Prepaid cards are similar to debit or credit cards, in that they can be used anywhere displaying the Mastercard or Visa logo. The key difference is that prepaid cards offer no credit whatsoever, so always have to load your card up with funds before you use it.

Why use prepaid cards?

Well, there is no credit check undertaken in order to obtain one, so if you are 18 years old and a UK resident, you are likely to be accepted. This makes prepaid cards ideal if you find it difficult to obtain more mainstream credit cards – because of a bad credit score, or if you’ve simply never had credit before (young adults, or those new to the UK for example).

Prepaid cards have evolved over the years, now offering much more than simply an alternative for people who have few other choices. Most offer all the functionality you would expect from a high street bank account, including the ability to set up direct debits and standing orders, the facility to pay in wages, make online or mobile payments, and more. Further to this, prepaid cards can offer cashback or discounted retail goods, user-friendly apps to help budget and manage your finances, more favourable foreign exchange rates and fee-free use abroad, and cards that make business accounting less painful.

For all their impressive functionality though, prepaid cards do charge fees, and these fees are the most important aspect to consider when choosing your perfect card.

What fees can prepaid cards charge?

Before choosing your prepaid card, you should be fully aware of all the charges they incur. Typically, prepaid cards are either Pay Monthly or Pay As You Go. Pay Monthly cards charge a monthly fee, but tend to have lower fees for other banking transactions, while Pay As You Go cards tend to be free (or certainly less than the Pay Monthly option), but everyday transactions are more expensive.

Ideally, you should spend some time thinking about how you plan to use your prepaid card  -whether you take out cash regularly, use your card solely for purchasing, plan to set up a number of direct debits, plan use your card abroad etc. – and then check out the fees for all those transactions. Here’s a list of some features that prepaid cards will charge you for. The exact list of chargeable services will vary from card to card.

What types of prepaid cards are there?

Is there a limit to how much I can load or spend on my prepaid card?

Yes, so it is always best to check your chosen card thoroughly before you apply to ensure that the limits fit your financial needs. There is often a cap on how much cash you can load at any one time, how much you can withdraw from an ATM, and the total balance you can carry on the card at any one time. Further to these limits for single transactions, some cards place further limits on the amount you can load, spend, or carry over the period of one year. Finally, it should be noted that some cards have minimum and maximum loads and spend, but will allow transactions above or below these amounts, but charge a fee for the privilege.