What are prepaid cards?

Prepaid cards also known as prepaid credit cards, prepaid debit cards and pay as you go cards; provide an alternative to getting a plastic card to buy goods and use to manage your money. You can manage your account online just like an online bank account; the difference is you can only spend what you load.

They look and work like a normal credit card and debit card, but do not offer any line of credit or overdraft facility as they are a prepaid card with one added feature there is no credit check so as long as you provide suitable identification and make any initial application cost you can get one. You simply preload your funds in advance, then you simply purchase as normal, set up standing orders or withdraw money from an ATM.

What are the advantages of buying a prepaid card?

By buying a prepaid card it is not attached to your bank account so you can spend the funds you load, there are no late payment charges and no interest to pay. Even if you are have really bad credit or new to credit you can get one where some prepaid cards offer credit builder, which can help you, repair damaged credit ratings. You can even get one if you are bankrupt

What happens if i am running low and need to top up?

All prepaid money providers provide a customer service department so you can topup over the phone, online facilities and SMS text top up's. In addition you can topup at retail outlets or at your local post office.

What ID do i need to provide?

A passport or driving license and a utility bill, most companies use online systems to instantly confirm your identity,

Why do i need to supply ID?

ID also known as KYC “Know your customer is required as a legal requirement to comply with money laundering requirements

Are there any prepaid cards where i don't need ID?

Yes these are known as restricted prepaid cards where you can on average load up to £600.00 a year on to the card, after this amount you will need to either upgrade to an unrestricted prepaid card or purchase a new one.

Our verdict on prepaid cards –

Prepaid cards are not for everyone but are now a safe alternative to debt cards or credit cards, depending on how you intend to use the card can save you money especially if this is for internet spending as you can get cash back when shopping online which in most cases out way any fees you have to pay. It is suggested that when choosing a prepaid card, don't rely on how the card looks but what fees are attached to the card, how many times you intend on using the card and also what additional benefits or discounts you will get.

Typical charges

There are three prepaid tariffs available –

Pay as you go – where you only pay a fee when you use the card, this can be a cheap option if you only want to use the card on an occasional basis

Weekly Tariff - where you want to manage your spending on a weekly basis and you are not sure if you are going to use the card on a constant basis.

Monthly Tariff – if you intend on using your card on a regular basis then this could be the cheapest option. Where you pay a set fee per month and can budget what your charges will be. Ensure to check if transaction charges are included and read the terms and conditions of the provider before you buy.

Are there fees for using the card?

Fees can vary from card to card, so compare before you buy.

Look at the following before you buy:

Card Application fee - This is the fee you pay to get your card although some cards are free. Some charge a fee to get the card and refund this when you first load your card.

Transaction Fee (point of sale) - Nearly all prepaid credit cards charge a fee when using your card to buy goods abroad.

ATM Fee - Withdrawing cash from an ATM will incur a small fee, this is either a fixed amount or a percentage.

FX Conversion Fee - This refers to using the card in another currency other than that in which it was issued. So for example spending on a Dollar card in say the United Kingdom, which uses pounds sterling.

Top up / Reloading fee - How to reload your card and where you can topup, some charge for this option so look at the costs. There is also a minimum and maximum card balance.

What is the best card for me?

Before purchasing a prepaid card ask your self the following questions

What am I going to be using it for?

What are the fees attached to using the card

How often am I going to be using the prepaid card?

What benefits do I get?

So for example if I was going to use a prepaid card to make Internet purchases, on average 8 purchases a month, with Purchase Protection, but I suffer from bad credit so want to rebuild my credit? I would get a Cashplus pay monthly card

Bad points

Are the charges, as prepaid cards companies only make their money from what they charge you. Charges have come down a long way and have been made a lot clearer.

Why is there a load limit?

Based on the issuing banks they have worked out on average how much people load or spend on their cards they set a limit to fall in line with money laundering guidelines to stop abuse.

Are they safe to use?

Prepaid cards are safe to use like all forms of bank accounts or cards it is advised you do not give out your login details or your pin number. Prepaid card companies will email your from time to time but will never request you change your details online. If you get an email always check the email address if you are unsure ring their customer service line.

Can i use for car hire?

Not all prepaid cards allow you to hire cars you will need to check with your provider where some will require details confirmed before activating this feature.

Can i use my card abroad?

Yes you can use your card abroad just check who your card is issued with usually Visa or MasterCard, Maestro cards are also accepted abroad but do have limited use so check with your travel provider before travelling.

What is cash back?

Cashback is when you shop online at selected retailers and receive money back from buying their goods. Once you have logged in to the prepaid card cash back provider you will be directed to companies you can earn cash back when buying goods, just click on the company you wish to purchase from, buy your goods and your cash back will be credited to your account, this can vary from a fixed amount to a percentage of the transaction. All cash back is automatically loaded back to your prepaid card account.

What is creditbuilder?

A new way to repair your credit history, you pay a monthly fee which at the end of the year is submitted to the credit reference agency which builds up points on your credit.

How do i check my balance?

All prepaid card companies provide an online login system to check your balance and to set up standing orders, you can request paper statements but this is an additional cost.

What ways can i check my balance?

You can check your balance online, which is always free, or you can get SMS text alerts to update you as and when you spend or load money.

If i make a purchase are they protected?

Some prepaid cards offer purchase protection but not all you need to check with your provider, plus also see the terms and conditions to see what you are covered for.

Lost and stolen

Contact your prepaid card provider straight away they will put a stop on your card automatically and issue you a new one this may be an additional charge. If your card has been used fraudulently then they have set procedures in place, which they will go through step by step.