Prepaid Credit Cards

Prepaid cards work in the opposite way to credit cards as you need to load up a balance on the card before you can spend. The main benefit is that this enables you to budget more carefully. It also means you don't have to undergo any credit checks to be accepted for one.

They are designed to be used as a safer alternative to cash. You can use a prepaid card - whether you are in the UK or abroad - anywhere you see the logo featured on the front which is typically Visa, MasterCard or Maestro. If you lose your card, the issuer will usually replace it with the balance intact, but for a small fee.

Fees for prepaid card

The downside to prepaid cards is that it will cost you to use one. Charges can include an initial application fee, usually around £10 (and an often slightly cheaper replacement fee when the card reaches a certain expiry date) and a fee every time you top up your balance.

Your prepaid card is also likely to charge a transaction fee each time you hand it over the counter to pay for something or withdraw cash. If you are using the card abroad, these fees will jump up a notch.

When you apply for a prepaid card you will have to specify what currency you want loaded onto it, for example, dollars, pounds or euros. If you are spending in a different currency to the one loaded on your card, you will also have to pay a foreign exchange fee - just as if you were using a debit or credit card.

If this is the one employed by MasterCard or Visa, the exchange rate will be reasonable, but some pre-paid card providers use their own rate which can prove very expensive.

Choosing the best prepaid card

There is a raft of prepaid cards on the market so make sure you shop around to see which one best suits your particular needs.