Prepaid bank accounts pros and cons
No credit check
No risk of getting into debt
Can help you budget
Pay in wages and bank transfers
Pay your bills
Cards accepted in most places
Some have monthly charges
Fees for several transactions
Earn no interest
No branch you can use
No preapproved transactions
What is a prepaid current account?
It is an account you can use instead of a normal bank account. They let you:
Pay money into the account, including your wages
Pay for purchases using a prepaid card
Pay your bills with direct debits and standing orders
They only let you spend the money you have already paid onto the account's balance. Anything you spend and the fees you are charged are taken from this balance.
They do not offer an overdraft or any way of getting into debt. Most prepaid current accounts will accept you unless you have been convicted of fraud, and they do not need to run a credit check first.
How to pay money in
Your account will have its own sort code and account number so you or other people can pay money into it. You can pay in with:
Bank transfers, also known as BACS, which is how most employers pay your wages.
Faster payments, which include when you or someone else sends a transfer from a bank account.
Cash in person with some accounts. This can be done by visiting a post office, bank or PayPoint store.
Check if there is a minimum or maximum amount you are allowed to pay onto the card each time.
How to spend
You can spend in most of the same ways as using a normal bank account, but the transaction will not go through if you try to spend more than you have in your account.
You can use your card to pay shops, restaurants, online companies and other retailers as long as you have enough in your account to cover the amount you spend.
Some accounts also offer:
Transfers to another bank account through internet banking or their app
You cannot use some prepaid cards for preapproved transactions. These are made on your card when you use it to pay for something before you know what the full price will be. This includes at the start of a hotel stay or when you pay for petrol at a self service pump.
What they cost
Prepaid bank accounts can come with any of the following fees:
A monthly charge for holding the account, e.g. £10 per month.
Charges for paying bills, e.g. 50p per direct debit or standing order.
Cash withdrawals, e.g. 50p per withdrawal. There is sometimes an additional charge if you take out cash overseas, usually around 3% of the amount you withdraw.
Fees for failed payments and overspending, like a direct debit that does not go through because you do not have enough money in your account.
Paying in cash, e.g. a 3% fee, which would come to £3 if you paid in £100 cash.
They also come with some of the same charges as normal current accounts, like fees for duplicate statements, replacements cards or international payments.
How to get a prepaid bank account
They are not offered by the major banks, but you can find companies that offer prepaid bank accounts using our comparison.
Choose an account that offers all the features you need and work out which will charge the lowest fees for what you will use it for.
If you will use it frequently, an account with low charges for transactions may be cheapest, even if it has a monthly fee
If you will only use the account occasionally, one with no monthly fee may be cheaper, even if the costs per transaction are higher
You can apply online, and some accounts will be opened as soon as you are accepted. You have to wait a few days to receive your new card.
Who can get a prepaid current account?
You could still be accepted for a prepaid account if you have bad credit because providers do not run a credit check when you apply. This includes if you have previously missed repayments when you have borrowed money or even been declared bankrupt.
However, you need to prove your identity and have a permanent address. The provider may have other requirements like a minimum age and residence in the UK, so check this before you apply.
Credit checks are used when you apply for financial products that let you borrow money and some types of utility bill. Companies check your credit history, which includes details of what you owe to other companies and the repayments you have made in the past.
Missed payments and other problems can put lenders off letting you borrow money, but prepaid card providers do not need to check your credit record.