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Travel money card vs credit card vs debit card: which should you choose?

Vidhu Bajaj avatar
Vidhu Bajaj
- 11 min read
Travel money card vs credit card vs debit card: which should you choose?

Key highlights

  • Travel money cards can allow you to load multiple currencies, could lock in exchange rates, and should potentially avoid ongoing currency conversion fees;
  • Credit cards could offer perks like travel insurance and frequent flyer points, typically have wide acceptance, and can provide emergency access to credit;
  • Debit cards could provide easy access to funds, usually have global acceptance, and can make it easier to manage your account through apps and digital wallets.
  • Whether you’re considering a family holiday in Bali or a romantic wine tour of Tuscany, how to best access and spend your money while overseas has likely come up during your travel planning. 

    Three of the most popular options for Australian travellers to facilitate their spending needs are travel money cards, credit cards and debit cards. So, with a plethora of options available to you, which is the best choice when travelling? 

    Read on to learn more about each option. 

    Travel cards, credit cards, and debit cards: A quick comparison

    Feature Travel Cards Credit Cards Debit Cards 
    Exchange RateLocked in at the time of loadingVaries with each transactionVaries with each transaction
    Multiple Currencies Can typically load multiple currenciesSingle currency (but may work globally)Single currency (but may work globally)
    Currency Conversion FeesTypically avoided if preloaded in local currencyOften incur feesOften incur fees
    Spending LimitLimited to the amount preloadedBased on credit limitLimited to account balance
    AcceptanceWidely accepted (Visa/Mastercard)Widely accepted (Visa/Mastercard)Widely accepted (Visa/Mastercard)
    SecurityNot linked to primary bank account, lower risk if stolenHigher risk if not managed responsibly, potential to accumulate debtLinked to primary bank account, higher risk if stolen
    Additional BenefitsTypically noneMay offer perks like travel insurance, frequent flyer points, and cashback offersEasy access to savings, manageable via apps and digital wallets
    FeesPotential fees for issuance, loading, reloading, and ATM withdrawalsPotentially high interest rates, international transaction fees, and annual feesPotential foreign transaction fees and ATM withdrawal fees

    Compare credit cards

    Now let's delve deeper into each option to understand their specific benefits and drawbacks. 

    Travel money cards

    A travel money card is a type of prepaid card specifically designed for use while traveling abroad. It allows you to load funds onto the card in one or more currencies, which you can then use to make purchases and withdraw cash at ATMs. 

    Essentially, a travel card functions similarly to a debit card, in that you deposit a certain amount into the account, and you don’t typically have a credit limit. However, unlike a debit or credit card, you can lock in an exchange rate at the time of depositing the funds and load multiple foreign currencies onto your account – which may be beneficial for multi-country trips. 

    Benefits of a travel money card

    Some of the potential benefits of using a travel money card include: 

    Load multiple currencies 

    Travel money cards generally allow you to load multiple currencies. This could be beneficial if you’re travelling through multiple countries, as you won’t need to keep exchanging  currency. 

    Lock in exchange rate 

    One of the key advantages of using a travel money card is the ability to lock in an exchange rate at the time you load money onto the card. This can be particularly beneficial when the exchange rate is favourable, protecting you against future fluctuations in the currency market. By locking in a rate, it’s possible to budget more effectively for your trip, knowing exactly how much you're spending in your home currency. 

    Potentially avoid ongoing currency conversion charges 

    As the money you deposit into the travel card is typically converted into the currency or currencies you need at the time of purchase, you may avoid paying ongoing currency conversion fees throughout the trip. However, there may be some fees charged by the issuer, including purchase or closure fees, overseas ATM fees and inactivity fees. 

    Relatively less risk if stolen 

    One of the biggest benefits of a travel money card is that it is not connected to your everyday banking accounts or personal financial details. Meaning, if your travel money card is stolen, while this can be inconvenient and highly frustrating, your main financial details and any linked financial products have not been compromised by criminals. Dealing with issues like identity theft can be much more challenging while overseas. 

    Issued by Visa and Mastercard 

    Travel money cards may be issued by Visa or Mastercard, so they have a high likelihood of acceptance around the world. 

    Drawbacks of a travel money card

    While using a travel money card has several potential benefits, it’s worth considering the risks to make an informed choice. Some of the potential risks of using a travel money card include: 

    Associated fees 

    Even though you might save on ongoing currency conversion fees, be mindful of the other fees associated with the card, such as purchase fees, ATM withdrawal fees, or inactivity fees. 

    No credit facility 

    A travel money card gives you access to your preloaded funds and doesn't typically offer a credit limit. 

    Currency limitations 

    There might be restrictions on the specific currencies you can load, which could be inconvenient if you travel to a country with a less commonly supported currency. 

    Restrictions on pre-authorisations 

    Certain services, such as hotels and car rental companies, often require a pre-authorisation, where they temporarily hold a specific amount of funds as security before the actual transaction occurs. Some merchants may not accept travel money cards for pre-authorisations and might require a credit card instead. 

    Credit cards

    A credit card provides access to a line of credit and works similarly to a debit card, but instead of drawing from your bank account, it allows you to borrow funds up to a predetermined credit limit (ranging from $2,000 to over $100,000). You are typically charged interest on the purchases you make, and any cash withdrawn from an ATM. 

    Benefits of a Credit Card

    Credit cards, though potentially risky when not used responsibly, may offer various benefits and conveniences that can enhance your travel experience and serve as a financial safety net in emergencies. However, it's important to remember that credit cards can also lead to significant debt accumulation if balances are not paid off promptly each statement period. 

