Prepaid cards operate just like a credit or debit card, but have the added security that you only load the card with some money before or during your travel. If the card is lost or stolen, the most you will ever lose is the money already loaded onto the card.

See YourMoney.com’s Why you should consider a prepaid card for your holiday cash for more information.

Many of the cards charge fees to load money onto them, with costs varying based on how the card is loaded and the currency in which the card is denominated. But customers normally accept this as part of using the card.

While there are some prepaid cards that are very cheap, and often the most cost-effective way to spend abroad, many of them come with fees and charges that aren’t immediately apparent, or which can catch out the unwary.

Defaqto looked at 111 different prepaid cards in the market and these are the fees customers face when having the card:

• Card purchase fee: 59% of cards have a fee to obtain them in the first place. Typically this is £4 to £7.50, with the minimum (where charged) standing at 99p. But one card provider (T24 Black Full) charges £150.
• Card replacement fee: If you lose your card and want to replace it 76% of cards will charge a fee, the typical replacement cost being around £5. The minimum (where charged) and maximum come in at £3 and £20.
• Card cancellation fee: Once you’ve used the card abroad and decide you don’t want it any more, you might want to cancel it. Nearly four out of five (79%) cards charge a fee just to cancel them. This could be anything from £1.50 to £25, with a typical cost being around £5-£10.
• Monthly service fee: Around a quarter of cards (26%) charge a monthly fee for keeping it active. The average is around £5.40 a month, but the maximum is £14.50.
• Annual service fee: A handful (4%) of cards charge an annual fee rather than a monthly one, ranging from £4.95 to £72.
• Renewal fee: 85% of the prepaid cards have a validity period – typically three years – after which they will need to be renewed. Renewal fees tend to be around the £5 mark.
• Dormancy fee: If you choose not to cancel your card, but keep it dormant instead, half of the cards (50%) will charge a dormancy fee, either per year, or sometimes every 90-120 days or so. On average this works out at around £8 per year but can be as much as £15.

The fees above relate to just having the card, not actually using it. There are also fees charged when you use the card, typically abroad, but they could also apply in the UK. The common fees are:

The prepaid card market is a minefield for the customer, with a great many different charging schemes in place.

You need to tread carefully when choosing one of these cards, and need to think about how you are going to use them and whether this will be a permanent addition to your holiday wallet or whether you want it just for a short period of time.

Best buy prepaid card

Our best buy card for spending in Europe – and for most currencies – is the Revolut Card. Its key features include:

• Purchase fee £5
• Managed via a smartphone app
• Load in sterling direct from your bank with no fee
• Convert into various currencies (e.g. euros, dollars) instantly at near wholesale market rates
• Move unused money back to your bank via Faster Payments with no fee
• No transaction fees on spending
• Withdraw up to £200 per month from ATMs with no charge. Anything above this is charged at 2% of the amount withdrawn (conversion of the currency is based on wholesale market rates)
• Enhanced security features (such as turn on/off ATM withdrawal, online spending etc.) using the smartphone app.

Brian Brown is head of insight at independent financial information business, Defaqto