What's a prepaid card?
They are just like a debit or credit card, but unlike all other forms of plastic, you can only spend what’s on the card so there is no overdraft. Once the balance runs out you can’t use the card until you’ve added more funds onto it. This makes prepaid cards ideal for someone with a poor or no credit history, as there’s no risk of debt, and you won’t get credit checked when you apply. In fact, many people use them to build their credit score, proving that they are responsible and can manage their own money properly.
The low or zero transaction and withdrawal fees also makes them a sound choice for travelling abroad. You can even load them with foreign currency to swerve the usual debit and credit card fees you can be hit with. What’s more, as most prepaid cards are Visa or Mastercard, they are widely accepted by retailers at home and abroad. With prepaid cards, you can usually opt for either pay monthly or pay-as-you-go. Some pay monthly cards charge a monthly fee and are better suited to people who spend regularly on their card, particularly as you’ll often get rewards and cashback on your spending. Transactions are often lower than with pay-as-you-go cards, which only suit spenders who make a small number of transactions on their card each month.
A prepaid card can offer you all the benefits of a credit or debit card but without the risk of debt. This can make them an attractive option for anyone wanting to control their spending. However, care should be taken with monthly fees and other charges such as loading fees or withdrawal fees as these can add up and you will need to budget for these accordingly.