    Perks and freebies 

    Some credit cards are designed for overseas spending, and can offer customer perks like complimentary travel insurance, frequent flyer points earned on spending, access to airport lounges, and more. Some may also waive foreign transaction fees when spending overseas (or on overseas-based websites). 

    Sign-up bonuses 

    One of the biggest advantages of credit cards can be that you may earn bulk frequent flyer points on sign up that can be exchanged for flights, seat upgrades, accommodation, rental car hire, and more. 

    Widely accepted 

    Credit cards can be more widely accepted – particularly in hotels or at rental car hire lots – than travel money cards or debit cards. Some hotels may not let you book a room without offering your credit card details. 

    Emergency access to credit 

    Some travellers may opt to bring a credit card in case of emergencies, due to their wide acceptance and the access to credit provided.

    Drawbacks of a credit card

    Although a credit card can be a handy tool for managing expenses overseas, it's important to understand the risks, including potentially high fees and interest rates, as well as the temptation to overspend. Despite their potential benefits, credit cards may not be suitable for everyone. 

    Debt accumulation 

    It is very easy to accrue debt if you’re not diligent with paying off your balance in time each statement period, due to high interest rates and additional charges. While having greater access to credit you otherwise may not have in your bank account can be helpful when travelling, it can be easier to accrue debt if you don’t meet your repayments. 

    Credit requirements 

    Obtaining a credit card requires meeting specific criteria, including a hard credit check, which might affect your credit score

    Temptation to overspend 

    A credit card allows you to spend money up to a predetermined credit limit, but you need to repay that money with additional interest. While access to a line of credit can be handy during emergencies, it could easily snowball into debt if you're not careful, especially for those who lack impulse control while shopping or spending. 

    Potentially high fees and additional charges 

    When using credit cards internationally, be aware of potential currency conversion and international transaction fees, which can be as high as 3% per transaction or more. It's advisable to consult your card issuer about conditions that might waive these fees or to seek a card that does not impose them. Additionally, other charges such as monthly account-keeping, annual, and foreign transaction fees may apply, increasing the overall cost of using your credit card abroad. 

    Debit cards

    A debit card is your humble, everyday bank card linked to a transaction account. Some travellers may simply opt to use their main bank card when spending overseas, as it is an accessible option compared to taking out a new travel card or credit card.

    Benefits of a debit card

    If you don’t want to go through the hassle of pre-loading a travel card and prefer not to use credit, you might choose to use your debit card to access funds while traveling. Here are some potential benefits of using a debit card for your expenses when traveling. 

    Many debit cards refund, or do not charge, overseas fees 

    Depending on your card issuer, you may not incur additional fees for transactions made in foreign currencies when using your card overseas, or any such fees may be reimbursed. 

    Global acceptance 

    Debit cards offered by Visa and Mastercard are widely accepted, ensuring easy access to funds and secure transactions globally. 

    Easily access and view your cash through apps and digital wallets 

    Using your debit card gives you full access to your funds and the convenience of managing your account through apps and digital wallets. These tools allow you to monitor transactions, check balances, and control your card settings, enhancing security and efficiency. 

    Access to all your funds, not just spending money 

    Unlike travel cards which must be loaded up ahead of time, opting for using a debit card means you’ll have access to all your funds, not just a small portion. Depending on your spending habits, this can be advantageous or risky. 

    Drawbacks of a debit card

    While using a debit card for your holiday expenses is convenient, it's important to be aware of any associated risks before deciding. 

    Some foreign transaction fees may be charged 

    Debit cards may incur foreign transaction fees if you don’t do your research. This can include currency conversion fees and overseas ATM fees, which can climb up to 4% of every transaction. Meaning, if you spent $5,000 on your overseas holiday, your bank is pocketing at least $200 – the equivalent of an additional night’s stay for mid-level hotel accommodation. There are many debit cards and transaction accounts that do not charge these fees, so it’s worth doing your research before travelling. 

    Not every retailer accepts debit cards overseas 

    Even though debit cards are widely accepted, you may encounter issues with pre-authorisations, especially at some hotels and car rental companies. These merchants often specifically request credit cards. 

    Funds may stay on ‘hold’ longer 

    Hotels can put a ‘hold’ on funds when checking in, which can take weeks to return to your account, even after the payment for your stay has been deducted from your card. 

    If stolen, it may be more challenging to repair these damages 

    If your debit card is stolen, the thief could potentially access your entire account. Although most card issuers implement robust security protocols, recovering stolen funds can be challenging. It typically requires a comprehensive investigation by your bank, during which you may not have access to the stolen money. 

    So, which option to consider for spending your cash while travelling?

    Ultimately, the best option for your overseas spending depends on your specific needs and budget. It’s worthwhile reviewing the benefits and drawbacks listed above and carefully thinking about the types of destinations you’re visiting and how you are likely to spend your money. 

    For example, if you’re going to a destination with a higher crime rating, it may be worthwhile bringing a card you’re less concerned about if it’s stolen, like a travel card. Or if you’re likely to be withdrawing cash frequently, a credit card that charges a high cash advance rate is likely to not suit you as much as a debit card with no foreign ATM fees. 

    Comparison tools, such as the tables on this page, may be helpful in allowing you to compare your options. See card types side by side, including any fees or interest rates charged, so you can compare apples with apples. 

    Compare credit cards

    Product database updated 20 Jun, 2024

    This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.