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| What is a pre paid card? | |
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There’s been quite a lot of confusion lately over what a prepaid card actually is - and how similar is it to a credit card? Although prepaid cards are really popular in the US they have yet to really take off in the UK.. A prepaid card is very simply a card with which you can make purchases. You can’t go into debt though, as you have to load the card with money, and this money (your own!) you can then spend. It’s not a credit card. It’s similar to a pay as you go phone. You can only spend what you’ve put on there, and you’re not borrowing anything. Okay, onto the advantages and disadvantages.. Advantages a) You can buy things online and over the phone. If you don’t have a debit card or a credit card, for example you’ve been refused either, then you can still get a pre paid card b) You don’t have to carry cash with you. Just load your prepaid card and use it for all purchases. Easy! c) You can drip feed and manage your spending. You can for example put £100 a week on it - and that will be all you can spend! d) It’s brilliant for when you’re travelling! It means you don’t have to carry travellers cheques with you, and if you have it drip fed then if you lose it or it’s stolen it’s not such a big deal. Also - other people can put money onto your card (like your parents!) e) Anyone can get a card - they don’t have to carry out a credit check, and as long as you’re over 18, you should be eligible. Even if you don’t use it that often, since it’s free and you won’t be tunred down - it might be a good idea to get one for emergencies But, like anything else, there are also disadvantages… Disadvantages a) Some cards have an application fee - although this might be a small one-off payment, think carefully about whether you want to be spending money for a card. b) Are there any regular / monthly charges on the card? If you don’t use your card then if you’re still being charged monthly then is this worth the cost? c) Is there a charge when you load the card up? Quite a few pre paid cards work like this - to put money on them you have to pay a charge d) Are there any costs when you withdraw cash or make a payment with a card? If you take out money from a cash machine then you get charged, (similarly with credit cards). How much is the charge though? e) Do you get charged for closing the account or getting a new card? We haven’t had the time to go through the pre paid cards individually to see where the charges are, and whether they make a prepaid card a good / bad idea overall.. but we’ll look further into it, and if people want it, then we’ll look into this and report back.. For now - if you’re thinking of getting a pre paid card, make sure you do the research and you know the costs involved. The benefits pretty much speak for themselves - but do they outweigh the costs? |
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