What is a credit-building prepaid card?

Key takeaways

• A credit-building prepaid card is designed to help establish or improve your credit history by reporting certain payments to credit reference agencies

• Unlike a credit card, a prepaid card generally doesn't involve borrowing, as you spend money you've already loaded onto the card

• There's no guarantee it will improve your credit score, so check the costs and how the provider reports information before applying

A credit-building prepaid card is a type of prepaid card or financial product designed to help you build a credit history by reporting information about your payments to credit reference agencies.

Unlike a traditional credit card, a prepaid card doesn't normally involve borrowing money. You load money onto the card and spend from that balance, so you generally can't spend more than you've loaded.

However, not all prepaid cards help build credit. Ordinary prepaid cards don't usually report your spending or payments to credit reference agencies, so using one won't normally affect your credit score.

Products specifically marketed as credit builders can work differently. They may report regular payments to agencies to create a record of your financial behaviour.

It's important to remember that there is no guarantee a credit-building prepaid card will improve your credit score. The Financial Conduct Authority (FCA) has found little evidence that some credit-builder products significantly improve credit scores for most consumers.

When might I need a credit-building prepaid card?

You might consider a credit-building prepaid card if you want to improve a limited or poor credit history. For example, you may have little credit history if you:

• have recently moved to the UK

• have recently turned 18 and haven't borrowed before

• have never had a credit card or loan

• have had problems managing credit in the past

• have a limited credit history because you have rarely used financial products

Building a credit history can make it easier to demonstrate to lenders that you can manage credit responsibly. However, you don't necessarily need a credit-building prepaid card to do this.

Other steps can include registering to vote at your current address, checking your credit reports for errors and making sure you keep up with repayments on any existing credit commitments.

You could also consider a credit-builder credit card. These are specifically designed for people with limited or poor credit histories, although they are a form of borrowing and can have relatively high interest rates.

If you're struggling to manage existing debts or meet essential household costs, taking out a credit-building product may not be appropriate. Free debt advice may be more useful in this situation.

Charities such as StepChange, National Debtline, and Citizens Advice are there to offer free, independent, and non-judgemental advice and support for those struggling with debt. You shouldn't have to pay for this advice.

How do credit-building prepaid cards work?

The exact process varies between providers, so check the terms and conditions before applying. However, it generally works as follows:

What are the costs of a credit-building prepaid card?

The costs vary between providers, so it's important to look beyond the headline fee.

Potential charges can include:

• Monthly or annual fees: You may pay a regular fee to use the product

• Application fees: Some providers charge an initial fee when you apply

• Top-up fees: You could be charged when adding money to your card, depending on how you do it

• Cash withdrawal fees: There may be a charge for withdrawing money from a cash machine

• Foreign transaction fees: Check these if you intend to use the card abroad

• Replacement card fees: You may have to pay if your card is lost, stolen or damaged.

• Inactivity fees: Some prepaid cards charge you if you don't use them for a certain period

Before applying, work out the total cost over a year and consider whether the potential credit-building benefit justifies the expense. For example, a card costing £8 a month would cost £96 over a year, before any additional charges.

Are there any guarantees a credit-building prepaid card will boost my credit score?

No. There is no guarantee that a credit-building prepaid card will increase your credit score.

A provider reporting your payments to a credit reference agency doesn't automatically mean your score will rise.

Your credit score is based on information in your credit report, and different lenders use different criteria when assessing applications. Factors such as your existing credit history, missed payments, debts and applications for credit can all affect how lenders view you.

The FCA reviewed certain credit-builder products in 2025 and found little evidence that they significantly improve credit scores for most consumers.

It also raised concerns about the way some products are marketed and the fact that many of the products it reviewed were not regulated.

The FCA's findings don't mean that every credit-building product is ineffective. However, they do mean you should consider carefully whether paying for one is worthwhile.

It's also worth remembering that a good credit score isn't a guarantee you'll be accepted for credit. Lenders make their own decisions based on your circumstances and their lending criteria.

Is the money I load onto a credit-builder prepaid card safe?

The protection for money held on a credit-builder prepaid card depends on the provider.

If your money is held as an eligible deposit with a UK-authorised bank, it may be protected by the Financial Services Compensation Scheme (FSCS).

Money held by an e-money or payment provider isn’t FSCS protected, but safeguarding rules require providers to keep customers’ money separate from their own funds. Check the provider’s terms to see how your money is protected before applying.

Pros and cons of a credit-building prepaid card

Pros

• Potentially helps build your credit history

• Doesn't normally involve borrowing

• Can help with budgeting

• May be easier to access

• An alternative to a credit card

Cons

• No guarantee of improving your credit score

• Fees can add up

• Limited evidence of effectiveness

• May have spending restrictions

• Could be unsuitable if you're struggling financially

Other useful guides

If you’re looking to improve your credit score, we have a range of guides that can help, including:

• How to improve your credit score with a credit card?

• Understanding CCJs and bankruptcy

• What is a bad credit score?

Compare credit-builder credit cards with MoneySuperMarket

If you're considering a credit-building prepaid card, it’s also worth looking at credit-builder credit cards. These are not prepaid cards – they are a form of borrowing, meaning you’re given a credit limit and can spend up to that amount before repaying what you owe.

Credit-builder credit cards are specifically designed for people who want to establish or rebuild their credit history. They typically have lower credit limits and higher interest rates than cards aimed at people with stronger credit profiles.

Using a credit-builder credit card responsibly – for example, keeping your balance manageable and making at least the minimum payment on time each month – can help demonstrate that you can manage borrowing. However, there’s no guarantee that using one will improve your credit score, and carrying a balance can be expensive because of the interest charged.

When comparing credit-builder credit cards, look at the interest rate, credit limit, fees and eligibility criteria, as well as how the provider reports your account to credit reference agencies.

MoneySuperMarket can help you compare credit-builder credit cards in one place, so you can consider the costs and features before deciding whether one is right for you.