About prepaid credit cards

Most of us know that there are many different credit cards available these days, and many people can’t imagine life without their credit cards, reflecting how reliant the nation has become on these pieces of plastic.

However, although credit cards have always been associated with ease, convenience, and flexibility, they have also become known for getting people into serious levels of debt and contributing hugely to the ever-growing debt mountain in the UK.

Those with poor credit have often found it difficult to get a credit card, as well as any other form of finance, but lately a number of credit card providers have started to offer credit cards designed for those with damaged credit.

These cards usually offer lower credit limits and higher interest rates than the standard credit card, and although they can help consumers to get back on track with their credit if used and repaid responsibly they can still lead to increasing debt.

One solution that has become more popular recently is the pre-paid credit cards, and these cards are use for those that have credit that is too badly damaged to get any sort of traditional credit card and those that want to enjoy ease and convenience without the risk of being in debt with a credit card.

A prepaid credit card offers the convenience and ease of a credit card, enabling you to make cashless purchases in person, by telephone, or online, yet will not allow you to get into debt because you will not get any actual credit.

A pre-paid credit card works much like the pre-pay mobile phones that we have all become used to in that you have to load the card with money before you can use it. These pre-paid cards are available from a number of card providers, and the amount that you can load onto the card varies from one card and provider to another.

Many think that these cards may increase in popularity as a result of the credit crunch, where many banks and card companies have started to turn down increased number of applications for standard credit cards. In order to enjoy the security, ease, and convenience of not having to carry cash around many of those unable to get a standard credit card may turn to these pre-paid cards.

In addition it is important to remember that many major retailers and companies are now no longer accepting cheque payments, which means that for those without access to standard credit cards or a debit card the pre-paid credit card could prove even more useful in terms of not having to carry money around to pay for things.

Many basic bank account customers may find that although they get a cash card to withdraw cash they do not get a debit card facility, and a pre-paid card could prove the answer.

Now for the downside. Actually loading and using a pre-paid credit card can actually prove quite costly, and some experts have deemed these cards ineffective because of the fees that are charged to the customer for effectively using his or her own money.

According to reports it can cost around £20 per month to actually load a pre-paid credit card and spend £100 per week on it. One industry professional recently stated: ‘It’s like pouring money into a bucket with a hole in it,’ he says. ‘A lot of it leaks out in charges.’

However, there have also been positive comments about these prepaid credit cards. For example, some experts think that they are a great way for parents to introduce kids to budgeting without losing control of how much they are spending.

Others state that they are useful for people like students who can keep one as an emergency in case they need access to funds.

One industry official stated: ‘They allow parents to give money to their children in a controlled way.’ Another said: ‘Different types of customers have adopted the card for different reasons.

For example, we are seeing students taking the card as a ‘bail-out’ card, to be used for emergency spending if they hit an overdraft limit.’ A customer who has a Cashplus prepay card stated: ‘I know friends whose credit cards have been cloned and used by crooks. ‘They had a lot of hassle with their banks to get their records clear.’ Speaking about spending on the card whilst he was abroad he added: ‘I used it to pay for petrol and road tolls. At one garage my ordinary credit card wouldn’t work, but cashplus did.’