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Prepaid Cards: As Good as Cash

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Prepaid Cards can be life savers

Once upon a time the typical holiday from hell involved turning up to the one of the Spanish Costa’s and discovering that you hotel was a building site, or getting food poisoning from a less than hygienic kitchen. These days, though the ultimate dread scenario is having your cash or credit card stolen, leaving you stranded with no money and a maxed out bill on your return home.

How do Prepaid Cards work?

This is where a prepaid card comes in: Products such as Net+, FairFX and Virgin Pay Monthly work in the same way as a pay as you go mobile phone: You simply load an amount onto the card from a bank transfer, over the phone or the post office and then you can use the it virtually anywhere that accepts debit or credit cards.  If your prepaid card is lost or stolen, you only run the risk of losing what is pre-loaded on it, rather than having your credit cards maxed out and your bank account wiped clean before you even realise they are missing. They’re available in sterling, Euros or US Dollars, so they’re ideal travelling to mainstream countries, or anywhere that accepts Dollars.

Advantages over credit or debit cards

Prepaid cards offer other advantages to debit or credit cards, too: Firstly, you can only spend what is pre-loaded onto the card, so if you have a strict budget on a shopping trip, there is no chance of going over your limit. You can even load your monthly spending budget onto the card and leave your debit and credit cards back at in the hotel safe to avoid any unnecessary temptations.

Not linked to your bank account

Prepaid cards are not linked to your bank account so you will always have a grip on your outgoings, and some even offer cash back on your purchases. Maybe your child is going on a school trip and you would prefer they carry a prepaid card rather than cash? In general, there isn’t a minimum age to use one (although not the case for all companies, so check beforehand) so you can pack your child off, safe in the knowledge they won’t be overspending.

Prepaid Cards

No credit checks

Don’t worry if your credit score isn’t that great either: Prepaid cards don’t require a credit check as they aren’t a credit facility and some can actually be useful to build up your credit rating. How does this work? Well, many prepaid cards will have a monthly fee associated with them which will show as a small 12 month loan on your credit history. As long as you make sure you always pay the monthly fee, then this can help re-build your credit score.

Research the best Prepaid Cards

Whilst there are obvious and clear advantages of a prepaid card, they might not be for everyone and it is worth doing some research to get yourself the best deal. Some have a set-up fee, some are free and many come with a monthly fee if used. Some cards may charge a ‘top up’ fee between 1-3%, which should be taken into consideration as well as the fact that many cards only have a limited lifespan, so you may find a sneaky ‘replacement’ fee to pay to have a new card issued.  If you are using the card abroad, then check the exchange rates. Most prepaid cards will use the Mastercard / Visa rate but then add a fee on top and some cards use their own exchange rates, so be sure to read the small print.

Different legal rights to Credit Cards

As prepaid cards are not credit cards, you won’t pay interest on your balance – but be aware that they don’t offer you the same protection and legal rights on your purchases as a credit card does. If you buy something such as a TV or sofa using your prepaid card and your supplier goes bust, your money will probably be lost – it’s literally as though you had paid with cash.

You may also find that some prepaid cards have a cap on usage, and set a maximum amount that you can pre-load onto your card at either any one time or per month. Some may also charge ‘inactivity fees’, so if you aren’t using the card regularly it can prove more costly.

Prepaid Cards to suit circumstances

Deciding whether a prepaid card is for you or not will depend on your own circumstances you’re your reasons for having one. Some are best for UK spending, others for taking abroad, some for smaller purchases, others for larger buys – and they’re almost always great for making purchases online. Whatever your requirements, the choice is constantly expanding: So there should be an option to suit anyone.

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About Rebecca Robinson

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About Rebecca Robinson

After spending the last 8 years juggling life as a mum of two, wife and working full time as a Project Manager for a global telecommunications company, Rebecca Robinson made the decision to follow her love of writing and took the plunge; turning her passion into a full time career. Since becoming a full time writer, Rebecca has worked with various media and copy-writing companies and with the ability to make any topic relevant and interesting to the reader, now contributes to The Working Parent on articles ranging from credit cards to teenage relationships. Ever the optimist, Rebecca's dreams for the future include a house in the country filled with children, dogs and horses in the field!

Website: Rebecca Robinson

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