Prepaid Credit Cards Offer Convenience Without Debt Risk

The main difference between a prepaid credit card and other credit cards on the market is that a prepaid card needs an initial deposit to be made into the account before it can be activated. They are pretty similar to the electronic gift cards that are now widely available they are 'Loaded' with cash and no borrowing is available on them. Unlike normal credit cards you will not pay any interest as the money you are using on the card is your own.

The amount you deposit will be the same amount you have available to spend on your card and you cannot exceed this amount, but apart from that the card works in just the same way as a debit or credit card using chip and pin technology and it allows you to withdraw money from a cash machine or purchase goods and services from the majority of retailers as long as they accept Visa or MasterCard payments.

This type of card is ideal if you are working on a tight budget or are a student as it means you cannot exceed your spending limit. It's also good for having in case of emergencies.

Costs Involved

There are charges applied to the cards and most issuers will set a charge when you first get your card. Many will also have charges when a purchase is made, when the card is loaded, or will charge you an annual or monthly fee. Some providers will also charge you for replacing lost cards or unused cards; they may even make a charge for recovering a lost pin number.

One of the big attractions of these cards is that due to the fact no borrowing is being made very few or no credit checks are made before the card is issued. This means that if for some reason you didn't have a UK bank account you can still get a card and many of the cards available will allow you to load your salary onto the card through the BACS payment system.

How to Reload

The cards can be reloaded online using a debit card, or with cash at Post Offices or shops who display a Payzone or Paypoint symbol.

Regulation

A word of caution: prepaid cards are not regulated and users of this type of card are not covered under the Consumer Protection Act, so unless your card offers protection as part of the agreement you would not be covered for any losses if a merchant you used went bust.