Prepaid credit cards
What are prepaid credit cards?
A prepaid credit card is like a normal credit card, but where you have to put money on the card first before spending it. A little like a prepay mobile phone, where you have to top-up the phone before making a call or sending a text, prepaid credit cards only allow you to spend what money you have initially topped up.
These cards can be used by nearly anyone, and sometimes just being a UK resident is the only thing required to get one.
What are the advantages of a prepaid credit card?
One advantage of a prepaid credit card is that there are no credit checks required, and that most people get approved for the card they apply for.
They are also great for people who want a credit card, but don’t want to spend more than they have.
Those with bad credit, or teenagers too young to apply for a full credit card can also apply.
What are the disadvantages of a prepaid credit card?
The prepaid credit card won’t help increase a users credit rating, as there is no borrowing involved. Those with bad credit can apply, but the use of them won’t help improve their credit.
Most prepaid cards charge fees, either on application or on a monthly basis.
Some also charge a top-up fee every time you add money to your prepaid card account.
Cash machine withdrawals also incur a fee, which they wouldn’t if the user had a debit card.
Alternatives to a prepaid credit card
A normal credit card is one alternative, and can work out cheaper if the user pays off the balance in full each month.
Bad credit credit cards are another alternative, and have been designed for those with a bad credit rating.