Is there anything to watch out for?

The main disadvantages of prepaid cards are the costs and fees associated with using them. Some of the potential costs to look out for include:

• Card application fee – some providers levy an application fee but read the small print as it may be waived if you load more than a certain amount onto the card.
• Monthly service charge – check to see if there is a monthly subscription fee. If there is what services do you receive for this charge? For example, does the prepaid card company provide free top-ups, an online service, a helpline or other additional services for you, funded by this fee?
• Customer call helpline – calls to the customer helpline can be expensive so it's worth noting whether you will be charged at a premium rate, national rate or standard rate.
• Credit card or cash loading fee – some providers charge you every time you put money onto the card.
• Deposit fee – even if your card provider doesn't charge you for making a top-up, if you put money onto the card in a bank, the bank may charge for the service. If such a fee applies use an alternative way of loading up your card – if there isn't a convenient alternative it's probably worth considering a card from a different provider.
• ATM withdrawal fee – some prepaid cards are treated like credit rather than debit cards when it comes to making cash withdrawals. If you will be charged a fee for withdrawing money from an ATM it is advisable not to use the card for this purpose. And even if you are not charged for making withdrawals in the UK, check what the rule is for foreign transactions as you may be charged if you withdraw money from a cash machine abroad.
• Purchases and internet transaction - Is there a charge when you purchase goods on your card and do these vary for online transactions? Again, as with withdrawal fees, these costs may be higher if the transaction is made overseas.
• Account termination fee - is there a charge for closing your account?
• Card replacement – one of the attractions of prepaid cards is the security they offer, but if you lose your card or have it stolen, some providers will charge for a replacement.
• Card renewal - like a credit or debit card, a prepaid card will have an expiry date so check to see if you will be charged for a renewal.
• Inactivity fee – some firms charge a small sum if the card is not used for a defined period of time.

Which card is right for me?

It makes sense to look for a prepaid card with low sign-up, annual, monthly and top-up fees. However, there are other things to consider when deciding on the right card for you:

• What are the reload options - can you pop into a local bank, can you reload online, etc? If you can only top your card up at the place you bought it from, it won't be much use if you're heading off abroad.
• Can you manage the card online – as with many debit and credit card accounts, some prepaid cards allow you to view transactions and usage online, which can be very useful.
• If you want a prepaid card because you're going travelling or to work abroad, it's worth opting for a provider that offers a 24-hour service as you never know when you might need to top it up, and if you are in a different time zone, it may be difficult to load your card up during UK working hours.
• If you want two cards for the same account, look for a provider that doesn't charge a fee for an additional card.

As with a credit card, shopping around is the key to getting the best deal for you. At the moment the prepaid card market has relatively few providers compared to the credit card market but competition is beginning to intensify which will in turn drive down costs and increase service.

Moneysupermaket.com's price comparison tool enables you to compare prepaid cards, their fees and additional benefits such as reload options and whether you can manage the account online, so you can easily identify the most suitable card for your needs.

Next: Frequently Asked Questions