Prepaid cards are an easy and convenient way of managing money without borrowing it from any bank or provider. They are like standard cards or debit cards but only thing that separates them is that they have to be loaded with money much in advance. This money can then be used for travel, purchase and withdrawing cash when needed.
The best part about prepaid debit card is that there is no need of a credit check or credit arrangement and thus things become simple when one uses a prepaid card. In UK, the most widely accepted prepaid cards are Visa or MasterCard. They are also valid overseas and are a perfect budgeted solution for spending money without carrying huge amount of cash.
The cards can be loaded with cash from any post office or shop with PayPoint or Payzone facilities. Some of these can be loaded with credit or debit card online. The main advantage is that you cannot overdraw money for any kind of debt so, the cards make way for people with a bad credit rating.
You may need to pay a small initial fee to use the card but overall these cards are a very good option for managing money.
Major benefits and uses of prepaid debit cards:
Budget friendly option: As you cannot go for debts using these cards, the card proves to be an economical option. You can load the money once a month and use it for numerous smaller expenses over the period. You cannot go overboard in spending with these cards.
Easy to use abroad: The card is a convenient option for carrying cash abroad. This protects the cash from chances of theft. Some of these cards are exclusively available to be used abroad while in most cases you have to pay a little fee for foreign transactions.
Ideal for young people: Parents can rely on these cards and give them to their kids so that the child has a certain level of monetary freedom without any chances of overspending. Parents can top up the card with money and use an app to manage the money. Kids can also use the app. With these cards, children can buy age sensitive items online.
Good for credit ratings: If you have a bad credit history then these cards can help you build good credit rating. With them you cannot go overboard and hence create a good credit history. Transactions through the card do not reflect on the credit report and so, there are no chances of a bad credit report.
Protection: Pin protected, these cards are a safer option. In case of fraud or theft, you can easily recover the losses. Again, the cards are not linked to the holder’s bank account and so no one can take away money other than on the card itself.
Prepaid card and various fees associated with it:
Just like any other card, prepaid cards also come with some sort of fees which needs to be considered before applying for it. The nominal fees should be kept in mind so that you don’t end up spending more than what you thought off.
Following types of fees are associated with prepaid cards:
Application fees: This is once in a lifetime charge taken while you start using the card.
Annual or monthly fees:This depends on the credit card company. Some may charge a small monthly fees for 12 times a year while other may ask for a sizable fee annually. This is the charge paid to use the card.
Transaction or withdrawal fees: Some of the cards may charge you transaction fees. It charges on all transactions, online or in stores. Even withdrawals would be charged and will be depend on the amount taken off the card.
Inactivity fees: If you are not using the card for a long duration then you might be charged for it too.
Renewal fees: You need to renew the card after a certain period of time so that you can continue to use it.
Redemption fees: Under the electronic money regulations, prepaid card holders are not allowed to keep any outstanding e-money with them. The e-money holder can redeem it whenever needed. The company may charge a redemption fees in certain circumstances.
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