What are prepaid cards?
Prepaid cards are more common than you might think, and are a popular choice because they fill a gap in the market for many people. This could be those who want to manage their money better, teenagers learning to budget and spend their allowance, or people who want the flexibility of a credit card but have been declined. The Choose Wisely guide to applying for a prepaid card has all the information you need.
Find out more about prepaid cards
If you aren’t sure what a prepaid card is, how it works and what the different types are then you can find out all the information you need on Choose Wisely. You can easily compare prepaid cards to find the right one for you, as well as look at charges and other features.
Is a prepaid card right for you?
Before you apply you need to think about whether a prepaid card is right for you. One of the advantages of prepaid cards is that you can still apply even if you have poor, or no, credit rating. This is because there is no overdraft facility on the cards, and it isn’t possible to get into debt with them as you have to add your own cash in advance. However, there are some disadvantages too. Prepaid cards can usually handle direct debits and withdrawals from cash machines, but there are often charges. There are other things they cannot do, such as offer the flexibility of an overdraft and not all cards can be used easily in shops. There could be other charges such as using contactless and perhaps even for topping them up. There are plenty of other options if you decided a prepaid card isn’t what you need, such as basic bank accounts or bad credit credit cards.
Compare the charges
When you are applying for a prepaid card it’s important to do your research. You should try to find a card that fits best with how you handle your money, the type of transactions you most use and in the right amounts. You won’t get interest on your balance or some of the other perks of current accounts or credit cards, so one of the main points to comparison points will be the charges. If you like to withdraw cash often you need one with lower, or no fees, for using ATMs. If you use contactless payments when travelling you will want a card that keeps those fees to a minimum. Often there are charges to apply for the card, or for the account on a monthly or annual basis. Application fees are around £5-10 and monthly fees generally about £5.
Getting ready to apply
Most of the prepaid cards don't need a credit check, but you may have to provide proof of your address and identity to avoid fraud and money laundering. Once your application is processed you will be able to load up your card and start using it. When you top up your card, remember to budget for the monthly fee and any charges that crop up from your spending as you will lose some of your cash to them.
How applying for a prepaid card can help your credit
If you have a poor credit rating that you want to rebuild, a prepaid card might help. By having additional fees and charges, they help you budget and manage your money.
Mark joined Choose Wisely in 2015. He continues to work in close contact with the providers, brokers and journalists operating in the world of consumer credit.