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Prepaid cards: convenient, controllable spending

Prepaid cards: convenient, controllable spending

Category: Credit cards

Updated: 15/05/2017
First Published: 29/03/2017

Prepaid cards can be a fantastic way to manage your everyday finances.

In addition to not letting you get into debt, these flexible friends allow people who can't get a bank account, or who have a poor credit history, to get access to the convenience of card payments.

How do prepaid cards work?

The best way of explaining how prepaid cards work is by comparing them to mobile phones.

Pay as you go mobile phone tariffs are a way of paying for calls, texts and internet usage for those too young for a contract of their own, or simply for those who don't want to have a phone contract.

You simply pay for what you use. You pre-load, or "top up" your phone with credit. If you haven't got enough credit to make a call or send a text, you can't.

Prepaid cards work in a very similar way. You pre-load money onto a card, which you can then spend. You can only spend what you've put onto the card, so you can't get into debt.

The cards are mostly offered over the MasterCard payment network (although there are a few Visa cards on offer too), which means you can pay using the card wherever MasterCard is accepted. In the UK, that's most shops, restaurants and online retailers.

Prepaid cards have the same chip and pin technology that you get with a debit or credit card. You can also withdraw money from an ATM.

Who are prepaid cards good for?

You can't get into debt with a prepaid card, and because of this there's not the credit checks that you get when applying for a current account or credit card.

Prepaid cards might be good for you if:

  • You have a poor credit history
  • You have no credit history
  • You cannot get a UK bank account
  • You want to stay in control of your spending
  • You want to spend on a card when abroad but would prefer not to take a debit or credit card

What's the catch?

The "catch" with prepaid cards is undoubtedly the fees. This is the number one thing to look out for when choosing the best prepaid card for you. Providers can charge you a monthly management fee, a fee for topping up, even fees for using the card to make purchases or withdraw cash at an ATM.

Think about how you will use the card, how often and where, to determine the card that's best.

What next?

Compare prepaid cards for everyday use
Compare prepaid cards for travel use

More tips

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

 
 

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