Prepaid cards are rechargeable cash cards. You add money to them and recharge them when the funds run out, just as you would with a prepaid cell phone.
A prepaid card or prepaid debit card can be used to make purchases online or in person. Use it in the same way that you would use a credit or debit card.
You can hear it being called a ‘prepaid credit card’, but you don’t actually receive credit with one of these. Once the balance reaches £ 0, it cannot be used again until it is topped up. Some people also call them ‘cash cards’.
How do Prepaid Cards work?
Some retailers sell prepaid cards that you can charge with cash or obtain online.
They are designed for daily spending and there is usually a limit on how much you can charge. The limit varies, depending on where you buy the prepaid card.
If you have not loaded your prepaid card, you cannot spend on it. This makes them very useful if you are trying to maintain a budget.
Most prepaid cards are Visa or MasterCard. This is the company that processes the transactions on the card. So, once your card is loaded, you can use it at any restaurant, store or online retailer that accepts Mastercard or Visa.
Advantages of a Prepaid Card
Budget: you can only spend what you charge on a prepaid card, so they are very safe from a budget perspective. If you are prone to overspending, a prepaid card can be a good way to ensure that you are within budget
Security: Prepaid cards limit the damage that scammers and fraudsters can inflict on you. The most you can lose is the amount you loaded on the card.
Students: They are a good way for parents to teach young people about financial responsibility. Young people and students can learn to budget if their parents give them access to small amounts of money.
Travel: If you don’t want to carry cash when you’re traveling, prepaid cards protect you. They usually allow you to cancel them if they are stolen and are not connected to other accounts.
No credit check: there is no need to check your credit to get a prepaid card. This means that they are a good option for people with bad credit history or for those who have just moved to the UK.
Simple application: The application process for a prepaid debit card, across the UK, is quick and easy.
Disadvantages of a Prepaid Card
Prepaid cards are not perfect and there are some aspects to note. The disadvantages include:
Without section 75 protection: with a regular credit card, you will get free protection on purchases over £ 1,000. You can’t do this with a prepaid debit card, but you do have access to Visa and MasterCard chargeback schemes. This means that you can get your money back for defective products, services that are not provided and products that are not delivered when a business closes.
You can’t use them anywhere: sometimes, when you rent a car or check into a hotel, they take your card as a security deposit. When they do, they protect the funds until you pay the bill, so many people prefer to use a credit card. With prepaid cards, this means that there will be a portion of your money that you will not be able to access until the account is cleared.
Fees: There may be hidden fees, so be sure to learn about all the fees that a prepaid card charges before opening it.
Choose the best prepaid cards for you
The best prepaid cards, across the UK, are the cheapest and easiest to use.
Some of the features and costs to be aware of when trying to decide on the best prepaid cards are:
Registration fees: Most prepaid cards charge a fee when you open your account. But some cards do not need this if you carry more than a certain amount.
Monthly fees: Most cards charge a monthly fee. This ranges from £ 2- £ 5.
Renewal fees: Like your debit card, your prepaid card will expire after three years. Some cards charge a renewal fee to obtain a new card. This can also be waived if you are satisfied with carrying a certain amount of money.
Transaction / withdrawal fees: Most prepaid cards charge a fee for each transaction you make. For ATM withdrawals, the fee is a set amount, such as £ 2, or a percentage of the transaction.
By analyzing these charges before choosing your prepaid card, you should be able to find the best prepaid debit card available to you.
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How to top up a Prepaid Card
There are several ways to top up your prepaid MasterCard or Visa prepaid card, across the UK. The most common forms are:
Online: You can log into your account on the prepaid card provider’s website or app and add money to it and use it as a normal credit or debit card.
Cash: Some banks and retail stores offer PayPoint services, where you can pay in cash. It is then loaded onto your prepaid card.
Bank transfer: Some cards allow you to transfer funds directly from a checking account. You will need to know your prepaid card’s classification code and account number to do this.
Different prepaid cards have different limits for the maximum balance. Even the way you carry it can affect the limit. For example, you can load £ 1,500 using a bank transfer, but the top-up limit using cash on a PayPoint can be £ 250. Some also have daily limits and monthly limits.
There are free prepaid cards, but that just means that they do not charge any registration fees. Most free prepaid cards across the UK still charge transaction and withdrawal fees when you use the card. Therefore, they are not completely free.
You can buy prepaid cards at stores (like kiosks), online or over the phone. They are also available from some banks and credit unions.
If you buy a prepaid card online, just fill out the online form with your name, contact details and the amount you wish to charge. You can receive a ‘virtual card’ at the beginning and receive a physical card in the mail afterwards.
No, they do not allow you to borrow money in any way. You can only spend what you have already added to the card.
Yes, some allow you to take out additional cards for other people, for example, family or friends. They can only spend money added to their own card.