the merchant. On top of that, the card company may also charge a foreign transaction fee for the purchase, despite the purchase appearing to be made in home currency.

What are your other options?

It is important to know and understand the fees applicable to your card of choice and spending habits. It would help to develop a strategy using some of these tips:

  • Do your research beforehand.
    Know your options and choose the best one for your purposes. Some travel cards eliminate currency conversion fees altogether, meaning that you won’t be charged even if you spend in a currency that isn’t supported or preloaded on your card.
  • Don’t let your currency wallet run out of funds.
    Now that you understand dynamic currency conversion, you’d want to make sure your specific currency wallet doesn’t run out of local currency while you’re there. This will help avoid unnecessary fees and unfavourable exchange rates. Some reload options, such as BPAY and online transfer, can take up to three business days to appear in your account. Keep this in mind as your balance lowers and make sure to top up your account with plenty of time.

Finally, as with all card and travel money options, deciding on your best option is a process of thorough research and a matter of matching prudent options with your personal needs and preferences. Start comparing today and spend with peace of mind tomorrow!

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