Do you want to avoid carrying cash in your wallet? Or do you want a card that helps you manage spending limits? If you answered yes to either of these questions, what you should be searching for is a prepaid card. These cards look similar to debit and credit cards but slightly differ in their nature and working. No doubt you can make purchases with them and even withdraw cash, they need to be loaded with cash first. There are many companies offering prepaid cards, so compare your options and select the suitable one for your needs.
What Are Prepaid Cards?
Prepaid cards are simply pounds in plastic form. They’re also called everyday cards. Unlike a debit card, they’re not linked to a bank account. Also, you can’t borrow money on them like with a credit card. You have to first add balance to the card and pay-as-you-go. When your prepaid card balance falls to a low, you can choose to top-up and keep using the card. Useful for online shopping, they provide ultimate protection as scammers can’t withdraw huge amounts even if they nick your personal details. The damage would limit itself to the money on the card or until you notice and get it blocked by the issuing company.
Generally speaking, prepaid cards are best for teenagers, people who want to keep a hold on their spending and those who don’t have a bank account. Moreover, they enable you to remain debt-free, are good for budgeting and are given without a credit check.
How Do Prepaid Cards Work?
When you first buy a card, you have to load it with money. There’s usually an upper limit in keeping with the purpose of curbing unnecessary expenses. As money runs out, you can top it up at a Post Office, Paypoint or simply a shop that accepts prepaid cards. Again, if you want to transfer pounds online to your card or set up direct credits to your card, you’ll need to have a bank account. Another form of plastic currency, any shop that accepts debit and credit cards will be ready to accept this mode of payment. You would have to enter a PIN for payment to happen. Some retailers may tell you to just sign instead. Prepaid cards are quite safe as they are protected by a unique PIN number and monitored by the card issuing company for fraudulent activity.
How Much Do They Cost?
Prepaid cards don’t always come free. You’ll usually have to pay a small fee to get the card in your name. But, sometimes the card issuer may give you a waiver if you load with a certain amount like £40 or at times of special offers. Some also carry a monthly fee to use the card. Some also charge a small amount for shopping online or in a brick and mortar store.
Pros of Prepaid Cards
- Pay monthly vs pay-as-you-go:
With a pay monthly card, you pay a monthly sum but enjoy lower transaction fees and rewards and cashback which isn’t available for pay-as-you-go cards.
Pay monthly cards are designed for people who take full advantage of them for their day-to-day transactions. Whereas pay-as-you-go is geared towards customers who transact fewer times in a month.
As money has to be loaded beforehand, it helps people stick to their budgets. Parents can keep an eye on how much their teenage children are spending. It’s great for businesses too.
- No credit check:
As the money you’re loading onto the prepaid card is your own, no credit check is done. This means even people with a poor credit record can easily get hold of them. Some cards also offer a ‘credit builder’ service to help you better your credit rating.
- Alternative to bank account:
It’s okay if you don’t have a bank account. You can request your employer to credit your salary to the prepaid card.
- Great for travelers:
If you identify yourself as a frequent traveler abroad, prepaid cards are a handy addition to your wallet. Allowing you to pre-load foreign currency, they enable you to side-step the expensive fees on debit card payments overseas.