In the USA, prepaid credit cards and secured credit cards have been a thriving product for a few years now. However, we seem to have been a bit slower to catch on here in the UK. But we’re getting there…. While there is still little in the way of secured credit cards available, prepaid cards are really beginning to take off.

But what is a prepaid credit card? Well, essentially it is a payment card that works much like your debit card. You will have a pin number to enable you to use it at ATMs or in stores and it will most likely be a VISA card. The money you spend, however, will not come from your bank account or be applied to a credit card bill that you will receive later on. Instead, it will be deducted from an amount of money that you have already loaded on to the card. In this sense, what are commonly referred to as ‘prepaid credit cards’ actually work more like debt cards. So what’s the point?

Well there are a number of benefits to prepaid cards:-

  • There are no credit checks to obtain them, which means they are ideal for those who, due to poor credit, are unable to get a bank account with a VISA/Mastercard.
  • They offer security for those who shop online a lot (or offline even). If the card is not associated with a bank account, then if you are a victim of fraud, your bank balance is not at risk  by default of someone obtaining the card details.
  • They are great for helping to control your spending. You could, for example, load on your entire Christmas shopping budget and you will know when you have spent up. The cards will not let you spend a penny more than what is loaded on.
  • Prepaid cards are great for travelling and are widely used as an alternative to traveller’s cheques.
  • Top up online or in the Post Office! Most providers permit these forms of top up while some offer other ways in which you can add money too.

Of course, as with anything, there are the downsides too. The disadvantages of prepaid cards:-

  • Many providers charge an application and/or setup fee for prepaid cards.
  • A number of prepaid credit card providers charge for ATM withdrawals, in much the same way a credit card provider would charge for this service.
  • Some, though definitely not all, charge a monthly subscription fee.
  • Some providers charge to renew your card at its expiry.

So the best thing to do is shop around and find the prepaid card that suits you. There are plenty available that do not charge a monthly fee, though most do have some form of charge at setup. However, each provider offers a slightly different package and reading the small print before you apply for anything means you can find the card that provides exactly what you need.

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