Increased availability of prepaid cards

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Increased availability of prepaid cards

16th December 2009

To meet the challenges of the current economic recession in the UK, Prepaid Credit Cards are increasing in popularity and availability.

More and more banks and other companies are now offering Prepaid Cards to cater to the increase in demand. There are various reasons for the surge in popularity of Prepaid Cards during the recession, some of which are:

  • They are available for people who have been refused a credit card
  • They enable you to budget wisely as you can only spend up to the amount that has been uploaded to the card
  • It is free to upload cash to the card at any Post Office
  • They are available for people, such as migrant workers, who are unable to open a UK bank account
  • You can use them to make online purchases

So how do they work?

Prepaid Cards look similar to a debit or credit card, and can be used at shops or online, anywhere where either MasterCard or Maestro cards are accepted. However, they differ from credit and debit cards as they are not tied to a bank account, and you cannot borrow money with them. Instead you can load cash onto the card, and can only spend up to the amount on the card. Some cards are reloadable, but others are for a fixed amount. Reloadable cards can be topped up by bank transfer, at Post Offices, or at certain stores. You spend on them in the same way in which you would using a debit or credit card, and you can use them to withdraw from cash machines.

You can use a Virgin Money reloadable Prepaid Card, an Optimum reloadable Prepaid Card or an APS CashPlus reloadable Prepaid Card anywhere where MasterCard is accepted, and you can transfer money to these from your bank account free of charge. You don't need a bank account or a credit check to obtain either of these, and the Virgin Money and APS CashPlus card have the added advantage of offering purchase protection. With a Bread Prepaid Card or Splash Prepaid Card you can shop worldwide, wherever Maestro cards are accepted. You don't need a credit check to apply for one, and you can view your transaction history online. These are a selection of the many Prepaid Cards on the market, and each of them levies different charges at various stages.

Advantages
  • No credit checks are necessary, just proof of ID, and details of name and address
  • They can protect you from identity fraud, as a thief will only be able to spend up to the limit on the card
  • They can be given as a gift, for example, to student children
  • You can use them abroad
  • No interest charges are applicable
  • They are safer than cash as you need a PIN number to use one
  • Increased availability of Prepaid Cards
Disadvantages
  • They can be expensive, but most companies give details of fees upfront
  • Charges can be levied at different stages e.g. on taking out the card, uploading cash to the card, making purchases, and withdrawing cash
  • Most cards don't offer protection if the goods you are buying fail to arrive

In these uncertain times, Prepaid Cards could offer a solution to people wanting to take control of their finances, but it is wise to shop around and take account of all the charges and features involved.


Posted in Prepaid credit cards

 
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