Prepaid Cards
Prepaid cards are becoming increasingly popular in the UK as a safe alternative to cash and cheques. Unlike a debit card, which is linked to the funds available in your current account, you can only spend as much as you preloaded onto the card when you use a prepaid card. It works in the same way as a prepaid mobile phone voucher, or prepaid gift card for shops. You, or somebody else can 'load' the card with money and these funds are then available to pay for goods and services in the same way you would with a traditional debit card. You pay by entering a PIN or signing a payment receipt at the shop's till. The payment will then be automatically deducted from the funds on the card. If you do not have sufficient funds, the transaction will be declined. You may also make purchases online or by telephone by using the card. Some types of prepaid card will also allow you to withdraw funds from cash machines.
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 had problems obtaining a debit card, a prepaid card may be a viable alternative. A prepaid card can be blocked if it is lost or stolen, which makes it more secure than cash: this is ideal if you travel abroad and do not wish to carry large amounts of cash with you. Most prepaid cards can be used with foreign ATMs to make a withdrawal while travelling. As a prepaid card does not offer credit facilities, such as an overdraft, it is ideal for young adults and teenagers, who may have less experience managing their money: there is no borrowing and no chance of debt. Additionally, there may be reward benefits attached to the card. For example, you may be eligible for discounts on certain purchases if you use your card to pay.
Prepaid cards are available from a wide variety of companies, such as banks, retail and online stores. They are available in a number of different forms: travel cards, gift cards and everyday-use cards. Prepaid travel cards are aimed at travellers who will use the card specifically whilst travelling, while prepaid gift cards offer an alternative to gift cards from shops, and can be used anywhere the relevant payment logo is seen. Prepaid everyday-use cards are the basic prepaid card, and can be used for any purchase, online or in-store, anywhere where the payment logo is shown. The everyday card is best able to replace a debit card, since it can be topped up as and when desired and used with a wide range of retailers.
Most prepaid cards are backed by the three big payment systems, MasterCard, VISA and Maestro and are therefore widely accepted across the UK and abroad: essentially, anywhere where you see the Maestro, MasterCard or VISA logos. You can also manage your card via internet banking to view your balance and transaction history.
There are a number of possible charges when using a prepaid card. These may include: card application fee, monthly service charge, card loading fee, ATM withdrawal fee, purchase and/or online shopping fee. You should read the terms and conditions of each card before you decide which one to choose. In addition, if you use a prepaid card, you are not protected under the Consumer Credit Act, which protects you against fraudulent payments and problems with suppliers.
