Questions and answers about using prepaid credit cards, money loading, fees and more.

What are prepaid cards?

Prepaid cards also known as prepaid credit cards, prepaid debit cards and pay as you go cards; they provide an alternative to getting a credit card and debit card and are also used to manage your money. You can manage your account online just like an online bank account: the only difference is you can only spend what you load.

Prepaid cards look and work like a normal credit card and debit card, but do not offer any line of credit or overdraft facility as they are a preloaded with your money, with one added feature. There is no credit check done when applying so as long as you provide suitable identification and also pay any initial application cost you can get one. You simply preload your funds in advance, then you simply purchase as normal. You can even set up standing orders or withdraw money from ATM machines.

What are the advantages of buying a prepaid card?

By buying a prepaid card this is not attached to your bank account you can only spend the funds you load. There are no late payment charges and no interest to pay. Even if you are have really bad credit or you are new to credit you can get one. Some prepaid cards offer creditbuilder, which can help you repair damaged credit ratings. You can even get a prepaid card if you are bankrupt.

What happens if I am running low and need to top up?

All prepaid money providers provide a customer service department so you can top up over the phone or using the online facilities. Some card providers offer SMS text top ups and allow top ups at retail outlets or at the post office.

What ID do I need to provide?

A passport or driving license plus proof of address. Most companies use online systems to instantly confirm your identity.

Why do I need to supply ID?

ID also known as KYC (Know your customer) is required as a legal requirement to comply with money laundering legislation.

Are there any prepaid cards where I don't need ID?

Yes these are known as restricted prepaid cards where you can on average load up to £600.00 a year on to the card. After you have reached this amount you will need to either upgrade to an unrestricted prepaid card or purchase a new one.

Our verdict on prepaid cards –

Prepaid cards are not for everyone but are now a safe alternative to debt cards or credit cards, depending on how you intend to use the card can save you money especially if this is for internet spending as you can get cash back when shopping online. Which in most cases outweighs any fees you have to pay.

It is suggested that when choosing a prepaid card, don't rely on how the card looks but what fees are attached to the card, how many times you intend on using the card and also what additional benefits or discounts you will get.

Typical charges

There are three prepaid tariffs available –

Pay as you go – where you only pay a fee whenever you use the card, this can be a cheap option if you only want to use the card on an occasional basis.

Weekly Tariff - where you want to manage your spending on a weekly basis and you are not sure if you are going to use the card on a constant basis.

Monthly Tariff – if you intend on using your card on a regular basis then this could be the cheapest option. Where you pay a set fee per month and can budget what your charges will be. Ensure to check if transaction charges are included and read the terms and conditions of the provider before you buy.

Are there fees for using the card?

Fees can vary from card to card, so compare now before you buy as you could save more money on our gocompare comparison table.

Look at the following before you buy:

Card application fee - This is the fee you pay to get your card although some cards are free. Some charge a fee to get the card and refund this when you first load your card.

Transaction fee (point of sale) - Nearly all prepaid credit cards charge a fee when using your card to buy goods abroad.

ATM fee - Withdrawing cash from an ATM will incur a small fee, this is either a fixed amount or a percentage.

FX conversion fee - This refers to using the card in another currency other than that in which it was issued. For example spending on a Dollar card in the United Kingdom.

Top up / reloading fee - How you can reload your card and where you can top up, some charge for this option. So look at the costs. There is also a minimum and maximum card balance.

What is the best card for me?

Before purchasing a prepaid card ask yourself the following questions -

What am I going to be using the prepaid card for?

What are the fees attached to using the card?

How often am I going to be using the prepaid card?

Bad points

Are the charges, as prepaid cards companies only make their money from what they charge you. Charges have come down a long way and have been made a lot clearer.

Why is there a load limit?

Based on the issuing banks they have worked out on average how much people load or spend on their cards. This has been capped with an upper limit to stop money laundering abuse.

Are they safe to use?

Prepaid cards are safe to use like all forms of bank accounts or credit card and debit cards. It is advised you do not give out your login details or your pin number. Prepaid card companies will email your from time to time but will never request you change your details online. If you get an email always check the email address or if unsure ring their customer service helpline.

Can I use for car hire?

Not all prepaid cards allow you to use your prepaid card to secure a deposit for hire car. You will need to check with your provider and in most cases they will require additional details before activating this feature.

Can I use my card abroad?

Yes you can use your card abroad just check who your card is issued with, usually Visa or MasterCard. Maestro cards are also accepted abroad but do have limited use so check with your travel provider before travelling.

What is cash back?

Cashback is when you shop online at selected retailers and receive money back from buying their goods. Once you have logged in to the prepaid card cash back provider you will be directed to companies you can earn cash back from when buying goods. Just click on the company you wish to purchase from, buy your goods and your cash back will be credited to your account. This can vary from a fixed amount to a percentage of the transaction. All cash back is automatically loaded back to your prepaid card account.

What is creditbuilder?

Is a new way to repair your credit history, you pay a monthly fee for a period of 12 months. At the end of the year the prepaid card provider submit this to the credit reference agency, which builds up points on your credit.

How do I check my balance?

All prepaid card companies provide an online login system to check your balance and to set up standing order you can request for paper statements but this is an additional cost.

What ways can I check my balance?

You can check your balance online for free, or you can get SMS text alerts to update you as and when you spend or load money. This may be an additional charge.

If I make a purchase are they protected?

Some prepaid cards offer purchase protection so check with your provider before you buy. Read the terms and conditions to see what you are covered for.

Lost and stolen

Contact your prepaid card provider straight away, they will put a stop on your card automatically and issue you a new one, though this may be an additional charge. If your card has been used fraudulently then they have set procedures in place, which they will go through step by step.