The Prepaid Card
Prepaid cards are becoming increasingly popular in the UK as a safe alternative to cash. Unlike a credit or debit card, you can only spend as much money as you have preloaded onto the card. The card works in much the same way as a prepaid mobile phone voucher, or a prepaid gift card for a store. You, or somebody else, can 'load' the card with money and then use the card to pay for goods and services in the same way that you would use a traditional debit card: by entering a PIN or signing a payment receipt at the cash till. The payment will be deducted from the funds on the card immediately. If you do not have sufficient funds on the card to cover the cost of the purchase, the transaction will not be processed. You can also use your prepaid card to make purchases online or by telephone. Some types of prepaid card will also allow you to withdraw funds from cash machines. Most prepaid cards are backed by one of the two big payment systems, MasterCard and VISA, and are therefore widely accepted across the UK and abroad; anywhere that you see the maestro, MasterCard or VISA logos you can make a purchase. You can also use internet banking to view your balance and transaction history.
Prepaid cards are available from a wide variety of companies such as banks, retail stores and online retailers. They are available in a number of different types: as a travel card, a gift card and an everyday use card. Prepaid travel cards are aimed at customers who will use the card specifically for the purpose of travelling, whilst prepaid gift cards offer an alternative to store gift cards since they can be used anywhere the relevant payment logo is seen. The basic prepaid card is the everyday use card, which can be used for any purchase, online or in-store, anywhere the payment logo is displayed.
As an alternative to debit and credit cards, prepaid cards offer a variety of benefits. Firstly, you do not need to undergo a credit check to obtain one. If you have a poor credit history and have been rejected by credit card providers, you will still be able to get a prepaid card. In addition, a prepaid card can be blocked if it is lost or stolen, which makes it a secure alternative to cash. This is ideal if you travel abroad and do not wish to carry large amounts of cash with you. Prepaid cards can be used with foreign ATMs to access the preloaded money while travelling. As a prepaid card does not offer credit facilities, it is ideal for young adults and teenagers who may have less experience of managing their money: there is no borrowing and thus no debt. Additionally, there may be reward benefits attached to the card, such as discounts on purchases at certain stores.
There are a number of possible charges for using a prepaid card. These include: a card application fee, a monthly service charge, a card loading fee, an ATM withdrawal fee, and a purchase or online shopping fee. You should read the terms and conditions of the card before you decide if it is suitable for you. It is important to remember that if you use a prepaid card you are not protected under the Consumer Credit Act, which protects funds against fraudulent payments and problems with suppliers.
