Prepaid credit cards

A prepaid credit card is similar in principle to a pay-as-you go phone. It allows you to load your card with cash and then spend it. The cards can be topped up by bank transfer, direct debit, and through many retail outlets.

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This type of credit card is designed with those who are unable to obtain a standard credit card in mind. If you are too young to apply for a credit card, or perhaps you have had an application turned down because of a poor credit history, a prepaid credit card could be the solution.

A major factor that attracts people to this type of card is that you are not permitted to spend beyond the amount that has been loaded to your account, it is therefore impossible to get into debt with a prepaid credit card. This can help you (and pretty much forces you) to budget properly.

However, there are fees and charges involved when using a prepaid credit card including an initial application fee, as well as loading fees, and purchase fees (particularly for online purchases). Different cards have different fees and provide different levels of customer service so be sure to check out exactly what you are getting if you decide to opt for a prepaid credit card.

You would be forgiven for thinking that with all of these fees you may well just be better off with a debit card, and this maybe the case, however, there are a few key things that lead to people opting for a prepaid credit card rather than a debit card.

1. Credit cards, including prepaid credit cards, provide extra protection for when you are making purchases as you are covered by the card provider's protection policy.
2. It is safer to use a credit card than a debit card when purchasing products online.
3. Prepaid credit cards do not allow you to get into debt or overdrawn.
4. Credit cards are accepted in more places and for
5. Certain cards, such as the Post Office Travel Money Card, are ideal for travelling, offering advantages such as no commission being charged on foreign currency and, unlike with Traveller's Cheques, there is no need for ID to use it.

A prepaid credit card can be a widely accepted, handy spending tool that helps you budget and avoid debt. They can be good for students, under 18s, travellers and those who have been rejected a standard card.

However, with all of their fees and charges they are not the card for everyone and with the increasing amount of places that accept debit cards and the fact that the money that sits dormant in a prepaid credit card account will not gain any interest you should think hard before you make your choice.

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