There are a wide range of payment cards out there now – and choosing the right option for you can be tricky. From traditional credit cards and debit cards to prepaid cards, each type can come with different features, eligibility criteria and application processes.
Prepaid cards have been around for less time but are quickly becoming a strong option for certain groups including foreign nationals, freelancers and travellers. It’s wise to research any financial product before taking it out however, so we’ve outlined their key advantages below to help you make an informed decision.
You can’t overspend
As the name suggests, prepaid cards have to be preloaded with cash. You can only spend as much as you add, which makes them ideal if you want to stick to a budget.
This is different to credit cards and debit cards that are linked to a bank account and may come with additional credit and overdraft facilities. While having this extra money available can be useful in some circumstances, it also becomes easier to get into debt.
It’s safer and more convenient than cash
A cashless society is said to be drawing ever closer, with a recent study revealing a 35% drop in cash transactions in 2020 due to the pandemic.
Prepaid cards make this transition easier as they’re more convenient than carrying sums of cash around. You’ll also be at less risk of losing money or having it stolen.
They’re easy to use and reload
Prepaid cards are usually aligned with a major card network such as Mastercard or Visa and are accepted at thousands of locations worldwide, including stores, websites and ATMs. You can also make contactless payments like you would with a regular debit card.
There are lots of ways to load money onto them too, including bank transfers and cash top-ups both online and in-person.
An accessible banking alternative
A key advantage of prepaid cards for many people is that they’re easier to access than traditional bank cards. You won’t need to go through credit checks as they’re not linked to a credit facility, and you’re less likely to have to jump through hoops to prove your address.
This accessibility makes them a viable option for the estimated 1.3 million unbanked people in the UK.
They’re secure
It’s important to feel secure when spending and saving money. Prepaid cards are protected by a PIN in the same way as traditional debit cards, and because they aren’t connected to a bank account, your personal details will be better protected from fraud.
Many prepaid card providers allow you to instantly lock your card from an app on your phone too, so you can react quickly if you lose your card or have it stolen.
Could a prepaid card help you save and spend money?