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Prepaid cards: What are the fees and how do they work?

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Prepaid cards are a convenient and safe way to spend the money you have, rather than the money you don’t have. In this day and age convenience is everything, but when you use a credit or debit card there’s a risk you could end up in debt.

There’s also a chance that you’ll also struggle to get accepted for a card if you have poor credit history. Prepaid cards don’t typically require a credit check, but there are some things you need to think about before you sign up.

How prepaid cards work

Once you’ve received your prepaid card, you’ll need to load money onto it before you can start spending. Some cards have a minimum and/or a maximum load amount. For example, you may need to upload a minimum of £10 before it can be used, but up to a maximum of £500.

As these limits differ between lenders, it’s always a good idea to compare different ones and think about your usage needs. Will you need to use the card frequently over the month? If so you need a card that doesn’t place a limit on the amount you can spend over the course of a month.

Just like with a credit or debit card, you’ll receive a PIN number, which you can use to withdraw money at the cashpoint or make transactions in store. It is worth noting that these services often incur some charges.

When it comes to topping up, you will have three different options: most providers allow you to do it online, but there’s also the option to top up via a paypoint or at the Post Office. Your final method is a bank transfer ; although this is the least common method.

One worry you may have is whether these cards are accepted in the same amount of places as a credit or debit card. The cards will usually be accepted in most places that accept Maestro cards throughout the UK and Ireland.

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The different fees involved

While many prepaid cards don’t charge a monthly fee, they will still usually have some fees that apply. The exact fees and charges do vary between providers, but here are some of the more common ones:

• Application fee, which you’ll need to pay when you get the card

• ATM or cash withdrawal fees

• Transaction fees – more applicable when shopping abroad, but still worth looking out for

• Top up or reload fees, which could be as much as 2-3% of the amount you top up with.

Overall, prepaid cards do have a large number of advantages – not only are they great for those who have poor credit, but they are also suitable for students too.

If you compare the different cards available you should be able to find one to suit your budget and your needs. However, if you want a card you can depend on, as well as getting good value for money, it’s important to shop around.

 

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About Jemma Porter

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About Jemma Porter

Jemma Porter is an experienced content creator who has written for a number of online publications. A self-confessed penny pincher; she's often found seeking out the best personal finance deals.

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