Prepaid Debit Cards - Prepaid Credit Cards
Prepaid credit cards are actually pre-paid debit cards branded in a similar manner to the all too common credit cards. They work in a similar way to prepaid phone cards, a prepaid gift card or a prepaid sim card?.
Money is loaded on to a card, and it can then be used by retailers and online merchants. You can pay your bills and top up your mobile phone(s), whilst actioning withdrawals with the prepaid Visa or MasterCard at an ATM in the UK or worldwide.
Money can be added to your prepaid credit card by bank transfer, cash, another credit card, voucher or even an online transfer, and because it is a Visa or MasterCard you can use it anywhere in the world.
Prepaid debit cards generally have the same uses as a credit card, so much so that they are commonly referred to as "prepaid credit cards".
A prepaid debit card is completely powered by your cash and therefore the money you have in your prepaid account is the money you have to spend. This means there is no risk of running into debt. There are no credit checks and no interest to pay.
Therefore; rather than referring to it as a prepaid credit card, a better description would be a prepaid debit card, a prepaid Visa card or a prepaid MasterCard.
Advantages of a Prepaid Debit Card (Prepaid Credit Card)
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Accessibility:
No credit checks, meaning you can get a card no matter what your credit history looks like. -
Security:
If you're buying online or on the phone and your card is used fraudulently you can get your money back. -
Safety:
carrying a card can be safer than carrying cash, which can be appealing to the parents for their children's use. -
Control:
prepaid cards are an ideal way to control the spending of children and employees. Like any card you will get a full breakdown of the transactions on the card. -
No risk of debt:
With a prepaid card threes zero chance of spending too much, as you are limited to the amount on your card. -
The Travel Card:
You will be able to use it at ATM's worldwide. -
Support:
If you lose your card you can contact your provider and they will send a new one to you.
Arguably the main disadvantage of the prepaid card is the unattractive costs and fees associated with them. Here is a guide to some of the potential costs.
Question to ask regarding the use of Prepaid Credit Cards:
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Card application fee:
Is there a charge for opening a prepay account - Typically if the withdrawal charges are lower than the competitors you will see a charge for the account, but as the landscape gets more competitive we think these will fade away! -
Monthly service charge:
Is there a monthly subscription fee and what do you get for this charge - For example does the prepaid card company provide an online service, i.e., a helpline? -
Credit card/cash load:
Is there a charge every time you top-up and does this alter with the manner in which you top-up your prepaid card? -
Customer call helpline:
Are you charged at national rate (or above) for essential calls to the company's helpline? -
Bank deposit fee:
If you deposit funds at a bank, Post Office etc, do they take a fee for providing the service? -
ATM withdrawal fee:
Are there costs when you withdraw cash on your card and is this higher for foreign transactions? -
Purchase/Internet transaction:
Is there a charge when you purchase goods on line with your card - This could also be higher if your transactions are made overseas.
Additional questions before ordering a prepaid credit card:
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Courier delivery:
Do you pay to have your card sent to you quickly? -
Account termination fee:
Is there a charge for closing your account? -
Card replacement:
If you lose your prepaid card or it is stolen/damaged, how much will the prepaid card company charge for a replacement? -
Card renewal:
Like a credit card, a prepaid card will have an expiry date, do they charge for a replacement / renewal
With increasing choices and competition, these costs should be driven down with improved deals for customers. So make some noise and tell them if you have seen a better deal elsewhere.