Travel Card: Prepaid vs Credit, and What Each One Really Costs

A travel card can mean two different things. It might be a prepaid multi-currency card. Or it might be a travel credit card. Most guides only cover one type. Here’s both, side by side, with a real cost example.

Quick Answer: Which Travel Card Do You Need?

Prepaid travel cards (like Wise or Revolut) work best for most trips. You load money on before you travel and spend it directly, with low FX margins around 0.6-1%. Travel credit cards work best if you already pay off your card in full each month and want travel insurance or points included, but they carry real annual fees ($0-$1,750) and high interest if you carry a balance (11.49%-21.99% p.a.). On an $8,000 overseas trip, a poor-value card can add $200-$280 in fees alone. Watch for dynamic currency conversion (DCC) — it can silently add 3-5% on either card type.

Prepaid Travel Cards: How They Work

• You load money before you travel. Funds sit on the card in the currency you choose, or convert automatically at the point of sale.
• FX margins are usually low. Wise charges around 0.63% above the mid-market rate. Revolut is fee-free on weekdays up to $2,000 a month.
• ATM withdrawals have limits. Wise gives you $400 free per month, then charges 2.69%. Revolut gives $350 or 5 withdrawals free, then 2%.
• There’s no credit risk. You can only spend what you’ve loaded, which makes budgeting simple.

Travel Credit Cards: How They Work

• You spend now, pay later. Travel credit cards work like a normal credit card, often with travel perks layered on top.
• Annual fees vary a lot. They range from $0 to as much as $1,750 depending on the card’s rewards and inclusions.
• Foreign transaction fees still apply on many cards. Rates run from 0% to 3.5%. Some premium cards waive this fee entirely.
• Interest is the real risk. Rates run from 11.49% to 21.99% per annum. That applies if you don’t pay off the balance in full.
• Perks can add real value. Complimentary travel insurance, airport lounge access, and frequent flyer points are common inclusions.

A Real Cost Example: $8,000 Overseas Trip

• A 3.5% foreign transaction fee costs about $280. That’s what you’d pay on an $8,000 trip with a card that charges the higher end of the fee range.
• A low-margin prepaid card costs far less. At Wise’s 0.63% margin, the same $8,000 in spending costs roughly $50 in FX margin.
• A fee-free travel credit card can match that. Several travel credit cards now waive foreign transaction fees entirely, but usually carry a higher annual fee to offset it.
• The real comparison isn’t just the sticker fee. Weigh the annual fee, FX margin, and any perks you’d actually use against each other.

Which Type Suits Your Trip

• A short holiday favours prepaid. Load what you need, spend it, and there’s no ongoing fee once the trip ends.
• Frequent or long-term travel can favour a travel credit card. If you already pay your balance in full, the points and perks can outweigh the annual fee.
• Points-chasing travellers should compare earn rates carefully. Some cards earn 1.5-2 points per dollar on overseas spend specifically.
• If you’re unsure, prepaid is the lower-risk starting point. There’s no interest risk and no annual fee to worry about.

Watch Out for Dynamic Currency Conversion

• DCC lets a merchant charge you in Australian dollars instead of local currency. It sounds convenient, but the exchange rate is usually worse.
• This can add 3-5% to a transaction. That’s on top of whatever your card’s own FX margin already is.
• It applies to both prepaid and credit travel cards. No card type is immune to it.
• Always choose to pay in the local currency when asked. Decline the AUD conversion offer at the terminal or ATM.

FAQ: Travel Card

What is a travel card?
It can mean a prepaid multi-currency card you load before travelling, or a travel credit card with perks like insurance and points. They work very differently.

Is a prepaid travel card better than a travel credit card?
For most short trips, yes, mainly due to lower fees and no interest risk. A travel credit card can work out better for frequent travellers who pay their balance in full and value the points or included insurance.

How much can foreign transaction fees cost on a trip?
On an $8,000 trip, a 3.5% fee costs around $280. A low-margin prepaid card can bring that down to roughly $50.

What is dynamic currency conversion?
It’s when a merchant or ATM charges you in Australian dollars instead of local currency, usually at a worse rate, adding 3-5% to the transaction.

Do travel credit cards charge interest?
Yes, if you don’t pay the balance in full. Rates typically run from 11.49% to 21.99% per annum.

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