Guide to Prepaid Cards
Prepaid payment cards are a recent phenomenon. They have exploded in popularity across America over the last 10 years and are now taking off in the UK.
But how exactly do they work and are they worth considering? This guide will explain all.
What are prepaid cards and how do they work?
Prepaid cards look like credit and debit cards and they offer the same ability to purchase products and services but with a crucial difference – you can only spend the balance that has been preloaded onto the card. This means there is no risk of running into debt as it has no credit or overdraft facility.
You will be give a Pin number when you purchase a card, and once money has been credited, it can be used in the same way as a debit or credit card – for high street, online or telephone purchases, as well as cash withdrawals from ATMs.
Money can be loaded onto a prepaid card by cash at a bank, Post Office, at Payzone or PayPoint terminals or via a bank transfer. However, not all prepaid providers offer all of these loading options, so you need to bear this in mind when comparing deals as some are more flexible than others.
What are the advantages of prepaid cards?
The main advantages of prepaid cards include:
- Availability - there are no credit checks, which means you can get a card without worrying about your credit history. All prepaid card providers will carry out an identity check to confirm you are who you say you are.
- Control - prepaid cards are an ideal way to budget for yourself or help to manage your children's spending. Like a credit card you get a full breakdown of spending on the card so you can see what has been purchased, who from and when.
- No debt risk - with a prepaid card there is no chance of spending too much as you are limited to the amount you put on your card.
- The card for travel – prepaid cards are a good option if you are going overseas. They are popular with students heading off on gap years and children who go abroad on school trips as parents can load them up here in the UK. However, the benefits are not restricted solely to young travellers - any holidaymaker can take advantage: prepaid cards offer a good alternative to travellers' cheques. They are safe and you will probably be offered a better rate of exchange as you spend.
Next: Is there anything to watch out for?
