Potential Benefits

WORRIED THAT THE

already-weak dollar will keep losing strength and make your big European vacation a much costlier proposition? Then you could lock in the current exchange rate with a prepaid foreign currency card.

Launched earlier this month by Travelex, a London-based foreign exchange company, the Cash PassportThe card itself is issued by MasterCard).

For Americans who love to travel, the card can be a good way to hedge against future declines in the dollar. After all, the greenback's more than 20% decline against the euro over the last three years has yet to deter many Americans from traveling abroad. Financial forecasting firm Global Insight recently put together a report for AAA forecasting a 2.6% increase in the number of Americans traveling overseas this summer compared with last summer. Western European destinations in particular will see some of the biggest boosts in U.S. visitors: 6.7% more to France; 4.7% more to Italy; and 6.6% more to Ireland.

While the Cash Passport provides some certainty in a world where exchange rates constantly fluctuate you buy your euros today and know exactly how much that four-euro espresso will set you back it's still a gamble. "You might bet right and end up doing better than you would if you didn't buy the card," says Tim Winship, editor at large for SmarterTravel.com. "But there's also an equal possibility you'll bet wrong and come out the loser."

Potential Benefits

Theft and identity protections

To attain a Cash Passport, travelers apply in person with a photo ID at a

. (Travelex says more partners where you can buy a card will be available soon.)

To help keep your identity and money safe, the Cash Passport isn't linked to a bank account and doesn't carry sensitive identification details like your Social Security number. It's also protected with a personal identification number and your signature. If the card gets lost or stolen, the balance can be wired to you within 20 minutes, depending on where you are, says Maria Brusilovsky, communications manager at Travelex in New York. Travelers can also request to have two cards connected to the same account, but with different card numbers. That way, if you have to cancel one lost or stolen card, the second card will still work, says Brusilovsky.

Forgoing pricey currency conversion fees
Capital One and Commerce Bank don't charge this fee.) Travelers using the Cash Passport avoid these fees, which can rack up.

Locking in a predictable exchange rate
When budgeting for your vacation, it helps to know exactly how much you'll be paying for everything from breakfast to a guided tour at the Louvre. Say you load your card with $2,000 before you leave on your Parisian getaway. On the second day there, an interest rate move by the Federal Reserve causes the dollar to tumble and the euro to climb. But since you already have a Cash Passport with $2,000 worth of euros at the previous rate, the now-weaker dollar has no impact on your spending.

Potential Drawbacks

Added fees and costs

While you may avoid credit-card currency conversion fees, be prepared to get dinged by other charges. First, it costs $9.95 to buy the card. And every time you make an ATM withdrawal, you'll pay a $2-$3 transaction fee. "If you use your own bank card, like from

Bank of America

Citibank

Cardholders also need to make sure they either spend their entire Cash Passport balance or cash out the remaining funds from an ATM or the Travelex retailer where they bought the card. If the card goes unused for 12 consecutive months, you get charged an inactivity fee 2.30 euros or 1.75 pounds per month, currently $3.56 and $3.45, respectively.

Limitations
Travelers should also note that, in addition to fees, the Cash Passport comes with balance limits. For instance, the minimum amount you can load onto a card is 150 euros and 125 pounds. The maximum: 6,000 euros and 4,500 pounds. Here are some other limits to consider:

* As of date of publication, 1 pound = $1.97; 1 euro = $1.55

** No funds will be deducted if the balance is zero.

Data source: Travelex

Locking in a worse exchange rate
The security of knowing your exchange rate before you travel is certainly appealing. At the same time, though, "you may be locking in a rate that's worse than the rate you actually get when you take your trip," says Winship. In essence, cardholders are betting that between the time they buy the card and the time they travel, the value of the dollar will, at best, fall, and at worst, stay where it is. It's like predicting the stock market, says Winship. "It seems to me the longer the period between when you purchase the card and your trip, the more risk there is, because so many things could happen," he says.

Travelers should also consider how much the exchange rate might actually change which, over the course of a couple months, is likely to be a modest amount. "Unless you bought the card six months or a year before you use it, you're not going to have a huge fluctuation in the rate difference," says Justin McHenry, research director at IndexCreditCards.com, a credit-card comparison and news site.

Say, in February you were planning an end-of-May trip to the Italian Riviera. You went and loaded $500 worth of euros on a Cash Passport that translated into 330 euros on Feb. 27. Three months later, you're strolling the seaside cliffs of Portofino and the dollar has fallen: That $500 now buys you 315 euros. The savings: 15 euros. But add in the fees that come with your prepaid card not to mention the $9.95 you paid to buy it in the first place and you can say arrivederci to those 15 euros.

Also See:

• 6 Earth-Friendly Places to Stay

• How to Avoid Hidden Hotel Fees

• 4 Ways to Travel Abroad Despite the Weak Dollar